2017 Instructions for Form FTB 3805Z Enterprise Zone Business Booklet

References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2015, and to the California Revenue and Taxation Code (R&TC).

What’s New

Principal Business Activity Codes

The Principal Business Activity Codes, located at the end of these instructions, have been updated and revised to reflect updates to the North American Industry Classification System (NAICS).

General Information

In general, for taxable years beginning on or after January 1, 2015, California law conforms to the Internal Revenue Code (IRC) as of January 1, 2015. However, there are continuing differences between California and federal law. When California conforms to federal tax law changes, we do not always adopt all of the changes made at the federal level. For more information, go to ftb.ca.gov and search for conformity. Additional information can be found in FTB Pub. 1001, Supplemental Guidelines to California Adjustments, the instructions for California Schedule CA (540 or 540NR), and the Business Entity tax booklets.

The instructions provided with California tax forms are a summary of California tax law and are only intended to aid taxpayers in preparing their state income tax returns. We include information that is most useful to the greatest number of taxpayers in the limited space available. It is not possible to include all requirements of the California Revenue and Taxation Code (R&TC) in the instructions. Taxpayers should not consider the instructions as authoritative law.

Enterprise Zone (EZ) Incentives Repealed

For taxable years beginning on or after January 1, 2014, taxpayers cannot generate the following EZ incentives:

• Business Expense Deduction
• Net Interest Deduction
• Net Operating Loss

For taxable years beginning on or after January 1, 2014, taxpayers cannot generate any EZ Hiring Credit. However, qualified employees who are hired on or before December 31, 2013, by the qualified taxpayer within the EZ who paid or incurred qualified wages during the 60-month period immediately following the hire date, shall continue to qualify for the credit under this section for taxable years beginning on or after January 1, 2014.

For taxable years beginning on or after January 1, 2015, taxpayers cannot generate the EZ Sales or Use Tax Credit.

EZ Credits Carryover Period

The portion of any EZ sales or use tax credit or hiring credit remaining for carryover to taxable years beginning on January 1, 2014, shall be carried over only to the succeeding 10 taxable years if necessary, or until the credit is exhausted, whichever occurs first. Any hiring credits generated in the current taxable year for employees hired on or before December 31, 2013, and unusable in the current taxable year, may be carried over to the succeeding 10 taxable years.

Repeal of Geographically Targeted Economic Development Area Tax Incentives

The California legislature repealed and made changes to all of the Geographically Targeted Economic Development Area (G-TEDA) Tax Incentives. EZs and Local Agency Military Base Recovery Areas (LAMBRA) were repealed on January 1, 2014. The Targeted Tax Areas (TTA) and Manufacturing Enhancement Areas (MEA) both expired on December 31, 2012. For more information, go to ftb.ca.gov and search for repeal tax incentives.

EZ Incentives

Generally, no further EZ incentives can be generated after the expiration or repeal date. Any EZ credit carryover or EZ net operating loss carryover can continue to be utilized to the extent of tax on business income or business income attributable to the former EZ. For employers engaged in a trade or business in a former EZ, the hiring credit can be taken for qualified employees hired on or before the date of expiration or repeal of the EZ for the full five-year period of the hiring credit. However, the hiring credit may not be taken for any employees hired after the date of expiration or repeal of the EZ.

NASSCO AMT Reduction

The Board of Equalization ruled in the Appeal of NASSCO Holdings, Inc., 2010-SBE-001, November 17, 2010, that a corporate taxpayer may use EZ credits and/or the Manufacturing Investment Credit (MIC) to reduce corporate alternative minimum tax (AMT). Go to ftb.ca.gov and search for notice 2011-02 for additional information. However, the MIC carryover has expired. Therefore, corporate taxpayers can no longer use MIC carryover to offset against AMT.

Minimum Wage

For any employer who employs 25 or fewer employees, the California minimum wage is:

• $10.00 per hour from January 1, 2017 through December 31, 2017.
• $10.50 per hour from January 1, 2018 through December 31, 2018.

For any employer who employs 26 or more employees, the California minimum wage is:

• $10.50 per hour from January 1, 2017 through December 31, 2017.
• $11.00 per hour from January 1, 2018 through December 31, 2018.

Pass-Through Entities

For purposes of this booklet, the term “pass-through entity” refers to an S corporation, estate, trust, partnership, and a limited liability company (LLC). References to “partnerships” include LLCs classified as partnerships.

Single-Sales Factor Formula

R&TC Section 25128.7 requires all business income of an apportioning trade or business, other than an apportioning trade or business under R&TC Section 25128(b), to apportion its business income to California using the single-sales factor formula. For more information, get Schedule R, Apportionment and Allocation of Income, or go to ftb.ca.gov and search for single sales factor. However, business income apportioned to the EZ continues to be apportioned based on the property and payroll factors.

Assignment of Credit

Credit earned by members of a combined reporting group may be assigned to an affiliated corporation that is an eligible member of the same combined reporting group. A credit assigned may only be claimed by the affiliated corporation against its tax liability. For more information, see Schedule Z, Computation of Credit Limitations, on page 12, Assignment of Credit; or get form FTB 3544, Election to Assign Credit Within Combined Reporting Group; or form FTB 3544A, List of Assigned Credit Received and/or Claimed by Assignee; or go to ftb.ca.gov and search for credit assignment.

Introduction

Economic Development Area (EDA) Tax Incentives

California established four types of EDAs that have related tax incentives. These incentives have been established to stimulate growth and development in selected areas that were economically depressed. EDA tax incentives applied only to certain business transactions that were undertaken after an EDA had received final designation from the Housing and Community Development (HCD). Final designation was when the HCD designated an area to be an EDA. Tax incentives were available to individuals and businesses operating or investing within the geographic boundaries of the following EDAs:

• Enterprise Zones (repealed on January 1, 2014)
• Local Agency Military Base Recovery Areas (repealed on January 1, 2014)
• Manufacturing Enhancement Areas (designation expired on December 31, 2012)
• Targeted Tax Areas (designation expired on December 31, 2012)

Additional information on other EDAs can be found in the following Franchise Tax Board (FTB) tax booklets:

• The LAMBRA tax incentives, FTB 3807, Local Agency Military Base Recovery Area Business Booklet.
• The MEA hiring credit, FTB 3808, Manufacturing Enhancement Area Business Booklet.
• The TTA tax incentives, FTB 3809, Targeted Tax Area Business Booklet.

References in this booklet to the “EZ” are interpreted as “the boundaries of the former EZ as it existed on December 31, 2013.”

Reporting Requirement

California statutes require the FTB to provide information to the California Legislature regarding the number of businesses using the EDA tax incentives, types of EDA tax incentives being used, and in which EDAs the businesses are claiming the tax incentives.

Complete items A through I on Side 1 of form FTB 3805Z, Enterprise Zone Deduction and Credit Summary, as applicable. This information will be used to meet the FTB’s statutory reporting requirement.

Purpose

This booklet provides specific information on the available EZ tax incentives. Taxpayers operating or investing in a trade or business located within a designated EZ may be eligible for the following credit and/or claim the following credit carryover and carryover deduction:

• Hiring Credit
• Sales or Use Tax Credit Carryover
• NOL Carryover Deduction

Use this booklet to determine the correct amount of credits and deductions that a taxpayer may claim for operating or investing in a trade or business located within a designated EZ. Complete the worksheets in this booklet for each credit and deduction for which the business is eligible. Then enter the total credits and deductions on form FTB 3805Z.

Enterprise Zone Designation

EZs were established in California to provide tax incentives to businesses and allow private sector market forces to revive the local economy. The program offers special tax incentives to entities and individuals located in selected EZ areas and engaged in trades or businesses within the selected Standard Industrial Codes listed on page 19 of this booklet.

The areas listed below are the areas that have been officially designated as EZs.

Note: All EZs are repealed as of January 1, 2014.

Repealed zones

• Anaheim
• Arvin
• Barstow
• Calexico
• Coachella Valley
• Compton
• Delano
• Eureka
• Fresno – City
• Fresno – County
• Harbor Gateway Communities
• Hesperia
• Imperial Valley
• Kings County
• Long Beach
• Los Angeles – East (formerly Eastside)
• Los Angeles – Hollywood
• Merced (formerly Merced/Atwater)
• Oakland
• Oroville
• Pasadena
• Pittsburg-Bay Point
• Richmond
• Sacramento
• Salinas Valley
• San Bernardino (formerly Agua Mansa)
• San Diego
• San Francisco
• San Joaquin (formerly Stockton)
• San Jose
• Santa Ana
• Santa Clarita Valley
• Sequoia Valley
• Shasta Metro (formerly Redding/Anderson)
• Siskiyou County (formerly Shasta Valley)
• Southgate – Lynwood
• Stanislaus (including Ceres, Modesto, Turlock and Stanislaus County)
• Taft
• West Sacramento
• Yuba/Sutter

Expired zones

• Altadena/Pasadena
• Antelope Valley
• Bakersfield/Kern (formerly SE Bakersfield)
• Lindsay
• Los Angeles – Central City
• Los Angeles – Harbor Area
• Los Angeles – Mid-Alameda Corridor
• City of Lynwood
• Los Angeles – Northeast Valley
• Madera
• Pittsburg
• Porterville
• Sacramento – Army Depot
• Sacramento – Florin Perkins
• San Diego – South Bay
• San Diego – Metro
• San Francisco
• Shafter
• Watsonville

For business eligibility or zone related information, including questions regarding EZ geographic boundaries and designation period dates, contact the HCD at hcd.ca.gov and search for directory of zone contacts to find Directory of Economic Development Areas.

For information that is zone-specific but not tax-specific, you may contact the HCD. See page 23 for the HCD contact information.

Important Considerations

In general, EZ tax incentives applied only to investments and business activities undertaken within the EZ after the zone received final designation and before the designation expired or was repealed. The taxpayer could also claim the incentives when the zone received conditional designation.

Who Can Claim the EZ Tax Incentives?

The EZ credits and deductions are available to individuals, sole proprietors, corporations, estates, trusts, and partnerships operating or investing in a trade or business located within a designated EZ.

Forms List

The titles of forms referred to in this booklet are:

Form 100

California Corporation Franchise or Income Tax Return

Form 100S

California S Corporation Franchise or Income Tax Return

Form 100W

California Corporation Franchise or Income Tax Return – Water’s-Edge Filers

Form 109

California Exempt Organization Business Income Tax Return

Form 540

California Resident Income Tax Return

Long Form 540NR

California Nonresident or Part-Year Resident Income Tax Return

Form 541

California Fiduciary Income Tax Return

Form 565

Partnership Return of Income

Form 568

Limited Liability Company Return of Income

Schedule CA (540)

California Adjustments – Residents

Schedule CA (540NR)

California Adjustments – Nonresidents or Part-Year Residents

Schedule P (540)

Alternative Minimum Tax and Credit Limitations – Residents

Schedule P (540NR)

Alternative Minimum Tax and Credit Limitations – ­Nonresidents and Part-Year Residents

Schedule R

Apportionment and Allocation of Income

FTB Pub. 1061

Guidelines for Corporations Filing a Combined Report

Schedule C (100S)

S Corporation Tax Credits

Schedule D-1

Sales of Business Property

Schedule K-1 (100S)

Shareholder’s Share of Income, Deductions, Credits, etc.

Schedule K-1 (541)

Beneficiary’s Share of Income, Deductions, Credits, etc.

Schedule K-1 (565)

Partner’s Share of Income, Deductions, Credits, etc.

Schedule K-1 (568)

Member’s Share of Income, Deductions, Credits, etc.

FTB 3544

Election to Assign Credit Within Combined Reporting Group

FTB 3544A

List of Assigned Credit Received and/or Claimed by Assignee

How to Claim Deductions and Credits

To claim any EZ deduction or credit, attach a completed form FTB 3805Z to the ­California tax return.

Attach a separate form FTB 3805Z for each EZ business operating or investing within a designated EZ and for each EZ in which the business operates. Also complete the following schedule and/or worksheets:

• Corporations, complete Schedule Z and all the worksheets, except for Worksheet II, Income or Loss Apportionment, Section B.
• Sole proprietors, complete Schedule Z and all the worksheets.
• Trusts, estates, and partnerships, complete Worksheet IA Hiring Credit and Recapture, and Worksheet II, Section A.
• Individual investors receiving pass-through EZ credits, complete Worksheet II, Section B and Schedule Z. All other investors complete Worksheet II, Section A and Schedule Z.
• Individual investors receiving a pass-through loss, and having an overall NOL, complete Worksheet II, Section B and Worksheet III, Computation of NOL Carryover and Carryover Limitations. All other investors complete Worksheet III.

Schedule Z is on Side 2 of form FTB 3805Z.

To assist with the processing of the tax return, indicate that the business operates or invests within an EZ by doing the following:

Form 540 filers:

Claim EZ tax incentives on Form 540, lines 43 through 45, as applicable.

Long Form 540NR filers:

Claim EZ tax incentives on Long Form 540NR, lines 58 through 60, as applicable.

Form 100 filers:

Claim EZ tax incentives on Form 100, line 20, lines 24 through 26, as applicable.

Form 100S filers:

Claim EZ tax incentives on Form 100S, line 18, lines 22 through 24 as applicable.

Form 100W filers:

Claim EZ tax incentives on Form 100W, line 20, lines 24 through 26, as applicable.

Form 109 filers:

Check the “Yes” box for Question I at the top of Form 109, Side 1.

Keep all completed worksheets and supporting documents for your records.

Form FTB 3805Z – Instructions for Items A through I

For corporations, estates, trusts, exempt organizations, and sole proprietors, who operate a business in the EZ, complete items A through I.

Investors of pass-through entities, complete items A through D.

Standard Industrial Classification (SIC) and Principal Business Activity (PBA) Codes

The PBA codes are based on the North American Industry Classification System published by the United States Office of Management and Budget. The PBA codes are listed on page 20 through page 22 of this booklet. Enter the PBA code of your principal activities on form FTB 3805Z, Side 1.

For purposes of qualifying for the Long Beach EZ hiring credit, use the SIC codes listed on page 19. For the Long Beach EZ, enter the SIC code of the establishment that qualifies you to take this credit on form FTB 3805Z, Side 1. If your trade or business has more than one establishment, and if more than one of them qualifies you to take this credit, enter the SIC code that best represents your primary qualifying establishment.

Part I – Credits and Recapture

Line 1a – Hiring Credit

Note: All EZs are repealed as of January 1, 2014.

For employers engaged in a trade or business in a former (expired) or repealed EZ, the hiring credit can be taken for qualified employees hired on or before December 31, 2013, for the full 60-month period of the hiring credit. The hiring credit may not be taken for any employees hired on or after January 1, 2014. Hiring credits and carryovers may still be claimed to the extent of business income apportioned to the former expired or repealed EZ. The portion of any credit remaining for carryover to taxable years beginning on or after January 1, 2014, shall be carried over only to the succeeding 10 taxable years if necessary, or until the credit is exhausted, whichever occurs first. Any hiring credits generated in the current taxable year for employees hired on or before December 31, 2013, and unusable in the current taxable year, may be carried over to the succeeding 10 taxable years.

Employers hiring qualified employees, were required to obtain VoucherCert 10-07 from the local agency responsible for verifying employee eligibility on or before December 31, 2014. Do not file VoucherCert 10-07 with your tax return. Keep the voucher for your records. For vouchering questions, go to hcd.ca.gov and search for vouchering.

Employers engaged in a trade or business within an EZ may claim the hiring credit for a qualified employee. A qualified employee is an individual who meets all of the following:

• Was hired after the EZ received its final designation and before the designation expired.
• Spends at least 90% of work time for the qualified employer on activities directly related to the conduct of a trade or business located within an EZ.
• Performs at least 50% of the work for the qualified employer within the boundaries of the EZ.
• Qualifies for the former program area hiring credit or meets any of the following at the time of hire:
  1. A person receiving or eligible to receive subsidized employment, training, or services funded by the federal Job Training Partnership Act (JTPA) or its successor.
  2. A person eligible to be a voluntary or mandatory registrant under the Greater Avenues for Independence Act of 1985 (GAIN) or its successor.
  3. A member of a targeted group as ­defined in the federal Work ­Opportunity Tax Credit.
  4. An economically disadvantaged individual 14 years of age or older.
  5. A qualified dislocated worker.
  6. A disabled individual eligible for, enrolled in, or who completed a state rehabilitation plan.
  7. A service-connected disabled veteran.
  8. A veteran of the Vietnam era.
  9. A veteran who recently separated from military service.
  10. An ex-offender.
  11. A person eligible for, or a recipient of any of the following:
      • Federal Supplemental Security Income (SSI) benefits.
      • Aid to Families with Dependent Children (AFDC).
      • Supplemental Nutrition Assistance Program (SNAP).
      • State and local general assistance.
  12. A Native American.
  13. A resident of a targeted employment area (TEA).

For more information, refer to the federal JTPA or its successor, the Workforce Investment Act (WIA).

The percentage of wages used to compute the credit depends on the number of years the employee works for the employer in the EZ. The applicable percentage begins at 50% and declines 10% for each year of employment. After the fifth year of employment, no credit can be generated.

Wages that qualify for the hiring credit are those wages paid to a qualified employee for the consecutive 60-month period beginning on the first date the employee commenced employment with the employer. For this purpose, commencement of employment or the hire date is the first day of employment for which the individual receives wages/compensation. For an employer that operates a business that has regularly occurring seasonal or intermittent employment decreases and increases, reemployment of an individual is not a new hire; rather, it is a continuation of the prior employment and does not constitute commencement of employment for the qualified wages test.

The credit is based on the smaller of the following:

• The actual hourly rate paid or incurred by the employer for work performed by the employee during the taxable year.
• 150% of the minimum hourly wage established by the Industrial Welfare Commission.

Where the ­California minimum wage is higher than the federal minimum wage, the ­California minimum wage is used for purposes of computing the EZ hiring credit.

The California minimum wage were $8 per hour prior to July 1, 2014; $9.00 per hour from July 1, 2014 through December 31, 2015; and $10.00 per hour beginning on and after January 1, 2016.

For any employer who employs 25 or fewer employees, the California minimum wage is $10.00 per hour from January 1, 2017 through December 31, 2017. For purposes of computing the EZ hiring credit, 150% of the minimum wage is $15 per hour. For more information in regard to the California minimum wage, see General Information.

For purpose of the example below, the minimum wage prior to July 1, 2014, was $8.00 per hour. For purposes of computing the EZ hiring credit, 150% of the minimum wage was $12.00 per hour.

Example:

John Anderson was hired on January 1, 2013. John’s hourly rate for the first month was the minimum wage of $8.00. At the beginning of the second month, his hourly rate increased to $9.00. In the third month, John’s hourly rate increased to $13.00. The hourly rate that qualifies for the credit is limited to 150% of the minimum wage, or $12.00 per hour. The amount of qualified wages is computed as follows:

Long Beach Enterprise Zone

The percentage of wages on which the hiring credit is based increased for taxpayers engaged in aircraft manufacturing activities (described in Codes 3721, 3724, 3728, and 3812 of the Standard Industrial Classification Manual, 1987 Edition, published by the United States Office of Management and Budget). See page 19 for a list of qualified SIC codes. Qualified wages for purposes of the hiring credit for such aircraft manufacturers located in the Long Beach EZ, for up to a maximum of 1,350 qualified employees, are based on the smaller of the following:

• The actual hourly rate paid or incurred by the employer for work performed by the employee during the taxable year.
• The rates (based on the time qualified wages are paid or incurred) which represent 202% of the minimum hourly wage.

For any employer who employs 25 or fewer employees, the California minimum wage is $10.00 per hour from January 1, 2017 through December 31, 2017. For purposes of computing the EZ hiring credit, 202% of the minimum wage is $20.20 per hour.

Example:

John Anderson was hired on January 1, 2013. John’s hourly rate for the first month was $9.00. At the beginning of the second month, his hourly rate increased to $11.00. In the third month, John’s hourly rate increased to $16.50. The hourly rate that qualifies for the credit is limited to 202% of the minimum wage, or $16.16 per hour. The amount of qualified wages is computed as follows:

Record Keeping

Retain a copy of Form VoucherCert 10-07 and the documentation given to the vouchering agency. In addition, for each qualified employee, keep a schedule for the first 60 months of employment showing (at least):

• Employee’s name.
• Date the employee was hired.
• Number of hours the employee worked for each month of employment.
• Smaller of the hourly rate of pay for each month of employment or 150% (or 202%, if applicable) of the minimum wage.
• Location of the employee’s job site and duties performed.
• Records of any other federal or state subsidies received for hiring the qualified employee.
• Total qualified wages per month for each month of employment.

Line 1b – Hiring Credit Recapture

Recapture the amount of credit attributable to an employee’s wages if the employer terminates the employee at any time during the longer of either of the following:

• The first 270 days of employment (whether or not consecutive).
• 90 days of employment plus 270 calendar days.

Employers of seasonal employees recapture the amount of hiring credit attributable to the employee’s wages if both of these apply:

• The employer terminates the employee before the completion of 270 days of employment.
• The 270 days is during the 60-month period beginning the day the employee commences employment with the employer.

A “day of employment” means any day the employee receives wage compensation (including a paid sick day, holiday, or vacation day).

The employer adds to the current year’s tax the amount of credit claimed in the year of termination and all prior years in which the credit was claimed for the terminated employee.

The credit recapture does not apply if the termination of employment was any of the following:

• Voluntary on the part of the employee.
• In response to misconduct of the ­employee as defined in Cal. Code Regs., tit. 22, sections 1256-30 to 1256-43.
• Caused by the employee becoming disabled (unless the employee was able to return to work and the employer did not offer to reemploy the individual).
• Carried out so that other qualified individuals could be hired, creating a net increase in both the number of qualified employees and the number of hours worked.
• Due to a substantial reduction in the employer’s trade or business operations.

Instructions for Worksheet IA – Hiring Credit and Recapture

Section A – Credit Computation

Line 1, column (a)

Enter the name of each qualified employee. Attach additional schedule(s) if necessary.

Line 1, column (b) through column (f)

Enter in the appropriate columns the qualified wages paid or incurred during the taxable year to each qualified employee listed in column (a).

Example: If you are a 2014 calendar year taxpayer and you hired an employee on June 1, 2013, enter the total qualified wages paid to the employee for the period beginning January 1, 2014, and ending May 31, 2014, in column (b). You would enter the total qualified wages paid to the employee for the period beginning June 1, 2014, and ending December 31, 2014, in column (c).

The qualified wages from June 1, 2013 to December 31, 2013, were put in column (b) on the 2013 worksheet.

The credit computation is based on a 12 month period beginning with the employee’s hiring date.

Line 2, column (b) through column (f)

Add the amounts in each column.

Line 3, column (b) through column (f)

Multiply the total in each column of line 2 by the percentage in each column.

Line 5

The following credits reduce the EZ hiring credit in the taxable year these credits are accrued. Use the following worksheet to determine the amount to enter on this line.

Credit

1. LAMBRA Hiring Credit
2. Enter the amount here if for the 2017 taxable year you claimed the Federal Work Opportunity Tax Credit for employees hired on or after January 1, 2010, and before August 31, 2011 (excluding unemployed veterans and disconnected youths as described in IRC Section 51(d)(14)).
3. Total: Add line 1 and line 2. Enter on Worksheet IA, Section A, line 5

No other California jobs tax credit may be claimed for the same wage expense paid to employees shown in line 1, column (a).

Line 6

1. For partnerships, enter the amount from line 6 on form FTB 3805Z, Side 1, Part I, line 1a. Include the current year hiring amount on Forms 565 and 568, Schedule K, line 15f and the distributive share of the credit to partners and members on Schedule K-1, line 15f. In addition, add the entire amount of the credit on Schedule K, line 1, column (c).
2. For corporations, individuals, estates, and trusts, enter the amount from line 6 on Schedule Z, as follows:
   • Part II, line 8B, column (b) for ­corporations, individuals, estates, and trusts.
   • Part III, line 10, column (b) for S corporations.
   • Part IV, line 12, column (b) for ­corporations and S corporations subject to paying only the minimum franchise tax.

Important: Affiliated corporations that received credits assigned under R&TC Section 23663, do not include the assigned credits received on this worksheet. Those credits are entered and tracked on form FTB 3544A.

Credit Limitations

• Businesses reduce any deduction for wages by the amount of the hiring credit.
• S corporations are allowed only 1/3 of the EZ hiring credit by operation of law. S corporations reduce their wage deduction by 1/3 of the amount on Worksheet IA, Section A, line 6. Make the wage deduction adjustment on Form 100S, line 7. In addition, add back the entire amount of the credit on Form 100S, Schedule K, line 1, column (c).

  Example: In 2017, an S corporation qualified for a $3,000 EZ hiring credit. S corporations can claim only 1/3 of the credit ($3,000 x 1/3 = $1,000). Therefore, the S corporation must reduce its wage deduction by $1,000. On Form 100S, Schedule K, line 1, column (c), the S corporation would add $3,000 to its ordinary income or loss to reflect the credit passed through to the shareholder(s).

• The amount of hiring credit claimed may not exceed the amount of tax on the EZ business income in any year. Use Schedule Z to compute the credit ­limitation.
• In the case where the wage expense qualifies the business to take the EZ hiring credit as well as the LAMBRA, MEA, or TTA hiring credit, the business may claim only one credit.
• The portion of any credit remaining for carryover to taxable years beginning on or after January 1, 2014, shall be carried over only to the succeeding 10 taxable years if necessary, or until the credit is exhausted, whichever occurs first. In the case of an S corporation, 1/3 of the credit can be carried over if it cannot be used in the current year. The remaining 2/3 must be disregarded and may not be carried over.

For additional information about the treatment of credits for S corporations, see instructions for Schedule Z.

Section B – Credit Recapture

Line 1, column (a)

Enter the name of the terminated employee. Attach additional schedule(s) if necessary.

Line 1, column (b)

Enter the amount of credit recapture for each employee listed in column (a).

Line 2

Enter the amount from line 2, column (b) on form FTB 3805Z, Side 1, Part I, line 1b.

Also, include the amount of hiring credit recapture on your ­California tax return or schedule as follows:

• Form 100, Schedule J, line 5.
• Form 100S, Schedule J, line 5 and Schedule K-1 (100S), line 17d.
• Form 100W, Schedule J, line 5.
• Form 109, Schedule K, line 4.
• Form 540, line 63.
• Long Form 540NR, line 73.
• Form 541, line 37 and Schedule K-1 (541), line 14d.
• Form 565, Schedule K, line 20c and Schedule K-1 (565), line 20c.
• Form 568, Schedule K, line 20c and Schedule K-1 (568), line 20c.

Indicate that you included the hiring credit recapture on your tax return by writing “FTB 3805Z” in the space provided or next to the line on the schedule or form.

Partnerships identify the recapture amounts for partners and members on Schedule K-1 (565 or 568).

S corporation shareholders recapture the portion of credit that was previously claimed, based on the terminated employee’s wages. In addition, identify the recapture amount for shareholders on Schedule K-1 (100S). This amount will differ from the amount recaptured by the S corporation on Form 100S, Schedule J.

Line 1c – Sales or Use Tax Credit Carryover

All EZs are repealed as of January 1, 2014. For taxable years beginning on or after January 1, 2015, taxpayers cannot generate any sales or use tax credit. However, taxpayers can claim the EZ sales or use tax credit carryover from previous years to the extent of the amount of tax on the business income apportioned to the former EZ. The portion of any credit remaining for carryover to taxable years beginning on or after January 1, 2014 shall be carried over only to the succeeding 10 taxable years if necessary, or until the credit is exhausted, whichever occurs first.

Worksheet IA: Hiring Credit and Recapture – Enterprise Zones

Section A: Credit Computation

You cannot take the EZ hiring credit and another credit for the same wage expense.

1. 	Qualified wages paid or incurred for year of employment
   (a) Employee’s name	(b) 1st year	(c) 2nd year	(d) 3rd year	(e) 4th year	(f) 5th year

2. Total. See instructions: (b) 1st year, (c) 2nd year, (d) 3rd year, (e) 4th year, (f) 5th year
3. Multiply line 2 by the percentage for each column. See instructions: (b) 1st year: .50, (c) 2nd year: .40, (d) 3rd year: .30, (e) 4th year: .20, (f) 5th year: .10
4. Add the amounts on line 3, column (b) through column (f)
5. Enter the total amount of 2017 California and federal jobs tax credits allowed. See instructions.
6. Subtract the amount on line 5 from the amount on line 4 and enter the result here. See instructions.

Section B: Credit Recapture

1. (a) Terminated employee’s name	(b) Recapture amount

2. Total amount of credit recapture. Add the amount in column (b). See instructions for where to report on your California tax return.

Part II – Portion of Business Attributable to the Enterprise Zone

EZ tax credits are limited to the tax on business income attributable to operations within the EZ. EZ deductions are limited to business income attributable to operations within the EZ. If the business is located within and outside an EZ, or in more than one EZ, determine the portion of total business operations that are attributable to each EZ. Each taxpayer must complete one form FTB 3805Z for each zone, and therefore, must also compute the income limitation for each one.

For taxpayers operating in an expired EZ, any EZ credit or NOL carryover can be utilized to the extent of business income apportioned to the former EZ.

Business Income vs. Nonbusiness Income

Only business income is apportioned to the EZ to determine the incentive limitation.

Business income is defined as income arising from transactions and activities in the regular course of the trade or business. Business income includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the regular trade or business operations. Nonbusiness income is all income other than business income. See Cal. Code Regs., tit. 18 section 25120 for further references and examples of nonbusiness income.

For corporations and entities doing business in and outside of the enterprise zone, use Worksheet II, Section A, to determine the EZ apportionment factor to determine the amount of business income attributable to the Enterprise Zone.

Pass-through entities report to their shareholders, beneficiaries, partners, and members the following:

1. The distributive (or pro-rata for S corporations) share of the business income apportioned to the EZ.
2. The distributive (or pro-rata for S corporations) share of the business capital gains and losses apportioned to the EZ included in item 1.
3. The distributive (or pro-rata for S corporation) share of the EZ property and payroll to corporate partners, members, shareholders, beneficiaries.

Report these items as other information on Schedule K-1 (100S, 541, 565 or 568.)

For an individual, use Worksheet II, Section B to determine business income attributable to the EZ. Business income includes but is not limited to California business income or loss from federal Form 1040 (Schedule C, Profit or Loss from Business (Sole Proprietorship); Schedule D, Capital Gains and Losses; Schedule E, Supplemental Income and Loss; Schedule F, Profit or Loss from Farming); and California Schedule D-1, Sales of Business Property (or federal Form 4797, Sales of Business Property, if California Schedule D-1 is not needed), as well as wages. Be sure to include casualty losses, disaster losses, and any business deductions reported on federal Form 1040, Schedule A as itemized deductions.

Generally, all income which arises from the conduct of trade or business operations of a taxpayer is business income.

If you elected to claim part or all of your current year disaster loss under IRC Section 165(i)(1) on prior year’s tax return, do not include the amount of the loss that was claimed on prior year’s tax return in your current year business income from the EZ.

Apportionment

Business income is apportioned to an EZ by multiplying the total California business income of the taxpayer by a fraction. The numerator is the property factor plus the payroll factor, and the denominator is two. Loss is apportioned to an EZ by multiplying the taxpayer’s total overall business loss by a fraction. If a taxpayer conducts businesses in more than one EZ, the EZ apportionment factor and credit limitations are computed separately for each EZ.

Property Factor

Property is defined as the average value of all real and tangible personal property owned or rented by the business and used during the taxable year to produce business income.

Property owned by the business is valued at its original cost. Original cost is the basis of the property for federal income tax purposes (prior to any federal adjustment) at the time of acquisition by the business, adjusted for subsequent capital additions or improvements and partial dispositions because of sale or exchange. Allowance for depreciation is not considered.

Rented property is valued at eight times the net annual rental rate. The net annual rental rate for any item of rented property is the total rent paid for the property, less total annual subrental rates paid by subtenants.

Payroll Factor

Payroll is defined as the total amount paid to the business’s employees as compensation for the production of business income during the taxable year.

Compensation means wages, salaries, commissions, and any other form of remuneration paid directly to employees for personal services.

Payments made to independent contractors or any other person not properly classified as an employee are excluded.

Compensation Within the Enterprise Zone

Compensation is considered to be within the EZ if any of the following tests are met:

1. The employee’s services are performed within the geographical boundaries of the EZ.
2. The employee’s services are performed within and outside the EZ, but the services performed outside the EZ are incidental to the employee’s service within the EZ.

   Incidental means any temporary or transitory service performed in connection with an isolated transaction.

3. If the employee’s services are performed within and outside the EZ, the employee’s compensation is attributed to the EZ if any of the following items are met:
   1. The employee’s base of operations is within the EZ.
   2. There is no base of operations in any other part of the state in which some part of the service is performed, and the place from which the service is directed or controlled is within the EZ.
   3. The base of operations or the place from which the service is directed or controlled is not in any other part of the state in which some part of the service is performed and the employee’s residence is within the EZ.

      Base of operations is the permanent place from which employees start work and customarily return in order to receive instruction from the taxpayer or communications from their customers or persons; to replenish stock or other material; to repair equipment; or to perform any other functions necessary in the exercise of their trade or profession at some other point or points.

Corporations Filing a Combined Report

When determining the income attributable to the EZ, the business income of each corporation doing business in the EZ is the business income apportioned to California as determined under combined report mechanics. For more information on combined reports, get FTB Pub. 1061. Each corporation computes the income attributable to the EZ by multiplying California business by EZ apportionment factor computed in Worksheet II, Section A. The EZ property and payroll factors used to determine the EZ income includes only the taxpayer’s California amounts in the ­denominator. Each corporation doing business in the EZ compute the business income attributable to the EZ according to their own apportioned California business income and interstate apportionment factors.

Example: Computation of EZ income assigned to each entity operating within the EZ

Parent corporation A has two subsidiaries, B and C. Corporations A and B operate within an EZ. The combined group operates within and outside California and apportions its income to California using Schedule R. Assume the combined group’s business income apportioned to California was $1,000,000 and Corporation A’s and B’s share of business income assigned to California is $228,000 and $250,000 respectively. Corporation A’s and B’s separate EZ and separate California property and payroll factor amounts are shown as follows.

Business income apportioned to the EZ was determined as follows:

Instructions for Worksheet II – Income or Loss Apportionment

Section A – Income Apportionment

Use Worksheet II, Section A, Income Apportionment, to determine the amount of business income apportioned to the EZ.

If the business operates solely within a single EZ and all its property and payroll are solely within that single EZ, enter 100% (1.00) on Section A, line 4, column (c). Do not complete the rest of Worksheet II. The apportioned EZ business income determines the amount of the tax incentives that can be used. A taxpayer’s EZ business income is its California business income multiplied by the specific EZ apportionment percentage computed in Worksheet II, Section A.

Property Factor

When determining the income apportioned to the EZ, the numerator of the property factor is the average value of the real and tangible personal property owned or rented by the business and used within the EZ during the taxable year to produce EZ business income. See Worksheet II, Section A, column (b). The denominator of the property factor is the total average value of all the taxpayer’s real and tangible personal property owned or rented and used during the taxable year within California. See Worksheet II, Section A, column (a).

Payroll Factor

When determining income apportioned to the EZ, the numerator of the payroll factor is the taxpayer’s total compensation paid to the employees for working within the EZ during the taxable year. See Worksheet II, Section A, column (b). The denominator of the payroll factor is the taxpayer’s total compensation paid to employees working in California. See Worksheet II, Section A, column (a).

The average apportionment percentage shown on line 4 represents the portion of the taxpayer’s total business that is attributable to activities conducted within the EZ. Factors with zero balances in the totals of column (a) will not be included in the computation of the average apportionment percentage. For example, if the taxpayer does not have any payroll within or outside the EZ, the average apportionment percentage would be computed by dividing line 3 by one instead of by two as normally instructed.

Section B – Income or Loss Apportionment

Form 540 and Long Form 540NR filers, use Worksheet II, Section B to determine the amount to enter on the following:

• Worksheet III, line 1 and line 6
• Schedule Z, Part I, line 1 and line 3

Do not include disaster losses in any amounts used in the table.

Only California source business income is apportioned to the EZ. A taxpayer’s EZ business income is its California apportioned business income computed using Schedule R, multiplied by the specific EZ apportionment percentage computed using Worksheet II, Section A.

Determine which portion of the taxpayer’s net income is “business income” and which portion is “nonbusiness income.” Only business income is apportioned to the EZ. See Part II, Portion of Business Attributable to the Enterprise Zone instructions, for a complete discussion of business and nonbusiness income.

Part I – Individual Income and Expense Items

Wages

Taxpayers with wages from a company located within and outside an EZ determine the EZ wage income by entering the percentage of the time that they worked within the EZ in column (b). The percentage of time should be for the same period for which the wages entered on line 1 were earned. Determine this percentage based on their record of time and events such as a travel log or entries in a daily planner.

Part II – Pass-Through Income or Loss

Individuals with a Schedule K-1

The individual partner, member, or shareholder completes Worksheet II, Section B, Part II, Pass-Through Income or Loss, and Schedule Z, Computation of Credit Limitation.

Multiple Pass-Through Entities

If you are a shareholder, beneficiary, partner, or member of multiple pass-through entities located in the same enterprise zone, see the example for computing your enterprise zone business income.

Example:

Part III – Taxpayer’s Trade or Business

Business Income or Loss

Use business income or loss from federal Form 1040 Schedules C, C-EZ, E, and F, plus California adjustments from Schedule CA (540 or 540NR) for each trade or business. Also include business capital gains and losses from Schedule D and business gains and losses from California Schedule D-1 (or federal Form 4797, if California Schedule D-1 is not needed) as adjusted on Schedule CA (540 or 540NR).

Income Computation

Located Entirely Within the Enterprise Zone

Line 6 – Line 9: If your business operation reported on federal Form 1040 Schedule C, C-EZ, E, F, or other schedule is entirely within the EZ, enter the income or loss from this activity in column (a), and enter 1.00 in column (b).

Line 11 and Line 12: If the gain or loss reported on Schedule D or Schedule D-1 as adjusted on Schedule CA (540 or 540NR) was attributed to an asset used in an activity conducted entirely within the EZ, enter the gain or loss reported in column (a), and enter 1.00 in column (b).

Located Entirely Within California

Line 6 – Line 9: If your business operation reported on federal Form 1040 Schedule C, C-EZ, E, F, or other schedule is entirely within California, enter the income or loss from this activity in column (a). To determine the apportionment percentage in column (b), complete Worksheet II, Section A. Enter the percentage from Worksheet II, Section A, line 4, column (c) on Worksheet II, Section B, column (b).

Line 11 and Line 12: If the gain or loss reported on Schedule D or Schedule D-1 as adjusted on Schedule CA (540 or 540NR) was attributed to an asset used in an activity conducted entirely within California, enter the gain or loss reported in column (a). To determine the apportionment percentage in column (b), complete Worksheet II, Section A. Enter the percentage from Worksheet II, Section A, line 4, column (c) on Worksheet II, Section B, column (b).

Located Within and Outside the Enterprise Zone and California

Line 6 – Line 9: If your business operation reported on federal Form 1040 Schedule C, C-EZ, E, F, or other schedule is within and outside the EZ and California, get California Schedule R and complete line 1 through line 18b and line 28 through line 31. Enter the amount on Schedule R, line 18b and line 31 in column (a) of this worksheet. To determine the apportionment percentage in column (b), complete Worksheet II, Section A. Enter the percentage from Worksheet II, Section A, line 4, column (c) on Worksheet II, Section B, column (b).

When computing Schedule R, disregard any reference to Forms 100, 100S, 100W, 100X, 565, or 568. Also disregard any reference to Schedules R-3, R-4, or R-5.

Nonresidents that have an apportioning business that operates within the EZ should have already computed Schedule R, and can use those amounts when that schedule is referenced. Residents complete a Schedule R in order to determine their California source business income for purposes of the EZ credit computation.

Line 11 and Line 12: If the gain or loss reported on Schedule D or Schedule D-1 as adjusted on Schedule CA (540 or 540NR) was attributed to an asset used in an activity conducted within and outside the EZ and California, get Schedule R and complete Schedule R-1. Multiply the gain or loss reported by the percentage on Schedule R-1, Part A, line 2 or Part B, line 5 and enter the result in column (a). To determine the apportionment percentage in column (b), complete Worksheet II, Section A. Enter the percentage from Worksheet II, Section A, line 4, column (c) on Worksheet II, Section B, column (b).

Line 14 – If you are computing the EZ business income and the result on the Worksheet II, Section B, line 14, column (c) is a positive amount and:

• You have EZ NOL carryovers, enter the amount on Worksheet III, line 1 and line 6 (skip line 2 through line 5).
• You have EZ credit or credit carryovers, enter the amount on Schedule Z, Part I, line 1 and line 3 (skip line 2).

If the amount is negative, you do not have any business income attributed to the EZ and you cannot utilize any EZ NOL carryover, credit(s), or credit carryover(s) in the current taxable year.

Worksheet II: Income or Loss Apportionment – Enterprise Zones

Section A: Income Apportionment

Use Worksheet II, Section A, if your business has net income from sources within and outside an EZ.

Section B: Income or Loss Apportionment

Part I: Individual Income and Expense Items

See instructions.

Part II: Pass-Through Income or Loss

See instructions.

Part III: Taxpayer’s Trade or Business

See instructions.

Part III – Net Operating Loss (NOL) Carryover and Deduction

All EZs are repealed as of January 1, 2014.Taxpayers can no longer generate any EZ NOL beginning on or after January 1, 2014. However, taxpayers can claim an NOL carryover deduction from prior years.

For NOLs incurred in taxable years beginning on or after January 1, 2008, California has extended the NOL carryover period to 20 taxable years following the year of the loss. A business that operates or invests within an EZ that generated an NOL in a taxable year beginning before January 1, 2008, can carry the NOL forward 15 years. In addition, up to 100% of the NOL generated in an EZ can be carried forward.

For taxable years beginning in 2010 and 2011, California suspended the NOL carryover deduction. Taxpayers continued to compute and carryover NOLs during the suspension period. However, taxpayers with net income after state adjustments (pre-apportioned income) (corporations) or with modified adjusted gross income (individuals) of less than $300,000, or with disaster loss carryovers are not affected by the NOL suspension rules.

Corporations use line 17 of Forms 100 and 100W, or line 14 less line 16 of Form 100S to determine net income after state adjustments (pre-apportioned income).

Individuals use the amount shown on your federal tax return for the same taxable year without regard to the federal NOL deduction (Form 540/540NR, line 13, plus the federal NOL deduction listed on Schedule CA (540/540NR) column C, line 21c).

For taxable years beginning in 2008 and 2009, California suspended the NOL carryover deduction. Taxpayers continued to compute and carryover NOL during the suspension period. However, taxpayers with taxable income (corporations), net business income (individuals) of less than $500,000, or with disaster loss carryovers were not affected by the NOL suspension rules.

The carryover periods for any NOL or NOL carryover, for which a deduction is disallowed because of the 2008 - 2011 suspension, are extended by:

• One year for losses incurred in taxable years beginning on or after January 1, 2010, and before January 1, 2011.
• Two years for losses incurred in taxable years beginning before January 1, 2010.
• Three years for losses incurred in taxable years beginning before January 1, 2009.
• Four years for losses incurred in taxable years beginning before January 1, 2008.

For taxable years beginning in 2002 and 2003, California had suspended the NOL carryover deduction. Taxpayers continued to carryover an NOL during the suspension period. The carryover period for suspended losses was extended by two years for losses incurred before January 1, 2002, and by one year for losses incurred on or after January 1, 2002, and before January 1, 2003.

The business cannot generate NOLs from activities within the EZ before the first taxable year beginning on or after the date the EZ is officially designated.

Limitation

An EZ NOL carryover deduction can only offset business income attributable to operations within the EZ.

Election

If you elected and designated the carryover category (general or specific, EZ or LAMBRA NOL) on the original tax return for the year of a loss, file form FTB 3805Z for each year in which an EZ NOL deduction is being taken. The election is irrevocable.

If you elected the EZ NOL deduction, you are prohibited by law from carrying over any other type of NOL, relating to EZ activities, from this year.

Alternative Minimum Tax

For taxpayers claiming an EZ NOL carryover deduction, use Schedule P (100, 100W, 540, 540NR, or 541) to compute the NOL for alternative minimum tax purposes.

S Corporations

EZ NOLs incurred prior to becoming an S corporation cannot be used against S corporation income. See IRC Section 1371(b).

However, an S corporation is allowed to deduct an EZ NOL incurred after the “S” election is made. An S corporation may use the NOL carryover as a deduction against income subject to the 1.5% entity-level tax (3.5% for financial S corporations). The expenses (and income) giving rise to the loss are also passed through to the shareholders in the year the loss is incurred.

Combined Report

Corporations that are members of a unitary group filing a combined report must separately compute loss carryover for each corporation in the group (R&TC Section 25108) using their individual apportionment factors.

Unlike the NOL treatment on a federal consolidated tax return, a loss carryover for one member included in a combined report may not be applied to the intrastate apportioned income of another member included in a combined report.

Water’s-Edge Taxpayer

For any water’s-edge taxpayer, R&TC Section 24416(c) imposes a limitation on the NOL deduction if the NOL is generated during a non-water’s edge tax year. The NOL carryover is limited to the lesser of the NOL or the re-computed NOL. The re-computed NOL carryover is determined by computing the income and factors of the original worldwide combined reporting group, as if the water’s-edge election had been in force for the year of the loss. R&TC Section 24416(c) serves as a limitation. If this section applies, the NOL carryover for each corporation may only be decreased, not increased.

Instructions for Worksheet III – Computation of NOL Carryover and Carryover Limitations

Individuals, exempt trusts, and corporations with current year income and prior year EZ NOL carryover complete Worksheet III.

An EZ NOL carryover deduction can only offset business income attributable to operations within the EZ. Use this worksheet to compute the NOL carryover deduction for individuals, exempt trusts, and corporations to reduce current year business income from the EZ.

Line 1

See Part II for a discussion of business and nonbusiness income.

Form 540 and Form 540NR filers:

Be sure to include casualty losses, disaster losses, and any business deductions reported on federal Schedule A as itemized deductions.

Exception: If you elected to claim part or all of your current year disaster loss under IRC Section 165(i)(1) on prior year’s tax return, do not include the amount of loss that was claimed on prior year’s tax return in your current year business income for the EZ.

Line 2

In modifying your income, deduct your capital losses only up to your capital gains. Enter as a positive number any net capital losses included in line 1.

Line 3

Corporations must reduce income by the disaster loss deduction and the deduction for excess net passive income.

Line 6

This is your modified taxable income (MTI). You may reduce this amount by your EZ NOL carryover deduction. Your EZ NOL carryover deduction may not be larger than your MTI. If your MTI is a loss in the current year or if it limits the amount of NOL you may use this year, carry over the NOL to future years.

Line 7

Enter the amount from line 6 in line 7, column (d). If this amount is zero or negative, transfer the amounts from line 9 through line 25, column (b) to column (e), and go to line 26.

Line 8 through Line 25

Enter the amounts on line 8 through line 25 as positive numbers.

In column (c), enter the smaller of the amount in column (b) or the amount in column (d) from the previous line.

In column (d), enter the result of subtracting column (c) from the balance on the previous line in column (d).

In column (e), enter the result of subtracting the amount in column (c) from the amount in column (b), as applicable.

Example:

Line 26

Total the amounts in column (b) and column (e). Enter the totals from line 26, columns (b), and (e) on form FTB 3805Z, Side 1, line 3a and line 3c, accordingly.

Your EZ NOL carryover deduction for 2017 is the total of column (c). Enter this amount on your California tax return or schedule as follows:

• Form 100, line 20
• Form 100S, line 18
• Form 100W, line 20
• Form 109, line 6
• Schedule CA (540), line 21(e), column B
• Schedule CA (540NR), line 21(e), column B

Worksheet III: Computation of NOL Carryover and Carryover Limitations – Enterprise Zones

See instructions.

1. Enter the amount from Form 100, line 17; Form 100W, line 17; Form 100S, combined amounts of line 14 and line 16; or Form 109, line 1 or line 4. Form 540 or Long Form 540NR filers, enter the total from Worksheet II, Section B, line 14, column (c) on line 1 and line 6 (skip line 2 through line 5). See instructions. Corporations filing a combined report, enter the taxpayer’s business income assigned to California. See instructions for Part II.
2. 1. Form 100, Form 100W, Form 100S, and Form 109 filers: Enter any nonbusiness income included in line 1 as a negative number. Form 540 and Long Form 540NR filers leave blank.
   2. Form 100, 100W, 100S, and 109 filers: Enter any nonbusiness loss included in line 1 as a positive number. Form 540 and Long Form 540NR filers leave blank.
   3. Combine line 2a and line 2b.
3. Form 100 and Form 100W filers: Enter the amount from Form 100, line 21 or Form 100W, line 21. Form 100S filers: Enter the total of the amounts from Form 100S, line 16 and line 19. Form 540, Long Form 540NR, and Form 109 filers: Enter -0-. Enter this amount as a negative number.
4. Combine line 1, line 2c, and line 3. If zero or less, enter -0- on line 6.
5. Enter the average apportionment percentage from Worksheet II, Section A, line 4.
6. Modified taxable income. Multiply line 4 by line 5. See instructions.

Schedule Z – Computation of Credit Limitations

Credit Limitations

The amount of EZ credits you can claim on your California tax return is limited by the amount of tax attributable to EZ business income. The amount of tax attributable to the EZ business income is computed in this schedule. For corporations and other entities doing business in the enterprise zone, the EZ business income is computed in this schedule using the EZ apportionment factor formula computed on Worksheet II, Section A. For individuals, the EZ business income is computed on Worksheet II, Section B. Use Schedule Z to compute this limitation.

Assignment of Credit

Credit earned by members of a combined reporting group may be assigned to an affiliated corporation that is an eligible member of the same combined reporting group. A credit assigned may only be claimed by the affiliated corporation against its tax liability.

The eligible assignee shall be treated as if it originally generated the assigned credit. Any credit limitations or restrictions that applied to the assignor will also apply to the eligible assignee. The amount of EZ credits you may claim on your California tax return is limited to the tax attributable to a specific EZ. For zone credits assigned, the assignee must have a tax liability as a result of income generated in the same zone that the original credit was generated. For example, if the original credit was generated in the Fresno City EZ of the assignor, the assignee must have a tax liability on the income attributable to the Fresno City EZ in order to use the assigned credit. For more information on credit assignment, get form FTB 3544, or form FTB 3544A or go to ftb.ca.gov and search for credit assignment.

Other Limitations

If a taxpayer owns an interest in a disregarded business entity, the amount of the credit that can be utilized is limited to the difference between the taxpayer’s regular tax computed with the income of the disregarded entity, and the taxpayer’s regular tax computed without the income of the disregarded entity. Partnerships allocate the credit among the partners according to the partner’s distributive share as determined in a written partnership agreement. See R&TC Section 17039(e)(2).

Credits you are otherwise eligible to claim may be limited. Do not apply credits against the minimum franchise tax (corporations and S corporations), the annual tax (partnerships and QSub), the alternative minimum tax (exempt organizations, individuals, and fiduciaries), the built-in gains tax (S corporations) or the excess net passive income tax (S corporations).

Refer to the credit instructions in your tax booklet for more information.

S Corporations and the Application of Enterprise Zone Credits

The credits earned by an S corporation may be used to reduce EZ tax at both the corporate and the shareholder levels.

An S corporation may use 1/3 of the EZ credit to reduce the tax on the S corporation’s EZ business income. In addition, S corporation shareholders may claim their pro-rata share of the entire amount of the EZ credits computed under the Personal Income Tax Law.

Example: In 2017, an S corporation qualified for a $3,000 EZ hiring credit. The S corporation will be able to use 1/3 of the credit ($3,000 x 1/3 = $1,000), to offset the tax on the S corporation’s EZ business income.

The S corporation will also pass through a $3,000 credit to its shareholders to offset their individual tax (computed under the Personal Income Tax Law) on EZ business income.

S corporations attach form FTB 3805Z to Form 100S, California S Corporation Franchise or Income Tax Return, to claim the tax credits.

Shareholders should attach Schedule(s) K-1 (100S).

Carryover

If the amount of EZ credit available this year exceeds your tax, you may carry over any excess credit to future years. The portion of any credit remaining for carryover to taxable years beginning on or after January 1, 2014, shall be carried over only to the succeeding 10 taxable years if necessary, or until the credit is exhausted, whichever occurs first. Apply the carryover to the earliest taxable year possible. In no event can the credit be carried back and applied against a prior year’s tax. Generally, the credit cannot be transferred to another taxpayer unless:

• There was a qualifying merger.
• The credit qualifies under R&TC Section 23663 for assignment to an affiliated corporation. For additional information, get form FTB 3544, or form FTB 3544A.

For S corporations, the amount of the 1/3 credit that is in excess of the 1.5% entity-level tax (3.5% for financial S corporations) in the current year may also be carried forward and used in future years to offset the S corporation entity-level tax. See the instructions for Schedule Z, Part III for more information.

If a C corporation had unused credit carryovers when it elected S corporation status, the carryovers were reduced to 1/3 and transferred to the S corporation. The remaining 2/3 were disregarded. The allowable carryovers may be used to offset the 1.5% tax on net income in accordance with the respective carryover rules. These C corporation carryovers may not be passed through to shareholders. For more information, get Schedule C (100S), S Corporation Tax Credits.

Credit Code

Use credit code 176 to claim the EZ hiring credit and sales or use tax credit carryover on your tax return. Using an incorrect code may cause a delay in allowing the credit(s).

Instructions for Schedule Z – Computation of Credit Limitations

Reporting Requirements of S Corporations, Estates, Trusts, and Partnerships

• Partnerships and LLCs treated as partnerships do not complete Schedule Z. The partners and members of these types of entities should compute their EZ income from all sources by completing the Schedule Z to determine the amount of EZ credits that they may claim on their California tax return. For individual partners, report the distributive share of all the business income apportioned to the EZ. For corporate partners, report the distributive share of the EZ property and payroll. Report these items as other information on Schedule K-1 (565).
• S corporations and their shareholders complete Schedule Z.
• Report to shareholders, beneficiaries, partners, and members, the distributive or pro-rata share of business income, loss, and deductions apportioned to the zone.
• Separately state any distributive or pro-rata share of business capital gains and losses apportioned to the zone included in the amount above.

S Corporations

Complete only Part I and Part III of Schedule Z if your entity-level tax before credits is more than the minimum franchise tax.

Corporations and S corporations subject to the minimum franchise tax only

Complete only Part IV of Schedule Z.

All others

Complete Part I and Part II of Schedule Z.

Part I – Computation of Credit Limitations

For filers with NOL carryovers.

• Complete Worksheet III first if you have an NOL carryover.
• Then complete Schedule Z if you have any EZ credits.

If you do not have any NOL carryovers:

• Individuals: Go to Worksheet II, Section B. Follow the instructions there. Enter the amount from Worksheet II, Section B, line 14, column (c) on Schedule Z, Part I, line 1 and line 3 (skip line 2).
• Corporations: Follow the instructions for line 1 below.

Only business income is apportioned to the EZ to determine the incentive limitation. Business income is defined as income arising from transactions and activities in the regular course of the trade or business. Business income includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the regular trade or business operations. Nonbusiness income is all income other than business income.

For corporations filing a combined report, the business income of each corporation doing business in the EZ is the business income apportioned to California as determined under combined report mechanics. Get FTB Pub. 1061 for more information on combined reports and entity income apportionment.

Line 1

Enter all trade or business income. See form FTB 3805Z, Part II instructions for the definition of business income.

If a C corporation has a net loss for regular tax purposes, but has positive Alternative Minimum Taxable Income (AMTI), enter the taxpayer’s apportioned AMTI.

Line 2

If your business is located entirely within the EZ, enter 1.

This percentage is the apportionment percentage computed by the entity using Worksheet II, Section A, and represents the percentage of the entity’s business income attributable to the EZ.

Line 6a

Compute the tax as if the EZ taxable income represented all of your taxable income.

Individuals

Use the tax table or tax rate schedule in your tax booklet for your filing status.

Exempt organizations

Use the applicable tax rate in your tax booklet.

Corporations and S Corporations

Use the applicable tax rate.

If the amount on line 6a is the minimum franchise tax ($800), you cannot use your EZ credits this year. Complete Part IV of Schedule Z to compute the amount of credit carryover.

If a C corporation has a net loss for regular tax purposes and entered apportioned AMTI on line 1, use the applicable AMT rate. The result is the limitation based on EZ business income. Enter this amount on Part II, line 8A, column (f).

Example: Determination of EZ Income for Shareholders, Partners, or Members of Pass-Through Entities

John Anderson is vice president of ABC, Inc., an S corporation that has two locations: one in an EZ and one outside an EZ. Eighty percent (80%) of the S corporation’s business is attributable to the EZ.

This percentage was determined by ABC, Inc. using form FTB 3805Z, Worksheet II, Section A, when ABC’s S corporation tax return (Form 100S) was prepared. John divides his time equally (50/50) between the two offices of ABC, Inc.

Jackie Anderson (John’s spouse/RDP) works for ABC, Inc. at its office located in the EZ.

John and Jackie Anderson have the following 2017 items of California income and expense:

• John’s salary from ABC, Inc: $100,000
• Jackie’s salary from ABC, Inc: 75,000
• Interest on savings account: 1,000
• Dividends: 3,000
• Schedule K-1 (100S) from ABC, Inc.: Ordinary income: 40,000
• John’s unreimbursed employee expenses from federal Schedule A: (2,000)

The Anderson’s EZ business income (total amount to be reported on line 3) is computed as follows:

• John’s EZ salary ($100,000 × 50%): $50,000
• Jackie’s EZ salary ($75,000 × 100%): 75,000
• Pass-through ordinary income from ABC, Inc. ($40,000 × 80%): 32,000
• John’s unreimbursed employee business expenses (2,000 × 50%): (1,000)
• Total EZ income (Schedule Z, Part I, line 3): $156,000

The standard deduction and personal or dependency exemptions are not included in the computation of EZ business income since they are not related to trade or business activities.

John and Jackie compute the tax (to be entered on Schedule Z, Part I, line 6a) on the total EZ business income of $156,000 (as if it represents all of their income).

Line 6b – Corporations and S corporations

If the amount on line 6b is the minimum franchise tax ($800), you cannot use your EZ credits this year. Complete Part IV of Schedule Z to compute the amount of credit carryover.

Part II – Limitation of Credits for Corporations, Individuals, Estates, and Trusts

Use Part II of Schedule Z if you are a corporation, individual, estate, or trust. Corporations and S corporations that are subject to paying only the minimum franchise tax, go to Part IV.

Individuals that received a Schedule K-1, complete Schedule Z, Part II, using the information from the Schedule K-1.

Line 8A, column (f)

Enter the amount from line 7. This is the amount of limitation based on the tax on EZ business income.

Line 8A, column (g)

Enter the amount of credit that is used on Schedule P (100, 100W, 540, 540NR, or 541), column (b). The amount cannot be greater than the amount on line 8A, column (f) or the amount computed on line 8B, column (e). Enter this amount on form FTB 3805Z, Side 1, line 1a.

Line 8B, column (b)

Enter the amount of the current year credit that was computed on Worksheet IA, Section A, line 6. Individuals enter the current year hiring credit from the Schedule K-1.

Line 8B, column (c)

Enter the amount of the total prior year credit carryover. This is the amount of credit that was previously computed on Worksheet IA, Section A in the prior year minus the amount that was allowed to be taken on the prior year tax return.

Line 8B, column (d)

Enter the amount of credit assigned to affiliated corporations that are members of the same combined reporting group from form FTB 3544, column (g). Only C corporations who completed the form will enter an amount in this column. Individuals, and Estates and Trusts, leave blank and go to column (e) instructions.

Line 8B, column (e)

Add the amount of the current year credit on line 8B, column (b) and the amount of the total prior year carryover on line 8B, column (c), then subtract the amount on line 8B, column (d), if any.

Line 8B, column (f)

Compare the amounts on line 8A, column (f) and line 8A, column (g). Enter the smaller amount.

Line 8B, column (h)

Subtract the amount on line 8B, column (f) from the amount on line 8B, column (e). Enter the result on line 8B, column (h). This is the amount of credit that can be carried over to future years.

This carryover includes both the Schedule P (100, 100W, 540, 540NR, or 541) limitation and the limitation based on EZ business income.

Line 9A, column (f)

Subtract the amount on line 8B, column (f) from the amount on line 8A, column (f). If the result is zero, your remaining credits are limited and must be carried over to future years. In this case, enter the amount from line 9B, column (e) on line 9B, column (h).

Line 9A, column (g)

Enter the amount of credit that is used on Schedule P (100, 100W, 540, 540NR, or 541), column (b). The amount cannot be greater than the amount on line 9A, column (f) or the amount computed on line 9B, column (e). Enter this amount on form FTB 3805Z, Side 1, line 1c.

Line 9B, column (c)

Enter the amount of the total prior year credit carryover from prior year Schedule Z, Part II, line 9B, column (h).

Line 9B, column (d)

Enter the amount of credit assigned to affiliated corporations that are members of the same combined reporting group from form FTB 3544, column (g). Only C corporations who completed the form will enter an amount in this column. Individuals, and Estates and Trusts, leave blank and go to column (e) instructions.

Line 9B, column (e)

Subtract the amount on line 9B, column (d), if any, from the total prior year carryover on line 9B, column (c).

Line 9B, column (f)

Compare the amounts on line 9A, column (f) and line 9A, column (g). Enter the smaller amount.

Line 9B, column (h)

Subtract the amount on line 9B, column (f) from the amount on line 9B, column (e). Enter the result on line 9B, column (h). This is the amount of credit that can be carried over to future years.

This carryover includes both the Schedule P (100, 100W, 540, 540NR, or 541) limitation and the limitation based on EZ business income.

Example: Part II

Assume the ABC Business has $8,000 of tax. The business computed a credit limitation based on zone income of $7,000 on Schedule Z, line 7.

The business has the following credits:

• Hiring credit — $500 and a $300 carryover from a prior year
• Sales or use tax credit carryover — $9,000

Schedule Z, Part II would be computed as follows:

Part II: Limitation of Credits for Corporations, Individuals, Estates, and Trusts. See instructions.

Part III – Limitation of Credits for S Corporations Only

Use Part III of Schedule Z only if you are an S corporation. Adjust Schedule C (100S) to reflect the EZ business tax limitation (Part I, line 7) after completing this worksheet.

Line 10, column (b)

Enter the amount of current year credit that was computed on Worksheet IA in column (b) for line 10. Also include this amount on Form 100S, Schedule K, line 13d.

Line 10, column (c)

Multiply the amount on line 10, column (b) by 1/3. Enter this amount in column (c). The amount in column (c) is the maximum amount of the current year credit that may be used by the S corporation to offset its 1.5% entity-level tax (3.5% for financial S corporations).

Also include this amount on Schedule C (100S).

Line 10, column (d)

Enter the amount of total prior year credit carryover. This is the amount of credit that was previously computed on the prior year Worksheet IA, minus the amount that was allowed to be taken on the prior year return.

Line 11, column (d)

Enter the amount of the total prior year credit carryover from prior year Schedule Z, Part III, line 11, column (g).

Line 10 and Line 11, column (e)

Add the amounts of the current year credits in column (c), as applicable, and the total prior year carryovers in column (d).

Line 10 and Line 11, column (f)

Enter the credit amounts that were used by the S corporation in the current year to offset its 1.5% entity-level tax (3.5% for financial S corporations). Enter the amounts in column (f) for line 10 and line 11 on form FTB 3805Z, Side 1, line 1a and line 1c, as applicable.

Line 10 and Line 11, column (g)

Subtract the amount in column (f) for each line from the amounts in column (e). These are the credit amounts that can be carried over to future years and used by the S corporation.

Part IV – Limitation of Credits for Corporations and S Corporations Subject to Paying Only the Minimum Franchise Tax

Use Part IV of Schedule Z if you are a corporation or S corporation subject to paying only the minimum franchise tax.

Line 12, column (b)

Enter the amount of current year credit that was computed on Worksheet IA. S corporations may enter only 1/3 of the amount from Worksheet IA on line 12, column (b).

Line 12, column (c)

Enter the amount of the total prior year credit carryover. This is the amount of credit that was previously computed on Worksheet IA in the prior year, minus the amount that was allowed to be taken on the prior year return. S corporations may only enter 1/3 of the amount from Worksheet IA in the prior year, minus the amount that was allowed to be taken on the prior year return.

Line 13, column (c)

Enter the amount of the total prior year credit carryover from prior year Schedule Z, Part IV, line 13, column (e).

Line 12 and Line 13, column (d)

Enter the amounts of credits assigned to affiliated corporations that are members of the same combined reporting group from form FTB 3544, column (g). Only C corporations who completed the form will enter an amount in this column. S corporations, leave blank and go to column (e) instructions.

Line 12 and Line 13, column (e)

Add the amounts in column (b), as applicable, and column (c) for line 12 and line 13, then subtract the amounts in column (d), if any, for line 12 and line 13. These are the credit amounts that can be carried over to future years.

Standard Industrial Classification Manual, 1987 Edition (Partial Listing)

The Standard Industrial Classification (SIC) Manual classifies business activities based upon establishments, which are defined in the SIC Manual as an economic unit, generally at a single physical location, where business is conducted, or where services or industrial operations are performed. A taxpayer’s enterprise may consist of more than one establishment. The SIC Manual provides the following examples of establishments: A factory, mill, store, hotel, movie theater, mine, farm, ranch, bank, railroad depot, airline terminal, sales office, warehouse, or central administrative office. Where distinct and separate economic activities are performed at a single physical location (such as construction activities operated out of the same physical location as a lumber yard), each activity should be treated as a separate establishment where:

1. No one industry description in the SIC Manual includes such combined activities.
2. The employment in each economic activity is significant.
3. Separate reports are prepared on the number of employees, their wages and salaries, sales or receipts, property and equipment, and other types of financial data, such as financial statements, job costing, and profit center accounting.

The SIC Manual is organized using a hierarchical structure, first by division, next by two-digit major groups within each division, then by three-digit industry groups within each major group, and finally by four-digit industry codes within each industry group.

For purposes of this publication, SIC Codes 3721, 3724, 3728, and 3812 are listed since only Long Beach taxpayers with establishments in these industry codes qualify for the EZ hiring credit.

The complete Standard Industrial Classification Manual, 1987 Edition, is available for purchase from:

Mail

National Technical Information Service
5301 Shawnee Road
Alexandria, VIRGINIA
22312
Order No. PB 87-100012

Or to view the manual, go to osha.gov and search for SIC code.

The four-digit industry codes within Division D of the SIC Manual are:

3721

Research and Development on Aircraft

3724

Aircraft Engines and Engine Parts

3728

Aircraft Parts and Auxiliary Equipment, not elsewhere classified

3812

Search and Navigation Equipment

FTB 3805Z
Principal Business Activity Codes

This list of principal business activities and their associated codes is designed to classify a business by the type of activity in which it is engaged to facilitate the administration of the California Revenue and Taxation Code (R&TC). These principal business activity codes are based on the North American Industry Classification System published by the United States Office of Management and Budget.

For purposes of qualifying for the Long Beach EZ hiring credit, refer to the Standard Industrial Classification Manual (SIC). A partial listing of the SIC codes is located on page 19 of this booklet.

Agriculture, Forestry, Fishing, and Hunting

Crop Production

Code

 

111100

Oilseed & Grain Farming

111210

Vegetable & Melon Farming (including potatoes & yams)

111300

Fruit & Tree Nut Farming

111400

Greenhouse, Nursery, & Floriculture Production

111900

Other Crop Farming (including tobacco, cotton, sugarcane, hay, peanut, sugar beet, & all other crop farming)

Animal Production

112111

Beef Cattle Ranching & Farming

112112

Cattle Feedlots

112120

Dairy Cattle & Milk Production

112210

Hog & Pig Farming

112300

Poultry & Egg Production

112400

Sheep & Goat Farming

112510

Aquaculture (including shellfish & finfish farms & hatcheries)

112900

Other Animal Production

Forestry and Logging

113110

Timber Tract Operations

113210

Forest Nurseries & Gathering of Forest Products

113310

Logging

Fishing, Hunting and Trapping

114110

Fishing

114210

Hunting & Trapping

Support Activities for Agriculture and Forestry

115110

Support Activities for Crop Production (including cotton ginning, soil preparation, planting, & cultivating)

115210

Support Activities for Animal Production

115310

Support Activities for Forestry

Mining

211120

Crude Petroleum Extraction

211130

Natural Gas Extraction

212110

Coal Mining

212200

Metal Ore Mining

212310

Stone Mining & Quarrying

212320

Sand, Gravel, Clay, & Ceramic & Refractory Mineral Mining & Quarrying

212390

Other Nonmetallic Mineral Mining & Quarrying

213110

Support Activities for Mining

Utilities

221100

Electric Power Generation, Transmission & Distribution

221210

Natural Gas Distribution

221300

Water, Sewage, & Other Systems

221500

Combination Gas and Electric

Construction

Construction of Buildings

236110

Residential Building Construction

236200

Nonresidential Building Construction

Heavy and Civil Engineering Construction

237100

Utility System Construction

237210

Land Subdivision

237310

Highway, Street, & Bridge Construction

237990

Other Heavy & Civil Engineering Construction

Specialty Trade Contractors

238100

Foundation, Structure, & Building Exterior Contractors (including framing carpentry, masonry, glass, roofing, & siding)

238210

Electrical Contractors

238220

Plumbing, Heating, & Air-Conditioning Contractors

238290

Other Building Equipment Contractors

238300

Building Finishing Contractors (including drywall, insulation, painting, wallcovering, flooring, tile, & finish carpentry)

238900

Other Specialty Trade Contractors (including site preparation)

Manufacturing

Food Manufacturing

311110

Animal Food Mfg

311200

Grain & Oilseed Milling

311300

Sugar & Confectionery Product Mfg

311400

Fruit & Vegetable Preserving & Specialty Food Mfg

311500

Dairy Product Mfg

311610

Animal Slaughtering and Processing

311710

Seafood Product Preparation & Packaging

311800

Bakeries, Tortilla & Dry Pasta Mfg

311900

Other Food Mfg (including coffee, tea, flavorings, & seasonings)

Beverage and Tobacco Product Manufacturing

312110

Soft Drink & Ice Mfg

312120

Breweries

312130

Wineries

312140

Distilleries

312200

Tobacco Manufacturing

Textile Mills and Textile Product Mills

313000

Textile Mills

314000

Textile Product Mills

Apparel Manufacturing

315100

Apparel Knitting Mills

315210

Cut & Sew Apparel Contractors

315220

Men’s & Boys’ Cut & Sew Apparel Mfg

315240

Women’s, Girls’ and Infants’ Cut and Sew Apparel Mfg

315280

Other Cut & Sew Apparel Mfg

315990

Apparel Accessories & Other Apparel Mfg

Leather and Allied Product Manufacturing

316110

Leather & Hide Tanning & Finishing

316210

Footwear Mfg (including rubber & plastics)

316990

Other Leather & Allied Product Mfg

Wood Product Manufacturing

321110

Sawmills & Wood Preservation

321210

Veneer, Plywood, & Engineered Wood Product Mfg

321900

Other Wood Product Mfg

Paper Manufacturing

322100

Pulp, Paper, & Paperboard Mills

322200

Converted Paper Product Mfg

Printing and Related Support Activities

323100

Printing & Related Support Activities

Petroleum and Coal Products Manufacturing

324110

Petroleum Refineries (including integrated)

324120

Asphalt Paving, Roofing, & Saturated Materials Mfg

324190

Other Petroleum & Coal Products Mfg

Chemical Manufacturing

325100

Basic Chemical Mfg

325200

Resin, Synthetic Rubber, & Artificial & Synthetic Fibers & Filaments Mfg

325300

Pesticide, Fertilizer, & Other Agricultural Chemical Mfg

325410

Pharmaceutical & Medicine Mfg

325500

Paint, Coating, & Adhesive Mfg

325600

Soap, Cleaning Compound, & Toilet Preparation Mfg

325900

Other Chemical Product & Preparation Mfg

Plastics and Rubber Products Manufacturing

326100

Plastics Product Mfg

326200

Rubber Product Mfg

Nonmetallic Mineral Product Manufacturing

327100

Clay Product & Refractory Mfg

327210

Glass & Glass Product Mfg

327300

Cement & Concrete Product Mfg

327400

Lime & Gypsum Product Mfg

327900

Other Nonmetallic Mineral Product Mfg

Primary Metal Manufacturing

331110

Iron & Steel Mills & Ferroalloy Mfg

331200

Steel Product Mfg from Purchased Steel

331310

Alumina & Aluminum Production & Processing

331400

Nonferrous Metal (except Aluminum) Production & Processing

331500

Foundries

Fabricated Metal Product Manufacturing

332110

Forging & Stamping

332210

Cutlery & Handtool Mfg

332300

Architectural & Structural Metals Mfg

332400

Boiler, Tank, & Shipping Container Mfg

332510

Hardware Mfg

332610

Spring & Wire Product Mfg

332700

Machine Shops; Turned Product; & Screw, Nut, & Bolt Mfg

332810

Coating, Engraving, Heat Treating, & Allied Activities

332900

Other Fabricated Metal Product Mfg

Machinery Manufacturing

333100

Agriculture, Construction, & Mining Machinery Mfg

333200

Industrial Machinery Mfg

333310

Commercial & Service Industry Machinery Mfg

333410

Ventilation, Heating, Air-Conditioning, & Commercial Refrigeration Equipment Mfg

333510

Metalworking Machinery Mfg

333610

Engine, Turbine, & Power Transmission Equipment Mfg

333900

Other General Purpose Machinery Mfg

Computer and Electronic Product Manufacturing

334110

Computer & Peripheral Equipment Mfg

334200

Communications Equipment Mfg

334310

Audio & Video Equipment Mfg

334410

Semiconductor & Other Electronic Component Mfg

334500

Navigational, Measuring, Electromedical, & Control Instruments Mfg

334610

Manufacturing & Reproducing Magnetic & Optical Media

Electrical Equipment, Appliance, and Component Manufacturing

335100

Electric Lighting Equipment Mfg

335200

Major Household Appliance Mfg

335310

Electrical Equipment Mfg

335900

Other Electrical Equipment & Component Mfg

Transportation Equipment Manufacturing

336100

Motor Vehicle Mfg

336210

Motor Vehicle Body & Trailer Mfg

336300

Motor Vehicle Parts Mfg

336410

Aerospace Product & Parts Mfg

336510

Railroad Rolling Stock Mfg

336610

Ship & Boat Building

336990

Other Transportation Equipment Mfg

Furniture and Related Product Manufacturing

337000

Furniture & Related Product Manufacturing

Miscellaneous Manufacturing

339110

Medical Equipment & Supplies Mfg

339900

Other Miscellaneous Manufacturing

Wholesale Trade

Merchant Wholesalers, Durable Goods

423100

Motor Vehicle & Motor Vehicle Parts & Supplies

423200

Furniture & Home Furnishings

423300

Lumber & Other Construction Materials

423400

Professional & Commercial Equipment & Supplies

423500

Metal & Mineral (except Petroleum)

423600

Household Appliances and Electrical and Electronic Goods

423700

Hardware, & Plumbing & Heating Equipment & Supplies

423800

Machinery, Equipment, & Supplies

423910

Sporting & Recreational Goods & Supplies

423920

Toy & Hobby Goods & Supplies

423930

Recyclable Materials

423940

Jewelry, Watch, Precious Stone, & Precious Metals

423990

Other Miscellaneous Durable Goods

Merchant Wholesalers, Nondurable Goods

424100

Paper & Paper Products

424210

Drugs & Druggists’ Sundries

424300

Apparel, Piece Goods, & Notions

424400

Grocery & Related Products

424500

Farm Product Raw Materials

424600

Chemical & Allied Products

424700

Petroleum & Petroleum Products

424800

Beer, Wine, & Distilled Alcoholic Beverages

424910

Farm Supplies

424920

Book, Periodical, & Newspapers

424930

Flower, Nursery Stock, & Florists’ Supplies

424940

Tobacco & Tobacco Products

424950

Paint, Varnish, & Supplies

424990

Other Miscellaneous Nondurable Goods

Wholesale Electronic Markets and Agents and Brokers

425110

Business to Business Electronic Markets

425120

Wholesale Trade Agents & Brokers

Retail Trade

Motor Vehicle and Parts Dealers

441110

New Car Dealers

441120

Used Car Dealers

441210

Recreational Vehicle Dealers

441222

Boat Dealers

441228

Motorcycle, ATV, and All Other Motor Vehicle Dealers

441300

Automotive Parts, Accessories, & Tire Stores

Furniture and Home Furnishings Stores

442110

Furniture Stores

442210

Floor Covering Stores

442291

Window Treatment Stores

442299

All Other Home Furnishings Stores

Electronics and Appliance Stores

443141

Household Appliance Stores

443142

Electronics Stores (including Audio, Video, Computer, and Camera Stores)

Building Material and Garden Equipment and Supplies Dealers

444110

Home Centers

444120

Paint & Wallpaper Stores

444130

Hardware Stores

444190

Other Building Material Dealers

444200

Lawn & Garden Equipment & Supplies Stores

Food and Beverage Stores

445110

Supermarkets and Other Grocery (except Convenience) Stores

445120

Convenience Stores

445210

Meat Markets

445220

Fish & Seafood Markets

445230

Fruit & Vegetable Markets

445291

Baked Goods Stores

445292

Confectionery & Nut Stores

445299

All Other Specialty Food Stores

445310

Beer, Wine, & Liquor Stores

Health and Personal Care Stores

446110

Pharmacies & Drug Stores

446120

Cosmetics, Beauty Supplies, & Perfume Stores

446130

Optical Goods Stores

446190

Other Health & Personal Care Stores

Gasoline Stations

447100

Gasoline Stations (including convenience stores with gas)

Clothing and Clothing Accessories Stores

448110

Men’s Clothing Stores

448120

Women’s Clothing Stores

448130

Children’s & Infants’ Clothing Stores

448140

Family Clothing Stores

448150

Clothing Accessories Stores

448190

Other Clothing Stores

448210

Shoe Stores

448310

Jewelry Stores

448320

Luggage & Leather Goods Stores

Sporting Goods, Hobby, Book, and Music Stores

451110

Sporting Goods Stores

451120

Hobby, Toy, & Game Stores

451130

Sewing, Needlework, & Piece Goods Stores

451140

Musical Instrument & Supplies Stores

451211

Book Stores

451212

News Dealers & Newsstands

General Merchandise Stores

452200

Department Stores

452300

General Merchandise Stores, incl. Warehouse Clubs and Supercenters

Miscellaneous Store Retailers

453110

Florists

453210

Office Supplies & Stationery Stores

453220

Gift, Novelty, & Souvenir Stores

453310

Used Merchandise Stores

453910

Pet & Pet Supplies Stores

453920

Art Dealers

453930

Manufactured (Mobile) Home Dealers

453990

All Other Miscellaneous Store Retailers (including tobacco, candle, & trophy shops)

Nonstore Retailers

454110

Electronic Shopping & Mail-Order Houses

454210

Vending Machine Operators

454310

Fuel Dealers (including Heating Oil and Liquefied Petroleum)

454390

Other Direct Selling Establishments (including door-to-door retailing, frozen food plan providers, party plan merchandisers, & coffee-break service providers)

Transportation and Warehousing

Air, Rail, and Water Transportation

481000

Air Transportation

482110

Rail Transportation

483000

Water Transportation

Truck Transportation

484110

General Freight Trucking, Local

484120

General Freight Trucking, Long-distance

484200

Specialized Freight Trucking

Transit and Ground Passenger Transportation

485110

Urban Transit Systems

485210

Interurban & Rural Bus Transportation

485310

Taxi Service

485320

Limousine Service

485410

School & Employee Bus Transportation

485510

Charter Bus Industry

485990

Other Transit & Ground Passenger Transportation

Pipeline Transportation

486000

Pipeline Transportation

Scenic & Sightseeing Transportation

487000

Scenic & Sightseeing Transportation

Support Activities for Transportation

488100

Support Activities for Air Transportation

488210

Support Activities for Rail Transportation

488300

Support Activities for Water Transportation

488410

Motor Vehicle Towing

488490

Other Support Activities for Road Transportation

488510

Freight Transportation Arrangement

488990

Other Support Activities for Transportation

Couriers and Messengers

492110

Couriers

492210

Local Messengers & Local Delivery

Warehousing and Storage

493100

Warehousing & Storage (except lessors of miniwarehouses & self- storage units)

Information

Publishing Industries (except Internet)

511110

Newspaper Publishers

511120

Periodical Publishers

511130

Book Publishers

511140

Directory & Mailing List Publishers

511190

Other Publishers

511210

Software Publishers

Motion Picture and Sound Recording Industries

512100

Motion Picture & Video Industries (except video rental)

512200

Sound Recording Industries

Broadcasting (except Internet)

515100

Radio & Television Broadcasting

515210

Cable & Other Subscription Programming

Telecommunications

517000

Telecommunications (including paging, cellular, satellite, cable & other program distribution, resellers, & other telecommunications & internet service providers)

Data Processing Services

518210

Data Processing, Hosting, & Related Services

Other Information Services

519100

Other Information Services (including news syndicates, libraries, internet publishing & broadcasting)

Finance and Insurance

Depository Credit Intermediation

522110

Commercial Banking

522120

Savings Institutions

522130

Credit Unions

522190

Other Depository Credit Intermediation

Nondepository Credit Intermediation

522210

Credit Card Issuing

522220

Sales Financing

522291

Consumer Lending

522292

Real Estate Credit (including mortgage bankers & originators)

522293

International Trade Financing

522294

Secondary Market Financing

522298

All Other Nondepository Credit Intermediation

Activities Related to Credit Intermediation

522300

Activities Related to Credit Intermediation (including loan brokers, check clearing, & money transmitting)

Securities, Commodity Contracts, and Other Financial Investments and Related Activities

523110

Investment Banking & Securities Dealing

523120

Securities Brokerage

523130

Commodity Contracts Dealing

523140

Commodity Contracts Brokerage

523210

Securities & Commodity Exchanges

523900

Other Financial Investment Activities (including portfolio management & investment advice)

Insurance Carriers and Related Activities

524140

Direct Life, Health, & Medical Insurance Carriers

524150

Direct Insurance (except Life, Health, & Medical) Carriers

524210

Insurance Agencies & Brokerages

524290

Other Insurance Related Activities (including third-party administration of insurance and pension funds)

Funds, Trusts, and Other Financial Vehicles

525100

Insurance & Employee Benefit Funds

525910

Open-End Investment Funds (Form 1120-RIC)

525920

Trusts, Estates, & Agency Accounts

525990

Other Financial Vehicles (including mortgage REITS & closed-end investment funds)

“Offices of Bank Holding Companies” and “Offices of Other Holding Companies” are located under Management of Companies (Holding Companies) on next page.

Real Estate and Rental and Leasing

Real Estate

531110

Lessors of Residential Buildings & Dwellings (including equity REITs)

531120

Lessors of Nonresidential Buildings (except Miniwarehouses) (including equity REITs)

531130

Lessors of Miniwarehouses & Self-Storage Units (including equity REITs)

531190

Lessors of Other Real Estate Property (including equity REITs)

531210

Offices of Real Estate Agents & Brokers

531310

Real Estate Property Managers

531320

Offices of Real Estate Appraisers

531390

Other Activities Related to Real Estate

Rental and Leasing Services

532100

Automotive Equipment Rental & Leasing

532210

Consumer Electronics & Appliances Rental

532281

Formal Wear & Costume Rental

532282

Video Tape & Disc Rental

532283

Home Health Equipment Rental

532284

Recreational Goods Rental

532289

All Other Consumer Goods Rental

532310

General Rental Centers

532400

Commercial & Industrial Machinery & Equipment Rental & Leasing

Lessors of Nonfinancial Intangible Assets (except copyrighted works)

533110

Lessors of Nonfinancial Intangible Assets (except copyrighted works)

Professional, Scientific, and Technical Services

Legal Services

541110

Offices of Lawyers

541190

Other Legal Services

Accounting, Tax Preparation, Bookkeeping, and Payroll Services

541211

Offices of Certified Public Accountants

541213

Tax Preparation Services

541214

Payroll Services

541219

Other Accounting Services

Architectural, Engineering, and Related Services

541310

Architectural Services

541320

Landscape Architecture Services

541330

Engineering Services

541340

Drafting Services

541350

Building Inspection Services

541360

Geophysical Surveying & Mapping Services

541370

Surveying & Mapping (except Geophysical) Services

541380

Testing Laboratories

Specialized Design Services

541400

Specialized Design Services (including interior, industrial, graphic, & fashion design)

Computer Systems Design and Related Services

541511

Custom Computer Programming Services

541512

Computer Systems Design Services

541513

Computer Facilities Management Services

541519

Other Computer Related Services

Other Professional, Scientific, and Technical Services

541600

Management, Scientific, & Technical Consulting Services

541700

Scientific Research & Development Services

541800

Advertising & Related Services

541910

Marketing Research & Public Opinion Polling

541920

Photographic Services

541930

Translation & Interpretation Services

541940

Veterinary Services

541990

All Other Professional, Scientific, & Technical Services

Management of Companies (Holding Companies)

551111

Offices of Bank Holding Companies

551112

Offices of Other Holding Companies

Administrative and Support and Waste Management and Remediation Services

Administrative and Support Services

561110

Office Administrative Services

561210

Facilities Support Services

561300

Employment Services

561410

Document Preparation Services

561420

Telephone Call Centers

561430

Business Service Centers (including private mail centers & copy shops)

561440

Collection Agencies

561450

Credit Bureaus

561490

Other Business Support Services (including repossession services, court reporting, & stenotype services)

561500

Travel Arrangement & Reservation Services

561600

Investigation & Security Services

561710

Exterminating & Pest Control Services

561720

Janitorial Services

561730

Landscaping Services

561740

Carpet & Upholstery Cleaning Services

561790

Other Services to Buildings & Dwellings

561900

Other Support Services (including packaging & labeling services, & convention & trade show organizers)

Waste Management and Remediation Services

562000

Waste Management & Remediation Services

Educational Services

611000

Educational Services (including schools, colleges, & universities)

Health Care and Social Assistance

Offices of Physicians and Dentists

621111

Offices of Physicians (except mental health specialists)

621112

Offices of Physicians, Mental Health Specialists

621210

Offices of Dentists

Offices of Other Health Practitioners

621310

Offices of Chiropractors

621320

Offices of Optometrists

621330

Offices of Mental Health Practitioners (except Physicians)

621340

Offices of Physical, Occupational & Speech Therapists, & Audiologists

621391

Offices of Podiatrists

621399

Offices of All Other Miscellaneous Health Practitioners

Outpatient Care Centers

621410

Family Planning Centers

621420

Outpatient Mental Health & Substance Abuse Centers

621491

HMO Medical Centers

621492

Kidney Dialysis Centers

621493

Freestanding Ambulatory Surgical & Emergency Centers

621498

All Other Outpatient Care Centers

Medical and Diagnostic Laboratories

621510

Medical & Diagnostic Laboratories

Home Health Care Services

621610

Home Health Care Services

Other Ambulatory Health Care Services

621900

Other Ambulatory Health Care Services (including ambulance services & blood & organ banks)

Hospitals

622000

Hospitals

Nursing and Residential Care Facilities

623000

Nursing & Residential Care Facilities

Social Assistance

624100

Individual & Family Services

624200

Community Food & Housing, & Emergency & Other Relief Services

624310

Vocational Rehabilitation Services

624410

Child Day Care Services

Arts, Entertainment, and Recreation

Performing Arts, Spectator Sports, and Related Industries

711100

Performing Arts Companies

711210

Spectator Sports (including sports clubs & racetracks)

711300

Promoters of Performing Arts, Sports, & Similar Events

711410

Agents & Managers for Artists, Athletes, Entertainers, & Other Public Figures

711510

Independent Artists, Writers, & Performers

Museums, Historical Sites, and Similar Institutions

712100

Museums, Historical Sites, & Similar Institutions

Amusement, Gambling, and Recreation Industries

713100

Amusement Parks & Arcades

713200

Gambling Industries

713900

Other Amusement & Recreation Industries (including golf courses, skiing facilities, marinas, fitness centers, & bowling centers)

Accommodation and Food Services

Accommodation

721110

Hotels (except Casino Hotels) & Motels

721120

Casino Hotels

721191

Bed & Breakfast Inns

721199

All Other Traveler Accommodation

721210

RV (Recreational Vehicle) Parks & Recreational Camps

721310

Rooming & Boarding Houses Dormitories, & Workers’ Camps

Food Services and Drinking Places

722300

Special Food Services (including food service contractors & caterers)

722410

Drinking Places (Alcoholic Beverages)

722511

Full Service Restaurants

722513

Limited Service Restaurants

722514

Cafeterias and Buffets

722515

Snack and Non-alcoholic Beverage Bars

Other Services

Repair and Maintenance

811110

Automotive Mechanical & Electrical Repair & Maintenance

811120

Automotive Body, Paint, Interior, & Glass Repair

811190

Other Automotive Repair & Maintenance (including oil change & lubrication shops & car washes)

811210

Electronic & Precision Equipment Repair & Maintenance

811310

Commercial & Industrial Machinery & Equipment (except Automotive & Electronic) Repair & Maintenance

811410

Home & Garden Equipment & Appliance Repair & Maintenance

811420

Reupholstery & Furniture Repair

811430

Footwear & Leather Goods Repair

811490

Other Personal & Household Goods Repair & Maintenance

Personal and Laundry Services

812111

Barber Shops

812112

Beauty Salons

812113

Nail Salons

812190

Other Personal Care Services (including diet & weight reducing centers)

812210

Funeral Homes & Funeral Services

812220

Cemeteries & Crematories

812310

Coin-Operated Laundries & Drycleaners

812320

Drycleaning & Laundry Services (except Coin-Operated)

812330

Linen & Uniform Supply

812910

Pet Care (except Veterinary) Services

812920

Photofinishing

812930

Parking Lots & Garages

812990

All Other Personal Services

Religious, Grantmaking, Civic, Professional, and Similar Organizations

813000

Religious, Grantmaking, Civic, Professional, & Similar Organizations (including condominium and homeowners associations)

How to Get California Tax Information

(Keep This Page For Future Use)

Your Rights as a Taxpayer

Our goal at the FTB is to make certain that your rights are protected so that you will have the highest confidence in the integrity, efficiency, and fairness of our state tax system. FTB 4058, California Taxpayers’ Bill of Rights, includes information on your rights as a California taxpayer, the Taxpayers’ Rights Advocate Program, and how you can request written advice from the FTB on whether a particular transaction is taxable. See “Where to Get Tax Forms and Publications” below.

Where to Get Tax Forms and Publications

By Internet

You can download, view, and print California tax forms and publications at ftb.ca.gov/forms.

Access other state agencies’ websites at ca.gov.

By phone

To order current year California tax forms and publications, call our automated phone service. Refer to the list in your tax booklet and find the code for the form you want to order. Call 800-338-0505 and follow the recorded instructions.

Allow two weeks to receive your order. If you live outside California, allow three weeks to receive your order.

In person

Many post offices and libraries provide free California personal income tax booklets during the filing season.

Employees at libraries, post offices, and quick print businesses cannot provide tax information or assistance.

By mail

Write to:

Mail

Tax Forms Request Unit
Franchise Tax Board
PO Box 307
Rancho Cordova, CA
95741-0307

Letters

If you write to us, be sure your letter includes your federal employer identification number (FEIN), California Secretary of State (SOS) file number, California corporation number, social security number (SSN) or individual taxpayer identification number (ITIN), your daytime and evening telephone numbers, and a copy of the notice (if applicable). Send your letter to:

Mail

Correspondence, Analysis, Support
and Education Section MS F283
Franchise Tax Board
PO Box 1468
Sacramento, CA
95812-1468

We will respond to your letter within ten weeks. In some cases, we may need to call you for additional information.

Do not attach correspondence to your tax return unless the correspondence relates to an item on your tax return.

Internet and Telephone Assistance

Telephone assistance is available year-round from 7 a.m. until 5 p.m. Monday through Friday, except holidays. Hours subject to change.

Website

www.ftb.ca.gov

Phone

800-852-5711 from within the United States
916-845-6500 from outside the United States
California Relay Service
711 or 800-735-2929 for persons with hearing or speaking limitations

Asistencia Por Internet y Teléfono

Asistencia telefónica está disponible durante todo el año desde las 7 a.m. hasta las 5 p.m. de lunes a viernes, excepto días feriados. Las horas están sujetas a cambios.

Sitio web

www.ftb.ca.gov

Teléfono

800-852-5711 dentro de los Estados Unidos
916-845-6500 fuera de los Estados Unidos
Servicio de Retransmisión de California
711 o 800-735-2929 para personas con limitaciones auditivas o del habla

EZ Contact Information

For business eligibility or zone related information, including questions regarding EZ geographic boundaries and designation period dates, contact the HCD at hcd.ca.gov and search for directory of zone contacts to find Directory of Economic Development Areas.

For information that is zone-specific but not tax-specific, contact the HCD at:

Mail

Department of Housing &
Community Development
Division of Financial Assistance
Enterprise Zone Programs
2020 West El Camino Avenue Suite 650
Sacramento, CA 95833

Mailing address:

Mail

PO Box 952054
Sacramento, CA 94252-2054

Website

hcd.ca.gov

Phone

916-274-0575

Fax

916-263-2764

or for tax-specific information contact Franchise Tax Board:

Website

www.ftb.ca.gov

Phone

916-845-3464