Instructions for Schedule P (100W) - zillionforms.com

1 Instructions for Schedule P ( 100w ). Alternative Minimum Tax and Credit Limitations Water's-Edge Filers References in these Instructions are to the Internal Revenue Code (IRC) as of January 1, 1998, and to the California Revenue and Taxation Code (R&TC). What's New taxable years beginning on or after manner as net income for purposes of regular January 1, 1988. tax. A separate AMT calculation is required for Newly Formed Corporations The treatment of merchant marine capital each member of a combined report. Complete For corporations that incorporate or qualify to construction account funds as an a separate Schedule P ( 100w ), Side 1 and do business in California on or after adjustment item for AMT. Side 2, for each taxpayer included in the January 1, 2000, the prepayment of the combined report. Attach the Schedule California does not conform to the following minimum franchise tax to the Secretary of P ( 100w ) for each taxpayer member in the federal AMT provisions: combined report behind the combined State (SOS) is no longer required.

2 For the first The elimination of AMT for small taxable year the corporation will compute its Schedule P ( 100w ) for all members. See businesses. Instructions for Part I, line 4b, line 5a, line 5d, tax liability by multiplying its state net income The contribution deduction in excess of by the appropriate tax rate and will not be line 7b, line 9, and line 10. adjusted basis for appreciated property is subject to the minimum franchise tax. The still a tax preference item for California Short Period Return corporation will become subject to minimum purposes. For a short period return, use the formula in IRC. franchise tax beginning in its second taxable The federal repeal of the installment Section 443(d) to determine AMTI and AMT. year. The corporation will be required to make method for accrual basis taxpayers (IRC Credit for Prior Year AMT. estimated tax payments based on the Section 536(a)). Accrual basis taxpayers If the corporation paid AMT for 1999 or has a projected measured tax for its second and may still use the installment method for carryover of credit for prior year AMT and has third taxable years.

3 California. no AMT liability for 2000, the corporation may New Natural Heritage Preservation Tax use this credit in 2000 to reduce its regular tax Credit (NHPTC) General Information liability. Complete Part III to figure this credit. The NHPTC is 55% of the fair market value of Unless stated otherwise, the term corpora- the qualified contribution of property donated tion as used in Schedule P ( 100w ) and in Specific Line Instructions to the state, any local government, or to any these Instructions , includes banks, financial designated nonprofit organization. The credit corporations, limited liability companies Part I Tentative Minimum is figured on form FTB 3503, Natural Heritage Preservation Tax Credit. (LLCs) classified as corporations, and exempt Tax (TMT) and Alternative Mini- organizations other than exempt trusts, but not S corporations. mum Tax (AMT) Computation Important Information Line 2a Depreciation of tangible property California tax laws give special treatment to In general, California tax law conforms to the some types of income and allow special placed in service after 1986.

4 Internal Revenue Code (IRC) as of deductions and credits for some types of Do not include depreciation adjustments January 1, 1998. However, there are continu- expenses. Corporations that benefit from attributable to a tax shelter farm activity or a ing differences between California and federal these laws may have to pay AMT in addition passive activity on this line. Instead, include tax law. California has not conformed to most to the minimum franchise tax. the adjustment on line 2g or line 2h. of the changes made to the IRC by the federal Also use this Schedule to figure credits that Refigure the depreciation as follows: For Internal Revenue Service Restructuring and are limited by the tentative minimum tax property other than real property and property Reform Act of 1998 (Public Law 105-206) (TMT) or that may reduce AMT. on which the straight-line method was used, and has not conformed to any of the changes use the 150% declining balance method, See IRC Sections 55 through 59 for more switching to straight-line for the first taxable made by the Tax and Trade Relief Extension Act of 1998 (Public Law 105-277), the information on figuring AMT.

5 But note that year in which that method will give a higher Miscellaneous Trade and Technical Correc- R&TC Sections 23455, 23456, 23457, and depreciation deduction. Use the same life tions Act of 1999 (Public Law 106-36), and 23459 modify IRC Sections 55 through 59. classes as used on the federal Form 4626, the Ticket to Work and Work Incentives Who Must File Alternative Minimum Tax Corporations. For Improvement Act of 1999 (Public Law Banks and corporations should file personal property having no asset depreciation 106-170). Schedule P ( 100w ) if the sum of: AMT range (ADR) class life, use 12 years. For California law conforms to federal law adjustments, preference items, loss denials, residential rental and nonresidential real regarding: other items as specified under IRC property, use the straight-line method over The removal of the adjusted current Section 59, and state net income exceeds 40 years. Determine the depreciation adjust- earnings (ACE) depreciation adjustment. $40,000.

6 Exempt organizations, other than ment by subtracting the recomputed deprecia- The use of the same depreciation recovery exempt trusts with unrelated business tion from the California depreciation on form periods for regular tax and alternative income, should file Schedule P ( 100w ) if the FTB 3885, Corporation Depreciation and minimum tax (AMT). sum of: AMT adjustments, preference items, Amortization. Enter the difference on this line. The election by small property and loss denials, items specified under IRC If the corporation elected to depreciate a casualty insurance companies to be taxed Section 59, and state net unrelated business grapevine that was replanted in a vineyard as only on their taxable investment income, taxable income exceeds $40,000. Exempt a result of phylloxera or Pierce's Disease and to compute the ACE adjustment trusts should use Schedule P (541), Alterna- infestation over 5 years instead of 20 years without regard to all other items of income tive Minimum Tax and Credit Limitations for regular tax, it must depreciate the and expense not included in gross Fiduciaries.

7 Grapevine over 10 years for AMT. investment income. In addition, if the corporation claims credits Note: Depreciation that is capitalized to The repeal of the installment method AMT that are limited by TMT (Part I, line 17), or if inventory under the uniform capitalization adjustment for farmers. Farmers are the corporation claims credits that reduce the rules must be refigured using the rules allowed to use the installment method of AMT (Part I, line 19), the corporation must described above. accounting for purposes of AMT for file Schedule P ( 100w ). payments received in taxable years Line 2b Amortization of certified pollution Members of a Combined Report control facilities placed in service after beginning on or after January 1, 1997, for Alternative minimum taxable income (AMTI). installment sales related to the sale or 1986. and ACE are apportioned and allocated to disposition of farm property made in For any certified pollution control facility California and to each taxpayer in the same placed in service in California after 1986, Form 100w Booklet 2000 Page 29.

8 Figure the entry for this line in the same of certain property. For AMT, corporations may unallowed losses that apply to the passive manner as line 2a (without reducing the basis not determine income from dispositions of activity. by 20% under IRC Section 291(a)(5)), using inventory or other property described in IRC Tax shelter passive farm activities. Refigure the straight-line method of depreciation Section 1221(1) using the installment method, any gain or loss from a tax shelter passive instead of 150% declining balance. except for certain dispositions of timeshares or farm activity taking into account all AMT. Line 2c Amortization of mining exploration residential lots, if the corporation elected to pay adjustments, tax preference items, and AMT. and development costs incurred after 1987 interest under IRC Section 453(l)(2)(B) (R&TC prior year unallowed losses. If the amount is a If the corporation elected the optional 10-year Section 24667). gain, it may be included on form FTB 3802, write-off under IRC Section 59(e) for all If the corporation used the installment method Corporate Passive Activity Loss and Credit assets in this category, skip this line.

9 For regular tax purposes, but was required for Limitations, but if it is a loss, the adjustment With respect to each mine or other natural AMT purposes to report the entire gain in the for tax shelter passive farm activity is the loss deposit, (other than an oil, gas, or geothermal year of disposition, the corporation may have the corporation reported for regular tax. The well) refigure the expenses (before the 30% adjustments with respect to those dispositions. AMT loss carryover is the refigured AMT loss. reduction under IRC Section 291(b)) by Enter on this line as a negative amount the Note: If, at the end of the taxable year, the amortizing them over 10 years beginning with current year income the corporation reported corporation's liabilities exceed the fair market the year in which the expenses were paid or for regular tax. value of the corporation's assets (insolvency), incurred. Figure the adjustment by subtracting Farmers that received payments for a taxable increase the passive activity loss allowed by the refigured amount from the deduction year beginning on or after January 1, 1997, for that excess (but not more than the total loss).

10 Taken under IRC Section 616(a) or 617(a) qualified installment sales made in taxable years See IRC Section 58(c)(1). after the 30% reduction. Enter the amount on beginning on or after January 1, 1988, do not Line 2i Certain loss limitations this line. If a loss resulted with respect to need to make an adjustment on this line. Refigure the allowable losses from at-risk those expenses, see IRC Section 56(a)(2)(B). Line 2g Tax shelter farm activities activities and basis limitations applicable to Line 2d Basis adjustments in determining (personal service corporations only) partnerships, taking into account the AMT. gain or loss from sale or exchange of Caution: To avoid duplication, if the corpora- adjustments and tax preference items. See property tion included AMT adjustments or tax IRC Sections 59(h), 465, and 704(d). If the preference items on this line, do not include refigured loss is more than the loss reported If the corporation disposed of property during for purposes of the regular tax, enter on this the year, refigure the gain or loss from such them on any other line of this Schedule .