California Form 3805d - Net Operating Loss (Nol) Carryover Computation And Limitation - Pierce'S Disease - 2012 Page 2
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3Instructions for Form FTB 3805D
Net Operating Loss (NOL) Carryover Computation and Limitation – Pierce’s Disease
What’s New
B Definitions
an NOL which can be carried forward for nine
years at 100%.
Pierce’s Disease. Pierce’s disease is a
For taxable years beginning on or after
The carryover periods for an NOL incurred in
pathogen (a plant killing bacterium) which
January 1, 2012, California has reinstated
years:
attacks a plant’s water-conducting tissues.
the Net Operating Loss (NOL) carryover
• Beginning before January 1, 2002, have
deduction.
Vector. A vector is an insect that carries and
been extended for two years.
transmits a disease-causing organism. The
Important Information
• Beginning on or after January 1, 2002,
specific “vector” in Pierce’s disease is the
and before January 1, 2003, have been
glassy-winged sharpshooter.
For taxable years beginning in 2010 and 2011,
extended for one year.
California suspended the net operating loss
Affected Area. The affected area is the
For more information, get FTB Legal
(NOL) carryovers deduction. Taxpayers may
taxpayer’s area confirmed by the CDFA as
Ruling 2011-04.
continue to compute and carryover NOLs
having a pest infestation resulting from
To claim these NOLs, the California
during the suspension period. However, the
Pierce’s disease and its vectors.
Department of Food and Agriculture (CDFA)
NOL suspension rules do not apply to:
Business Income. Business income is defined
must confirm that a pest infestation occurred
• Corporations with net income after state
as income arising from transactions and
due to Pierce’s disease and its vectors. For
adjustments (pre-apportioned income) of
activities in the regular course of the trade or
more information, go to cdfa.ca.gov or call
less than $300,000,
business. Business income includes income
916.900.5024.
• Taxpayers other than corporations with
from tangible and intangible property if the
modified adjusted gross income of less
The PDV NOL carryover can be deducted
acquisition, management, and disposition of
than $300,000,
only against income apportioned to the area
the property constitute integral parts of the
• Taxpayers claiming disaster loss
affected by PDV using a two-factor (Property
regular trade or business operations.
and Payroll) formula.
carryovers.
Nonbusiness Income. Nonbusiness income
PDV NOL Election. If the taxpayer made
For taxable years beginning in 2008 and
is all income other than business income. See
an election and designated the carryover
2009, California suspended the NOL carryover
Cal. Code Regs. tit. 18, section 25120 for more
category on the original return for the taxable
deduction. Taxpayers may continue to
information and examples of nonbusiness
year of a loss and filed form FTB 3805D, Net
compute and carryover an NOL during
income.
Operating Loss (NOL) Carryover Computation
the suspension period. However, the NOL
Farming Business Activities. Farming
and Limitation – Pierce’s Disease, for each
suspension rules do not apply to:
business activities are generally determined
taxable year in which an NOL deduction is
• Corporations with taxable income of less
by the transactions and activities in the
being taken, this election is irrevocable.
than $500,000,
regular course of the farming trade or
• Taxpayers with a net business income of
The NOL allowed in computing the California
business as related to the production of
taxable income of a nonresident or part-year
less than $500,000,
crops, fruits, other agricultural products,
• Taxpayers claiming disaster loss
resident is no longer limited by the amount of
or for the sustenance of livestock. For more
carryovers.
NOLs from all sources. Only your California
information, see Cal Code Regs. tit.18,
sourced income and losses are considered
section 25128-2.
The carryover period for any NOL or NOL
in determining if you have a California NOL.
carryover, for which a deduction is disallowed
C Determining the Income
For more information, get form FTB 3805Q or
because of the 2008-2011 suspension, are
FTB 3805V.
extended by:
California source farming business income
If your residency status changes from the
is apportioned to an area affected by PDV
• One year for losses incurred in taxable
time you generate the NOL carryover to the
by multiplying the total California farming
years beginning on or after January 1,
time you apply the NOL carryover deduction,
business income of the taxpayer by a fraction.
2010, and before January 1, 2011.
you will need to recompute the NOL carryover
The numerator is the property factor plus
• Two years for losses incurred in taxable
amount. For more information, get FTB
the payroll factor, and the denominator is
years beginning before January 1, 2010.
Pub. 1100, Taxation of Nonresidents and
two. Those factors with zero balances in the
• Three years for losses incurred in taxable
Individuals Who Change Residency.
totals of column (a) will not be included in the
years beginning before January 1, 2009.
computation of the average apportionment
S Corporations. Pierce’s disease NOLs
• Four years for losses incurred in taxable
percentage. For example, if the taxpayer has
years beginning before January 1, 2008.
incurred prior to becoming an S corporation
payroll expenses, or property, but not both in
cannot be used against S corporation income.
For more information, get FTB Legal Ruling
California, the taxpayer must enter on line 4
However, an S corporation is allowed to
2011-04.
the same percentage listed on line 3.
deduct a Pierce’s disease NOL incurred after
Also, California modified the NOL carryback
the “S” election is made. An S corporation
Property Factor. Property is defined as the
provision. For more information, get form
may use the NOL as a deduction against
average value of all real and tangible personal
FTB 3805Q, Net Operating Loss (NOL)
income subject to the 1.5% entity-level tax
property owned or rented by the business and
Computation and NOL and Disaster Loss
(3.5% for financial S corporations). The
used during the taxable year.
Limitations — Corporations or form
expenses and income giving rise to the loss
Rented property is valued at eight times the
FTB 3805V, Net Operating Loss (NOL)
are also passed through to the shareholders
net annual rental rate. The net annual rental
Computation and NOL and Disaster Loss
in the taxable year the loss is incurred.
rate for any item of rented property is the
Limitations – Individuals, Estates, and Trust.
total rent paid for the property, less total
A Purpose
General Information
annual subrental rates paid by subtenants.
Use form FTB 3805D to determine the correct
When determining apportionment
For taxable years beginning on or after
amount of NOL carryover that you can
percentage on Part II, the numerator of the
January 1, 2001, and before January 1, 2003,
deduct this taxable year for prior year losses
property factor is the average value of the
farmers were allowed a deduction for losses
sustained due to PDV. Attach form FTB 3805D
taxpayer’s real and tangible personal property
sustained due to Pierce’s disease and its
to your California tax return.
vectors (PDV) in California. This loss created
FTB 3805D Instructions 2012 Page 1
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