Voluntary Contributions. You may contribute to the following new funds: Mental Health Crisis Prevention Voluntary Tax Contribution Fund and California Community and Neighborhood Tree Voluntary Tax Contribution Fund.
Expanded Definition of Qualified Higher Education Expenses. For taxable years beginning on or after January 1, 2021, California law conforms to the expanded definition of qualified higher education expenses associated with participation in a registered apprenticeship program and payment on the principal or interest of a qualified education loan under the federal Further Consolidated Appropriations Act, 2020.
California Microbusiness COVID-19 Relief Grant. For taxable years beginning on or after January 1, 2020, and before January 1, 2023, California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Microbusiness COVID-19 Relief Program that is administered by the Office of Small Business Advocate (CalOSBA).
Shuttered Venue Operator Grants. The Consolidated Appropriations Act (CAA), 2021 enacted on December 27, 2020, allows an exclusion from gross income for grants received by shuttered venue operators. California does not conform to this federal provision.
California Venues Grant. For taxable years beginning on or after September 1, 2020, and before January 1, 2030, California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Venues Grant Program that is administered by CalOSBA.
Restaurant Revitalization Grants. The ARPA allows an exclusion from gross income for restaurant revitalization grants awarded to eligible entities that are used for allowable expenses for the covered period.
Small Business COVID-19 Relief Grant Program. For taxable years beginning on or after January 1, 2020, and before January 1, 2030, California allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the COVID-19 Relief Grant under Executive Order No.E 20/21-182 and the California Small Business COVID-19 Relief Grant Program established by Section 12100.83 of the Government Code.
Income Exclusion for Rent Forgiveness. For taxable years beginning on or after January 1, 2020, and before January 1, 2025, gross income shall not include a tenant's rent liability that is forgiven by a landlord or rent forgiveness provided through funds grantees received as a direct allocation from the Secretary of the Treasury based on the federal CAA, 2021.
Paycheck Protection Program (PPP) Loans Forgiveness. For taxable years beginning on or after January 1, 2019, California law allows an exclusion from gross income for covered loan amounts forgiven under the federal CARES Act, Paycheck Protection Program and Health Care Enhancement Act, Paycheck Protection Program Flexibility Act of 2020, or the CAA, 2021. The CAA, 2021, allows deductions for eligible expenses paid for with covered loan amounts. California law conforms to this federal provision, with modifications. For California purposes, these deductions do not apply to an ineligible entity. "Ineligible entity" means a taxpayer that is either a publicly-traded company or does not meet the 25% reduction from gross receipts requirements under Section 311 of Division N of the CAA, 2021.
Advance Grant Amount. For taxable years beginning on or after January 1, 2019, California law conforms to the federal law regarding the treatment for an emergency Economic Injury Disaster Loan (EIDL) grant under the federal CARES Act or a targeted EIDL advance under the CAA, 2021.
Other Loan Forgiveness. California law allows an exclusion from gross income for borrowers of forgiveness of indebtedness described in Section 1109(d)(2)(D) of the federal CARES Act as stated by section 278, Division N of the federal CAA, 2021. The CAA 2021, allows deductions for eligible expenses paid for with covered loan amounts. California law conforms to this federal provision, with modifications.
Gross Income Exclusion for Bruce's Beach. Effective September 30, 2021, California law allows an exclusion from gross income for the first time sale in the taxable year in which the land within Manhattan State Beach, known as "Peck's Manhattan Beach Tract Block 5" and commonly referred to as "Bruce's Beach" is sold, transferred, or encumbered.
Reporting Requirements. For taxable years beginning on or after January 1, 2021, taxpayers who benefited from the exclusion from gross income for either the PPP loans forgiveness or the EIDL advance grant and related eligible expense deductions under the federal CARES Act, Paycheck Protection Program and Health Care Enhancement Act, Paycheck Protection Program Flexibility Act of 2020, or the CAA, 2021, should file form FTB 4197, Information on Tax Expenditure Items, as part of the Franchise Tax Board's annual reporting requirement.
Moving Expense Deduction. For taxable years beginning on or after January 1, 2021, taxpayers should file California form FTB 3913, Moving Expense Deduction, to claim moving expense deductions. Attach the completed form FTB 3913 to Form 540, California Resident Income Tax Return.
Homeless Hiring Tax Credit. For taxable years beginning on or after January 1, 2022, and before January 1, 2027, a Homeless Hiring Tax Credit (HHTC) will be available to a qualified taxpayer that hires individuals who are, or recently were, homeless. The amount of the tax credit will be based on the number of hours the employee works in the taxable year. Employers must obtain a certification of the individual's homeless status from an organization that works with the homeless and must receive a tentative credit reservation for that employee. Any credits not used in the taxable year may be carried forward up to three years.
Elective Tax for Pass-through Entities (PTE) and Credit for Owners. For taxable years beginning on or after January 1, 2021, and before January 1, 2026, California law allows entities taxed as a partnership or an "S" corporation to annually elect to pay an elective tax at a rate of 9.3 percent based on its qualified net income.
Main Street Small Business Tax Credit II. For the taxable year beginning on or after January 1, 2021, and before January 1, 2022, a new Main Street Small Business Tax Credit is available to a qualified small business employer that received a tentative credit reservation from the California Department of Tax and Fee Administration (CDTFA).
New Donated Fresh Fruits or Vegetables Credit. The sunset date for the New Donated Fresh Fruits or Vegetables Credit is extended until taxable years beginning before January 1, 2027.
Natural Heritage Preservation Credit. The Natural Heritage Preservation Credit is available for qualified contributions made on or after January 1, 2021, and no later than June 30, 2026. This credit may not be claimed for any contributions made on or after July 1, 2020, and on or before December 31, 2020.
Resident State Tax Filers List. For taxable years beginning on or after January 1, 2020, taxpayers will include on their Form 540 the address and county of their principal residence as part of the FTB's annual reporting requirements to the jury commissioner. Taxpayers that are required to provide this information include persons who are 18 years of age or older and have filed a California resident income tax return for the preceding taxable year. The list of resident state tax filers will be used as one of the source lists for jury selection by the jury commissioner's office.
Dependent Exemption Credit with No ID. For taxable years beginning on or after January 1, 2018, taxpayers claiming a dependent exemption credit for a dependent who is ineligible for a Social Security Number (SSN) and a federal Individual Taxpayer Identification Number (ITIN) may provide alternative information to the FTB to identify the dependent. To claim the dependent exemption credit, taxpayers complete form FTB 3568, Alternative Identifying Information for the Dependent Exemption Credit, attach the form and required documentation to their tax return, and write "no id" in the SSN field of line 10, Dependents, on Form 540, California Resident Income Tax Return. For each dependent being claimed that does not have an SSN and an ITIN, a form FTB 3568 must be provided along with supporting documentation.
CARES Act Qualified Employer Plan Loans. For taxable years beginning on or after January 1, 2020, California conforms to the qualified employer plan loans provision under the federal CARES Act which temporarily increases the amount of loans allowable from a qualified employer plan to $100,000 for coronavirus-related relief and delays by one year the due date for any repayment for an outstanding loan from a qualified employer plan if requirements are met.
Expansion for Credits Eligibility. For taxable years beginning on or after January 1, 2020, California expanded EITC and YCTC eligibility to allow either the federal ITIN or the SSN to be used by all eligible individuals, their spouses, and qualifying children. If an ITIN is used, eligible individuals should provide identifying documents upon request of the FTB. Any valid SSN can be used, not only those that are valid for work. Additionally, upon receiving a valid SSN, the individual should notify the FTB in the time and manner prescribed by the FTB. The YCTC is available if the eligible individual or spouse has a qualifying child younger than six years old.
Worker Status: Employees and Independent Contractors. Some individuals may be classified as independent contractors for federal purposes and employees for California purposes, which may also cause changes in how their income and deductions are classified. Proposition 22 was operative as of December 16, 2020 and may affect a taxpayer's worker classification.
Minimum Essential Coverage Individual Mandate. For taxable years beginning on or after January 1, 2020, California law requires residents and their dependents to obtain and maintain minimum essential coverage (MEC), also referred to as qualifying health care coverage. Individuals who fail to maintain qualifying health care coverage for any month during the taxable year will be subject to a penalty unless they qualify for an exemption.
Rental Real Estate Activities. For taxable years beginning on or after January 1, 2020, the dollar limitation for the offset for rental real estate activities shall not apply to the low income housing credit program.
R&TC Section 41 Reporting Requirements. Beginning in taxable year 2020, California allows individuals and other taxpayers operating under the personal income tax law to claim credits and deductions of business expenses paid or incurred during the taxable year in conducting commercial cannabis activity. Sole proprietors conducting a commercial cannabis activity that is licensed under California Medicinal and Adult-Use Cannabis Regulation and Safety Act should file form FTB 4197. The FTB uses information from form FTB 4197 for reports required by the California Legislature. Get form FTB 4197 for more information.
Net Operating Loss Suspension. For taxable years beginning on or after January 1, 2020, and before January 1, 2023, California has suspended the net operating loss (NOL) carryover deduction. Taxpayers may continue to compute and carryover an NOL during the suspension period. However, taxpayers with net business income or modified adjusted gross income of less than $1,000,000 or with disaster loss carryovers are not affected by the NOL suspension rules.
Excess Business Loss Limitation. The federal CARES Act made amendments to IRC Section 461(l) by eliminating the excess business loss limitation of noncorporate taxpayers for taxable year 2020 and retroactively removing the limitation for taxable years 2018 and 2019. California does not conform to those amendments.
Program 3.0 California Motion Picture and Television Production Credit. For taxable years beginning on or after January 1, 2020, California R&TC Section 17053.98 allows a third film credit, program 3.0, against tax. The credit is allocated and certified by the California Film Commission (CFC).
Business Credit Limitation. For taxable years beginning on or after January 1, 2020, and before January 1, 2023, there is a $5,000,000 limitation on the application of business credits for taxpayers. The total of all business credits including the carryover of any business credit for the taxable year may not reduce the "net tax" by more than $5,000,000. Business credits should be applied against "net tax" before other credits. Business credits disallowed due to the limitation may be carried over. The carryover period for disallowed credits is extended by the number of taxable years the credit was not allowed.
Loophole Closure and Small Business and Working Families Tax Relief Act of 2019. The Tax Cuts and Jobs Act (TCJA) signed into law on December 22, 2017, made changes to the IRC. California R&TC does not conform to all of the changes.
Like-Kind Exchanges. The TCJA amended IRC Section 1031 limiting the nonrecognition of gain or loss on like-kind exchanges to real property held for productive use or investment. California conforms to this change under the TCJA for exchanges initiated after January 10, 2019. California requires taxpayers who exchange property located in California for like.kind property located outside of California under IRC Section 1031, to file an annual information return with the FTB.
Young Child Tax Credit. For taxable years beginning on or after January 1, 2019, the refundable YCTC is available to taxpayers who also qualify for the California EITC and who have at least one qualifying child who is younger than six years old as of the last day of the taxable year.
Net Operating Loss Carrybacks. For taxable years beginning on or after January 1, 2019, net operating loss carrybacks are not allowed.
Alimony. California law does not conform to changes made by the TCJA to federal law regarding alimony and separate maintenance payments that are not deductible by the payor spouse, and are not includable in the income of the receiving spouse, if made under any divorce or separation agreement executed after December 31, 2018, or executed on or before December 31, 2018, and modified after that date (if the modification expressly provides that the amendments apply).
Small Business Accounting/Percentage of Completion Method. For taxable years beginning on or after January 1, 2019, California law generally conforms to the TCJA's definition of small businesses as taxpayers whose average annual gross receipts over three years do not exceed $25 million. These small businesses are exempt from the requirement of using the Percentage of Completion Method of accounting for any construction contract if the contract is estimated to be completed within two years from the date the contract was entered into. A taxpayer may elect to apply the provision regarding accounting for long term contracts to contracts entered into on or after January 1, 2018.
Student Loan Discharged Due to Closure of a For-Profit School. California law allows an income exclusion for an eligible individual who is granted a discharge of any student loan under specified conditions. This income exclusion has now been expanded to include a discharge of student loans occurring on or after January 1, 2019, and before January 1, 2024, for individuals who attended a Brightwood College school or a location of The Art Institute of California.
Charitable Contribution and Business Expense Deductions Disallowance. For taxable years beginning on or after January 1, 2014, California law disallows a charitable contribution deduction to an educational organization that is a postsecondary institution or to the Key Worldwide Foundation, and a deduction for a business expense related to a payment to the Edge College and Career Network, LLC, to a taxpayer who meets specific conditions, including that they are named in any of several specified criminal complaints.
Real Estate Withholding Statement. Effective January 1, 2020, the real estate withholding forms and instructions have been consolidated into one new Form 593, Real Estate Withholding Statement.
California Earned Income Tax Credit. For taxable years beginning on or after January 1, 2018, the age limit for an eligible individual without a qualifying child is revised to 18 years or older.
Native American Earned Income Exemption. For taxable years beginning on or after January 1, 2018, federally recognized tribal members living in California Indian country who earn income from any federally recognized California Indian country are exempt from California taxation. This exemption applies only to earned income.
IRC Section 965 Deferred Foreign Income. Under federal law, if you own (directly or indirectly) certain foreign corporations, you may have to include on your return certain deferred foreign income. California does not conform.
Global Intangible Low-Taxed Income (GILTI) Under IRC Section 951A. Under federal law, if you are a U.S. shareholder of a controlled foreign corporation, you must include your GILTI in your income. California does not conform.
Wrongful Incarceration Exclusion. California law conforms to federal law excluding from gross income certain amounts received by wrongfully incarcerated individuals for taxable years beginning before, on, or after January 1, 2018.
College Access Tax Credit. For taxable years beginning on and after January 1, 2017, and before January 1, 2023, the College Access Tax Credit (CATC) is available to entities awarded the credit from the California Educational Facilities Authority (CEFA). The credit is 50% of the amount contributed by the taxpayer for the taxable year to the College Access Tax Credit Fund.
Improper Withholding on Severance Paid to Veterans. The Combat Injured Veterans Tax Fairness Act of 2016 gives veterans who retired from the Armed Forces for medical reasons additional time to claim a refund if they had taxes improperly withheld from their severance pay. If you filed an amended return with the IRS on this issue, you have two years to file your amended California return.
California Achieving a Better Life Experience Program. For taxable years beginning on or after January 1, 2016, the California Qualified ABLE Program was established and California generally conforms to the federal income tax treatment of ABLE accounts. This program was established to help blind or disabled U.S. residents save money in a tax-favored ABLE account to maintain health, independence, and quality of life.
The California Franchise Tax Board has approved for filing all forms and schedules included in ProSeries/California.
You can file returns electronically with this version of ProSeries/California.
PDF attachments are supported for electronic filing with California returns. As you create returns for electronic filing, ProSeries will automatically track attachments required to be submitted with the California e-file return. If you would like to attach some or all of these attachments as PDF files you can now access that option for the California return under the e-file menu (either from within the return or on the HomeBase when the return is highlighted). The Electronic PDF attachments section of the California Information Worksheet, Part VII keeps track of required attachments that have been attached as PDF.
For a list of forms that can be e-filed, go to What's New This Year in Help Center.
If you prepare more than 100 California income tax returns annually and prepare one or more using tax preparation software, California requires that you e-file all personal income tax returns.
The California Franchise Tax Board scans computer-generated forms to quickly process the income tax returns it receives. To meet the requirements for producing computer-generated forms, ProSeries is required to limit the width of the tax information printed on forms that are scanned. In certain cases, data you entered may be truncated. After completing a tax return, review the information that prints (for example, mailing address information), make any necessary changes, and reprint the return before mailing it.
To avoid delays in the processing of tax returns, the Franchise Tax Board requests that all mailed tax returns are printed single sided only. Duplex printed tax returns can increase the amount of time to process the return.The Franchise Tax Board requires that all text data be printed in capital letters for imaging purposes. This does not apply to worksheets or any other non-FTB form.
The California Franchise Tax Board requires ProSeries to print only one payment voucher per page to enable these forms to be read by an automated scanner.
End of ProSeries/California ReadMe file