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Changes to 2008 Forms

Updates to the Form 3805Q Instructions on 01/18/2012 –– Instructions for 3805Q Form, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations - Corporation

We revised text on Page 2, General Information F, Types of NOLs, General NOL (GEN), New Business NOL (NB), and Eligible Small Business NOL (ESB) sections.

Previous Version

Type of NOL and Description Taxable Year NOL Incurred NOL Carried Over Carryover Period
General NOL (GEN)
Available as a result of a loss incurred in years after 1986 and allowed under R&TC Section 24416. Does not include losses incurred from activities that qualify as a new business, an eligible small business, EZ,LARZ, LAMBRA, TTA, disaster loss, or Pierce’s disease.

On or after
01/01/2004
2002-2003
2000-2001
1987-1999

100%
60%
55%
None

10 years
10 Years
10 Years
Expired
New Business NOL (NB)
Get FTB Legal Ruling 96-5 for more information.

Incurred by a trade or business that first commenced in California on or after January 1, 1994, during the first three years of business, 100% of an NOL may be carried over for 10 years, but only to the extent of the net loss from the new business. The term "new business" also includes any taxpayer engaged in biopharmaceutical activities or other biotechnology activities described in Codes 2833 to 2836 of the SIC Manual. Also, it includes any taxpayer that has not received regulatory approval for any product from the United States Food and Drug Administration. See R&TC 24416(g)(7)(A) for more information.

If a taxpayer’s NOL exceeds the net loss from the new business, the excess may be carried over as a general NOL.

If a taxpayer acquires assets of an existing trade or business which is doing business in California, the trade or business conducted by the taxpayer or related person is not a new business if the fair market value (FMV) of the acquired assets exceeds 20% of the FMV of the total assets of the trade or business conducted by the taxpayer or any related person. To determine whether the acquired assets exceed 20% of the total assets, include only the assets that continue to be used in the same trade or business activity as were used immediately prior to the acquisition. For this purpose, ………………………………………………………………

On or after
01/01/2000











Before 01/01/2000

Year of
business

Year 1
Year 2
Year 3


100%
For the
first three
years of business













100%
100%
100%


10 years

















8 Years
7 Years
6 Years
Eligible Small Business NOL (ESB)
Get FTB Legal Ruling 96-5 for more information.

Incurred in a trade or business activity that has gross receipts, less returns and allowances, of less than $1 million during the taxable year.

100% of an NOL may be carried over, but only to the extent of the net loss from the eligible small business. If a taxpayer’s NOL exceeds the net loss from an eligible small business, the excess may be carried over as a general NOL.

The corporation should use the same SIC Code division classifications described in the new business NOL section to determine what constitutes a trade or business activity.

On or after
01/01/2000

On or after
01/01/1994
and before
01/01/2000


100%




None


10 Years




Expired

Revised Version

Type of NOL and Description Taxable Year NOL Incurred NOL Carried Over Carryover Period
General NOL (GEN)
Available as a result of a loss incurred in years after 1986 and allowed under R&TC Section 24416. Does not include losses incurred from activities that qualify as a new business, an eligible small business, EZ,LARZ, LAMBRA, TTA, disaster loss, or Pierce’s disease.

On or after
01/01/2008
2004-2007
2002-2003
2000-2001
1987-1999

100%
100%
60%
55%
None

20 Years
10 Years
10 Years
10 Years
Expired
New Business NOL (NB)
Get FTB Legal Ruling 96-5 for more information.

NB means any trade or business activity that is first commenced in California on or after January 1, 1994. 100% of an NB NOL may be carried over, but only to the extent of the net loss from the new business. The term "new business" also includes any taxpayer engaged in biopharmaceutical activities or other biotechnology activities described in Codes 2833 to 2836 of the SIC Manual. Also, it includes any taxpayer that has not received regulatory approval for any product from the United States Food and Drug Administration. See R&TC 24416(g)(7)(A) for more information.

If a taxpayer’s NOL exceeds the net loss from the new business, the excess may be carried over as a general NOL.

If a taxpayer acquires assets of an existing trade or business which is doing business in California, the trade or business conducted by the taxpayer or related person is not a new business if the fair market value (FMV) of the acquired assets exceeds 20% of the FMV of the total assets of the trade or business conducted by the taxpayer or any related person. To determine whether the acquired assets exceed 20% of the total assets, include only the assets that continue to be used in the same trade or business activity as were used immediately prior to the acquisition. For this purpose, ………………………………………………………………

On or after
01/01/2008


On or after
01/01/2000
and before
01/01/2008







On or after
01/01/1994
and before

01/01/2000

Year of
business

Year 1
Year 2
Year 3


100%




100%
For the
first three
years of business










100%
100%
100%


20 Years




10 years














8 Years
7 Years
6 Years
Eligible Small Business NOL (ESB)
Get FTB Legal Ruling 96-5 for more information.

Incurred in a trade or business activity that has gross receipts, less returns and allowances, of less than $1 million during the taxable year.

100% of an NOL may be carried over, but only to the extent of the net loss from the eligible small business. If a taxpayer’s NOL exceeds the net loss from an eligible small business, the excess may be carried over as a general NOL.

The corporation should use the same SIC Code division classifications described in the new business NOL section to determine what constitutes a trade or business activity.

On or after
01/01/2008


On or after
01/01/2000
and before
01/01/2008


On or after
01/01/1994
and before
01/01/2000


100%




100%




None


20 Years




10 Years




Expired

Reason for the changes

For taxable years beginning on or after 01/01/2008, CA conforms to the federal provision for 20 years NOL carryover. We added new instructions to clarify that for taxable years beginning on or after 01/01/2008, general businesses, new businesses and eligible small businesses can carryover 100% of their NOL for 20 years.

Impact

There is no tax impact.

Back to Tax Form Changes for 2008