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E S Corporations

R&TC Sections 24416.2 or 24416.5 (relating to

or Form 109, California Exempt Organization

Enterprise Zone (EZ) or Local Agency Military

Business Income Tax Return.

An S corporation is allowed to carryover a loss

Base Recovery Area (LAMBRA) NOLs), the

Note: If the corporation will claim the NOL as

that is incurred during a taxable year in which

corporation must elect on its tax return for the

a carryback in any of the previous two years,

it has in effect a valid election to be treated as

taxable year in which the loss is incurred to

the corporation will first file the applicable 2013

an S corporation. The loss is also separately

carryover the loss either under that section or

tax return and attach the completed 2013 form

calculated under the pass-through rules and

the loss under R&TC Section 24416.20 (relating

FTB 3805Q to the tax return.

passed to the shareholders in the year incurred

to general NOLs). If the corporation elects to

After the 2013 tax return is filed, the corporation

and is taken into account in determining each

compute the NOL under R&TC Section 24416.1(c)

will file the amended return for 2011 and/or

shareholder’s NOL carryover, if any.

(relating to EZ or LAMBRA NOLs), the corporation

2012 to claim the NOL carryback deduction and

must:

If a corporation changes from a C corporation

provide the following explanation on Form 100X,

to an S corporation, the loss incurred while the

• Make the election in a statement attached to

Part V, line 2, Explanation of Changes: “2013 NOL

corporation was a C corporation may not be

the original tax return.

carryback deduction”. For amended Form 109,

applied to offset income subject to the 1.5%

• Use the applicable economic development

attach a statement and provide the following

tax imposed on an S corporation. However,

area (EDA) form to calculate the NOL.

explanation: “2013 NOL carryback deduction”.

losses incurred while the corporation was a

The election is irrevocable. Get form FTB 3805Z,

Do not attach the 2013 form FTB 3805Q to the

C corporation may be applied against the built-in

Enterprise Zone Deduction and Credit Summary,

2011 or 2012 amended return. Attaching form

gains which are subject to tax. If the corporation

or FTB 3807, Local Agency Military Base

FTB 3805Q may delay processing of the amended

incurred losses while it was a C corporation

Recovery Area Deduction and Credit Summary,

return.

and an S corporation, and the S corporation is

for more information.

Election to waive/relinquish NOL carryback: If

using C corporation losses to offset its built-in

the corporation would like to make the election

gains, the S corporation must complete two

B Apportioning Corporations

to waive the two year carryback period for

forms FTB 3805Q and attach them to Form 100S,

NOL incurred in 2013, check the box under the

California S Corporation Franchise or Income

The loss carryover for a corporation that

Election to waive carryback section. By making

apportions income is the amount of the

Tax Return. The unused losses incurred while

the election, the corporation is electing to carry

the S corporation was a C corporation are

corporation’s loss, if any, after adding income

an NOL forward instead of carrying it back in the

“unavailable” except as provided for above unless

or loss apportioned to California with income or

previous two years. Once the election is made, it’s

loss allocable to California under Chapter 17 of

and until the S corporation reverts back to a

irrevocable.

C corporation or the carryover period expires.

the Corporation Tax Law. The loss carryover may

be deducted from income of that corporation

If the corporation elects to waive the two-year

However, if an S corporation changes to a

apportioned and allocable to California in

carryback period and carry the NOL forward,

C corporation, any S corporation NOLs are lost.

subsequent taxable years.

go to Part II, Current Year NOLs, to record the

F Types of NOLs

corporation’s 2013 NOL carryover to 2014.

C Combined Reporting

Complete columns (b), (c), (d), and (h) only, for

The NOL Carryover and NOL Carryback tables

each type of loss that the corporation incurred.

Corporations that are members of a unitary group

on page 4 show the types of NOLs available, a

filing a single tax return must use intrastate

If the corporation has an eligible qualified new

description, and the percentages and carryover/

apportionment, separately computing the loss

business or a small business and the NOL is

carryback periods for each type of loss.

carryover for each corporation in the group

greater than the amount of net loss from such

Specific Line Instructions

using its individual apportionment factors (R&TC

a business, use the general NOL first. If the

Section 25108). Complete a separate form

corporation operates one or more new businesses

FTB 3805Q for each taxpayer included in the

Part I – Current year NOL

and one or more eligible small businesses,

combined report. Attach the separate forms for

determine the amount of the loss attributable to

Use Part I to figure the current year NOL eligible

each taxpayer member behind the combined form

the new business(es), the small business(es),

for carryback or carryover.

FTB 3805Q for all members.

and the general NOL in the following manner.

Line 2 – If the corporation incurred a disaster loss

The NOL is first treated as a new business NOL

Unlike the loss treatment for a federal

during the 2013 taxable year, enter the amount of

to the extent of the loss from the new business.

consolidated tax return, a California loss

the loss on this line. Enter as a positive number.

Any remaining NOL is then treated as an eligible

carryover for one member in a combined report

small business NOL to the extent of the loss from

may not be applied to the income of another

Line 3 – If the amount is zero or less, the

the eligible small business. Any further remaining

member included in the combined report. Get FTB

corporation does not have a current year general

NOL is treated as an NOL under the general rules.

Pub. 1061, Guidelines for Corporations Filing a

NOL. Go to Part II for computation of general NOL

Combined Report, for more information.

carryovers, the current year disaster loss, and

Line 9 – Go to Part II, Current Year NOLs, to

carryover from disaster losses.

record the corporation’s 2013 NOL carryover to

Note. If taxpayers are required to be included

2014. Complete columns (b), (c), (d), and (h)

in a combined report, the 2010 and 2011 NOL

Line 6 – Enter the current year NOL. California

only, for each type of loss that the corporation

limitation amount of $300,000 or more shall

will allow NOLs incurred in taxable years

incurred. See Part III, line 3, column (j) for each

apply to the aggregate amount of pre-apportioned

beginning on or after January 1, 2013, to be

type of loss that the corporation incurred.

income for all members included in the combined

carried back to each of the preceding two taxable

report.

years.

Part II – NOL carryover and

NOL carryback general rule: The corporation

D Water’s-Edge

disaster loss carryover

must first carry back the entire NOL incurred in

limitations

For water’s-edge taxpayers, R&TC

2013 to the preceding two years. Any loss not

Section 24416.20(c) imposes a limitation on the

applied in the preceding two years can be carried

Use Part II to limit current year disaster loss

NOL deduction if the NOL is generated during a

forward up to 20 years. The two-year carryback

and NOL carryover deductions to current year

non-water’s-edge taxable year. The NOL carryover

period does not apply to the portion of an NOL

income and to record all of the corporation’s loss

is limited to the lesser amount as re-determined

attributable to a qualified disaster. To determine

carryover information.

by computing the income and factors of the

the amount of NOL incurred in 2013 that can be

original worldwide combined reporting group

carried back, complete Part III, NOL carryback,

If the corporation has losses from more than

as if the water’s-edge election had been in

before completing Part I, lines 7 - 9.

one source and/or more than one category, the

force for the taxable year of the loss. If R&TC

corporation must compute the allowable NOL

Amended return – The corporation claims the

Section 24416.20(c) applies, the NOL carryover

carryover for each loss separately.

NOL carryback by amending the 2011 and/or

for each corporation may be decreased, but not

2012 tax return using Form 100X, Amended

increased.

Corporation Franchise or Income Tax Return,

Page 2 FTB 3805Q Instructions 2013

Instructions For Form Ftb 3805q - Net Operating Loss (Nol) Computation And Nol And Disaster Loss Limitations - Corporations - 2013 Page 2

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