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Changes to 2011 Forms

Updates to the Schedule P (540) Instructions on 03/03/2014 –– Instructions for 540 Schedule P, Alternative Minimum Tax and Credit Limitations - Residents

We replaced text on:

  1. Page 2, Column 1, B – Who Must File, Bullet 4
  2. Page 3, Column 2, Line 8, second to last paragraph
  3. Page 4, Column 1, Line 13
  4. Page 5, Column 1, Line 13f, first paragraph, last sentence
  5. Page 5, Column 1, after Line 13i, Pollution control facilities
  6. Page 5, Column 2, Line 13j
  7. Page 5, Column 2, Line 13k
  8. Page 5, Column 2, Line 13l
  9. Page 5, Column 2, Line 13l, Bullet 3
  10. Page 5, Column 2, Line 13l, last paragraph

Previous Version

  1. Schedule P (540), Part l, line 21, Alternative Minimum Taxable Income (AMTI), is more than Part II, line 22, Exemption Amount, and you have one or more adjustments on Part l, line 4 or line 7 through line 13l.
  2. Instead, include these types of depreciation when you figure adjustments for line 5, line 11, line 13f, line 13j, or line 13k, whichever applies.
  3. Line 13 – Other adjustments and preferences. Enter the amount of any other adjustments or preferences that apply to you on line 13a through line 13l
  4. Use line 13k for nonpassive tax shelter farm activities.
  5. Note: new text added.
  6. Line 13j – Research and experimental costs
  7. Line 13k – Tax shelter farm activities
  8. Line 13l – Related adjustments
  9. Line 13a through line 13k
  10. Figure the difference between AMT and regular tax amount for each item. Combine the amounts for all your related adjustments and enter the total on line 13l.

Revised Version

  1. Schedule P (540), Part l, line 21, Alternative Minimum Taxable Income (AMTI), is more than Part II, line 22, Exemption Amount, and you have one or more adjustments on Part l, line 4 or line 7 through line 13m.
  2. Instead, include these types of depreciation when you figure adjustments for line 5, line 11, line 13f, line 13k, or line 13l, whichever applies.
  3. Line 13 – Other adjustments and preferences. Enter the amount of any other adjustments or preferences that apply to you on line 13a through line 13m
  4. Use line 13l for nonpassive tax shelter farm activities.
  5. Line 13j – Qualified small business stock exclusion
    California law does not conform to federal law changes regarding the increase in the percentage of the gain exclusion for the sales of qualified small business stock acquired after February 17, 2009. California law allows an exclusion of 50% of any gain from the sale or exchange of qualified small business stock held for more than 5 years. For California purposes, 80% of the issuing corporation’s payroll must be attributable to employment located within California (at time of issuance). Also, at least 80% of the value of the corporation’s assets must be used by the corporation to actively conduct one or more qualified trades or businesses.

    R&TC Section 18038.5 also provides for the deferral of gain from the sale of small business stock that has been held for six months or more, if qualified replacement stock is purchased within 60 days after the sale giving rise to the gain. Report gain deferred from the sale of qualified small business stock in accordance with the instructions contained in Revenue Procedure 98-48.

    For more information, go to ftb.ca.gov and search for qsbs.
  6. Line 13k – Research and experimental costs
  7. Line 13l – Tax shelter farm activities
  8. Line 13m – Related adjustments
  9. Line 13a through line 13l
  10. Figure the difference between AMT and regular tax amount for each item. Combine the amounts for all your related adjustments and enter the total on line 13m.

Reason for the changes

AB 1412 (Stats. 2013, ch. 546), signed by the Governor on October 4, 2013, retroactively allows the Qualified Small Business Stock (QSBS) deferral and 50 percent gain exclusion for tax years 2008 through 2012.

Impact

This revision may decrease the tax liability for taxpayers who did not report a QSBS exclusion or deferral for taxable years beginning on or after January 1, 2008.

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Updates to the Schedule P (540) Instructions on 02/07/2013 –– Instructions for 540 Schedule P, Alternative Minimum Tax and Credit Limitations - Residents

We replaced text on Page 5, Column 1, Line 13i.

Previous Version

Qualified small business stock exclusion (R&TC Section 18152.5)

California law provides an exclusion similar to the federal exclusion under IRC Section 1202 for 50% of the gain on the sale of qualifying small business stock originally issued after August 10, 1993, and held for 5 years. However, for California purposes, 80% of the issuing corporation’s payroll as measured by total dollar value must be attributable to employment located within California, and at least 80% of the value of the assets of the corporation must be used by the corporation in the active conduct of one or more qualified trades or businesses in California. If you excluded gain as allowed under R&TC Section 18152.5, multiply the excluded amount by 50% and enter it on this line as a positive amount.

Revised Version

Pollution control facilities

For regular tax, you may elect to amortize the basis of a certified pollution control facility over 60 months. For facilities placed in service before 1999, the AMT deduction is figured using the alternative depreciation system (ADS) described in IRC Section 168(g). Use the federal Class Life Asset Depreciation Range System (ADR) under the straight-line method. For facilities placed in service after 1998, the AMT deduction is figured under the modified accelerated cost recovery system (MACRS) using the straight-line method. Enter the difference between your AMT pollution control facilities depreciation and your regular tax pollution control facilities amortization. If your AMT pollution control facilities depreciation is more than your regular tax pollution control facilities amortization, enter the adjustment as a negative amount.

Reason for the changes

The Court of Appeal’s held in Cutler v. Franchise Tax Board (2012) 208 Cal. App. 4th 1247, that the qualified small business stock exclusion and deferral statutes under California Revenue and Taxation Code (R&TC) Sections 18152.5 and 18038.5 are unconstitutional. These sections are now invalid and unenforceable.

The Pollution control facilities adjustment line was erroneously deleted in the 2011 tax year and is therefore, being added back this year.

Impact

This revision increases the tax liability for taxpayers who reported a qualified small business stock exclusion or deferral for taxable years beginning on or after January 1, 2008.

By adding back the Pollution control facilities adjustment, the tax liability for taxpayers may increase.

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Updates to the Schedule P (540) Instructions on 04/25/2012 –– Instructions for 540 Schedule P, Alternative Minimum Tax and Credit Limitations - Residents

We replaced text on Page 3, Column 1, Line 3 -- Personal property taxes and real property taxes.

Previous Version

Enter on this line any of the following from federal Schedule A (Form 1040) line 6 and line 8:

  • State and local personal property taxes
  • State, local, or foreign real property taxes

Revised Version

Enter on this line any of the following from federal Schedule A (Form 1040) line 6, line 7, and line 8:

  • State and local personal property taxes
  • State, local, or foreign real property taxes

Reason for the changes

The amounts reported on Line 3 of Schedule P (540), come from federal Schedule A (Form 1040).

In 2011, federal Schedule A (Form 1040), line 7, title changed from “New Motor Vehicle Taxes” to “Personal Property Taxes”. Since the amount reported on federal Schedule A, line 7, is now a personal property tax it should have been reported on Schedule P (540NR), line 3.

Impact

This revision may increase the tentative minimum tax on Schedule P (540NR) which may increase the overall tax liability.

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Updates to the Schedule P (540) Instructions on 03/14/2012 –– Instructions for 540 Schedule P, Alternative Minimum Tax and Credit Limitations - Residents

We replaced text on Page 1, Column 1, What’s New, Real Estate Taxes Deduction paragraph.

Previous Version

Real Estate Taxes Deduction
Beginning in January 2011, you are required to provide additional information regarding your property tax deduction. See Part III of Schedule CA for more information.

Revised Version

Note: text deleted.

Reason for the changes

This language is not applicable because there is no Part III of the Schedule CA.

Impact

No tax impact.

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