2022 Instructions for Form 565 Partnership Tax Booklet

2022 Instructions for Form 565, Partnership Return of Income

References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2015, and to the California Revenue and Taxation Code (R&TC).

In general, for taxable years beginning on or after January 1, 2015, California law conforms to the Internal Revenue Code (IRC) as of January 1, 2015. However, there are continuing differences between California and federal law. When California conforms to federal tax law changes, we do not always adopt all of the changes made at the federal level. For more information, go to ftb.ca.gov and search for conformity. Additional information can be found in FTB Pub. 1001, Supplemental Guidelines to California Adjustments, the instructions for California Schedule CA (540), California Adjustments – Residents, or Schedule CA (540NR), California Adjustments – Nonresidents or Part-Year Residents, and the Business Entity tax booklets.

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The instructions provided with California tax forms are a summary of California tax law and are only intended to aid taxpayers in preparing their state income tax returns. We include information that is most useful to the greatest number of taxpayers in the limited space available. It is not possible to include all requirements of the California Revenue and Taxation Code (R&TC) in the instructions. Taxpayers should not consider the instructions as authoritative law.

R&TC Sections 17024.5 and 23051.5 have been amended to clarify that, unless otherwise expressly disallowed, federal elections made before a taxpayer becomes a California taxpayer are binding for California tax purposes.

What’s New

Soundstage Filming Tax Credit – For taxable years beginning on or after January 1, 2022, R&TC Sections 23698(k) allows a fourth film credit, the Soundstage Filming Tax Credit against tax. The credit is allocated and certified by the California Film Commission (CFC). The qualified taxpayer can:

• Offset the credit against income tax liability.
• Sell the credit to an unrelated party (independent films only).
• Assign the credit to an affiliated corporation.
• Apply the credit against qualified sales and use taxes.

For more information, get form FTB 3541, California Motion Picture and Television Production Credit, form FTB 3551, Sale of Credit Attributable to an Independent Film, go to ftb.ca.gov and search for motion picture, or go to the CFC website at film.ca.gov and search for soundstage filming tax credit.

State Historic Rehabilitation Tax Credit – For taxable years beginning on or after January 1, 2021, a State Historic Rehabilitation Tax Credit is available to qualified taxpayers that received a tax credit allocation from the California Tax Credit Allocation Committee (CTCAC). The credit is for the rehabilitation of certified historic structures and for individual taxpayers, a qualified residence. Any credits not used in the taxable year may be carried forward up to eight years. Taxpayers should apply for the tax credit reservation with CTCAC and have received a tax credit allocation confirmation number from CTCAC prior to claiming the State Historic Rehabilitation Tax Credit on form FTB 3835. The credit was not funded, and cannot be claimed, for tax year 2021. For more information, get form FTB 3835, State Historic Rehabilitation Tax Credit, or go to the California Office of Historic Preservation website at ohp.parks.ca.gov and search shrtc.

Homeless Hiring Tax Credit – For taxable years beginning on or after January 1, 2022, and before January 1, 2027, a Homeless Hiring Tax Credit (HHTC) will be available to a qualified taxpayer that hires eligible individuals. The amount of the tax credit will be based on the number of hours the employee works in the taxable year. Employers must obtain a certification of the individual’s homeless status from an organization that works with the homeless and must receive a tentative credit reservation for that employee. Any credits not used in the taxable year may be carried forward up to three years. For more information, get form FTB 3831, Homeless Hiring Tax Credit or go to ftb.ca.gov and search for hhtc.

Reporting Requirements – Taxpayers may need to file form FTB 4197, Information on Tax Expenditure Items, with the Franchise Tax Board (FTB) to report tax expenditure items as part of the FTB’s annual reporting requirements under R&TC Section 41. To determine if you have an R&TC Section 41 reporting requirement, see the R&TC Section 41 Reporting Requirements section or get form FTB 4197.

Principal Business Activity Codes – The Principal Business Activity Codes, located within these instructions, have been updated and revised to reflect updates to the North American Industry Classification System (NAICS).

High Road Cannabis Tax Credit – For taxable years beginning on or after January 1, 2023, and before January 1, 2028, a High Road Cannabis Tax Credit (HRCTC) will be available to a qualified taxpayer that is a licensed commercial cannabis business that meets specified criteria. The HRCTC is allowed in an amount equal to 25 percent of the total amount of the qualified taxpayer’s qualified expenditures in the taxable year not to exceed $250,000 per taxable year. Any credits not used in the taxable year may be carried forward up to eight years. A qualified taxpayer must request a tentative credit reservation from the FTB during the month of July for each taxable year or within 30 days of the start of their taxable year if the qualified taxpayer’s taxable year begins after July. For more information, go to ftb.ca.gov and search for hrctc.

Thomas and Woolsey Wildfires Exclusion – For taxable years beginning before January 1, 2027, California law allows a qualified taxpayer an exclusion from gross income for any amount received in a settlement from Southern California Edison for claims relating to the 2017 Thomas Fire or the 2018 Woolsey Fire. If a qualified taxpayer included income for an amount received from these settlements in a prior taxable year, the taxpayer can file an amended tax return for that year. If the normal statute of limitations has expired, the taxpayer must file a claim by September 29, 2023. For more information, see Specific Line Instructions and R&TC Section 17138.6 and 24309.

Fire Victims Trust Exclusion – For taxable years beginning before January 1, 2028, California law allows a qualified taxpayer an exclusion from gross income for any amount received from the Fire Victims Trust, established pursuant to the order of the United States Bankruptcy Court for the Northern District of California dated June 20, 2020, case number 19-30088, docket number 8053. If a qualified taxpayer included income for an amount received from the Fire Victims Trust in a prior taxable year, the taxpayer can file an amended tax return for that year. If the normal statute of limitations has expired, the taxpayer must file a claim by September 29, 2023. For more information, see Specific Line Instructions and R&TC Section 17138.5 and 24309.3.

Turf replacement water conservation program – For taxable years beginning on or after January 1, 2022, and before January 1, 2027, California law allows an exclusion from gross income for any amount received as a rebate, voucher, or other financial incentive issued by a public water system, as defined, local government, or state agency for participation in a turf replacement water conservation program. For more information, see Specific Line Instructions and R&TC Section 17138.2 and 24308.9.

College Access Tax Credit – The sunset date for the College Access Tax Credit is extended until taxable years beginning before January 1, 2028. For more information, get form FTB 3592, College Access Tax Credit.

Small Business and Nonprofit COVID-19 Supplemental Paid Sick Leave Relief Grant – For taxable years beginning on or after January 1, 2021, and before January 1, 2030, California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Small Business and Nonprofit COVID-19 Supplemental Paid Sick Leave Relief Grant Program that is established by Section 12100.975 of the Government Code. For more information, see Specific Line Instructions and R&TC Section 17158 and 24312.

R&TC Section 41 Reporting Requirements

Taxpayers should file form FTB 4197 with the FTB to report tax expenditure items as part of the FTB’s annual reporting requirements under R&TC Section 41. “Tax expenditure” means a credit, deduction, exclusion, exemption, or any other tax benefit provided for by the state. The FTB uses information from form FTB 4197 for reports required by the California Legislature. Taxpayers that have a reporting requirement for any of the following should file form FTB 4197:

• For taxable years beginning before January 1, 2027, qualified taxpayers who benefited from the exclusion from gross income for any amount received in a settlement from Southern California Edison for claims relating to the 2017 Thomas Fire or the 2018 Woolsey Fire.
• For taxable years beginning on January 1, 2022, and before January 1, 2027, taxpayers who benefited from the exclusion of gross income for any amount received as a rebate, voucher, or other financial incentive issued by a public water system, as defined, local government, or state agency for participation in a turf replacement water conservation program.
• For taxable years beginning on or after January 1, 2021, taxpayers who benefited from the exclusion from gross income for the Paycheck Protection Program (PPP) loans forgiveness, other loan forgiveness, the Economic Injury Disaster Loan (EIDL) advance grant, restaurant revitalization grant, or shuttered venue operator grant, and related eligible expense deductions.

For more information, get form FTB 4197.

General Information

A. Important Information

Limited Liability Companies (LLCs) Classified as Partnerships File Form 568 – LLCs may be classified for tax purposes as a partnership, a corporation, or a disregarded entity. The LLC must file the appropriate California tax return for its classification. LLCs classified as a:

• Partnership file Form 568, Limited Liability Company Return of Income.
• General corporation file Form 100, California Corporation Franchise or Income tax Return.
• S corporation file Form 100S, California S Corporation Franchise or Income tax Return.
• Disregarded entities, see General Information R, Check-the-Box Regulations.

LLCs classified as partnerships should not file Form 565, Partnership Return of Income. The LLC will file Form 565 only if it meets an exception. For more information, see the exception in General Information D, Who Must File.

California Microbusiness COVID-19 Relief Grant – For taxable years beginning on or after January 1, 2020, and before January 1, 2023, California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Microbusiness COVID-19 Relief Program that is administered by the Office of Small Business Advocate (CalOSBA). For more information, see R&TC Section 17158.1 and the Specific Line Instructions.

California Venues Grant – For taxable years beginning on or after September 1, 2020, and before January 1, 2030, California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Venues Grant Program that is administered by the CalOSBA. For more information, see R&TC Sections 17158 and 24312 and the Specific Line Instructions.

Shuttered Venue Operator Grant – For taxable years beginning on or after January 1, 2019, California law allows an exclusion from gross income for amounts awarded as a shuttered venue operator grant under the federal Consolidated Appropriations Act, 2021 (CAA, 2021). The CAA, 2021 allows deductions for eligible expenses paid for with grant amounts. California law conforms to this federal provision, with modifications. For California purposes, these deductions do not apply to an ineligible entity. “Ineligible entity” means a taxpayer that is either a publicly-traded company or does not meet the 25 percent reduction from gross receipts requirements under Section 311 of Division N of the CAA, 2021. For more information, see Specific Instructions or R&TC Section 24308.3.

Other Loan Forgiveness – For taxable years beginning on or after January 1, 2019, California law allows an exclusion from gross income for borrowers of forgiveness of indebtedness described in Section 1109(d)(2)(D) of the federal Coronavirus Aid, Relief and Economic Security (CARES) Act as stated by section 278, Division N of the federal CAA, 2021. The CAA 2021, allows deductions for eligible expenses paid for with covered loan amounts. California law conforms to this federal provision, with modifications. For California purposes, these deductions generally do not apply to an ineligible entity. “Ineligible entity” means a taxpayer that is either a publicly-traded company or does not meet the 25 percent reduction from gross receipts requirements under Section 311 of the CAA, 2021. For more information, see Specific Line Instructions or go to ftb.ca.gov and search for AB 80.

Elective Tax for Pass-Through Entities (PTE) and Credit for Owners – For taxable years beginning on or after January 1, 2021, and before January 1, 2026, California law allows an entity taxed as a partnership or an “S” corporation to annually elect to pay an elective tax at a rate of 9.3 percent based on its qualified net income. The election shall be made on an original, timely filed return and is irrevocable for the taxable year.

The law allows a credit against the personal income tax to a taxpayer, other than a partnership, that is a partner, shareholder, or member of a qualified entity that elects to pay the elective tax, in an amount equal to 9.3 percent of the partner’s, shareholder’s, or member’s pro rata share or distributive share and guaranteed payments of qualified net income subject to the election made by the qualified entity. A disregarded business entity and its partners or members cannot claim the credit, except for a disregarded single member limited liability company (SMLLC) that is owned by an individual, fiduciary, estate, or trust subject to personal income tax. For more information, go to ftb.ca.gov and search for pte elective tax and get the following PTE elective tax forms and instructions:

• Form FTB 3893, Pass-Through Entity Elective Tax Payment Voucher
• Form FTB 3804, Pass-Through Entity Elective Tax Calculation
• Form FTB 3804-CR, Pass-Through Entity Elective Tax Credit

Gross Income Exclusion for Bruce’s Beach – Effective September 30, 2021, California law allows an exclusion from gross income for the first time sale in the taxable year in which the land within Manhattan State Beach, known as “Peck’s Manhattan Beach Tract Block 5” and commonly referred to as “Bruce’s Beach” is sold, transferred, or encumbered. A recipient’s gross income does not include the following:

• Any sale, transfer, or encumbrance of Bruce’s Beach;
• Any gain, income, or proceeds received that is directly derived from the sale, transfer, or encumbrance of Bruce’s Beach.

Small Business COVID-19 Relief Grant Program – California allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the COVID-19 Relief Grant under Executive Order No. E 20/21-182 and the California Small Business COVID-19 Relief Grant Program established by Section 12100.83 of the Government Code. If any amount was included for federal purposes, exclude that amount for California purposes.

Paycheck Protection Program (PPP) Loans Forgiveness – For taxable years beginning on or after January 1, 2019, California law allows an exclusion from gross income for covered loan amounts forgiven under the federal CARES Act, Paycheck Protection Program and Health Care Enhancement Act, Paycheck Protection Program Flexibility Act of 2020, the CAA, 2021, or the PPP Extension Act of 2021.

Also, the federal American Rescue Plan Act (ARPA) of 2021 expands PPP eligibility to include “additional covered nonprofit entities” which includes certain Code 501(c) nonprofit organizations and Internet-only news publishers and Internet-only periodical publishers. California law does not conform to this expansion of PPP eligibility. For more information, see Specific Line Instructions.

The CAA, 2021, allows deductions for eligible expenses paid for with covered loan amounts. California law conforms to this federal provision, with modifications. For California purposes, these deductions do not apply to an ineligible entity. “Ineligible entity” means a taxpayer that is either a publicly-traded company or does not meet the 25 percent reduction from gross receipts requirements under Section 311 of Division N of the CAA, 2021. For more information, see Specific Line Instructions or R&TC Section 24308.6 or go to ftb.ca.gov and search for AB 80.

Advance Grant Amount – For taxable years beginning on or after January 1, 2019, California law conforms to the federal law regarding the treatment for an emergency EIDL grant under the federal CARES Act or a targeted EIDL advance under the CAA, 2021.

Loophole Closure and Small Business and Working Families Tax Relief Act of 2019 – The federal Tax Cuts and Jobs Act (TCJA) signed into law on December 22, 2017, made changes to the IRC. California Revenue and Taxation Code does not conform to all of the changes. In general, for taxable years beginning on or after January 1, 2019, California conforms to the following TCJA provisions:

• California Achieving a Better Life Experience (ABLE) Program
• Student loan discharged on account of death or disability
• Federal Deposit Insurance Corporation (FDIC) Premiums
• Excess employee compensation

Technical Termination of a Partnership – For taxable years beginning on or after January 1, 2019, California conforms to the TCJA repeal of the termination of a partnership by the sale or exchange of 50 percent or more of the total interest in a partnership within a 12 month period.

A partnership may elect to have the repeal of the technical termination apply for taxable years beginning after December 31, 2017, and before January 1, 2019. Taxpayers make the R&TC Section 17859(d)(1) election by providing the following information to the FTB:

1. Include a statement with their original or amended California tax return stating the taxpayers’ intent to make an election under R&TC Section 17859(d)(1) of Assembly Bill 91.
2. On the top of the first page of the original or amended tax return, print “AB 91 – R&TC Section 17859(d)(1) Election” in black or blue ink.
3. Mail returns to: Mail Franchise Tax Board PO Box 1570 Rancho Cordova, CA 95741-1570

IRC Section 338 Election – For taxable years beginning on or after July 1, 2019, California requires taxpayers to use their federal IRC Section 338 election treatment for certain stock purchases treated as asset acquisitions or deemed election where purchasing corporation acquires asset of target corporation. If an election has not been made by a taxpayer under IRC Section 338, the taxpayer shall not make a separate state election for California.

Small Business Method of Accounting Election – For taxable years beginning on or after January 1, 2019, California conforms to certain provisions of the TCJA relating to changes to accounting methods for small businesses.

A small business may elect to apply the same provisions above to taxable years beginning on or after January 1, 2018 and before January 1, 2019. Taxpayers make the election by providing the following information to the FTB:

1. Include a statement with their original or amended California tax return stating the taxpayers’ intent to make a Small Business Method of Accounting election(s).
2. On the top of the first page of the original or amended tax return, print “AB 91 – Small Business Method of Accounting Election” in black or blue ink.
3. Mail returns to: Mail Franchise Tax Board PO Box 942857 Sacramento, CA 94257-0500

New Partnership Audit Regime – For federal purposes, the Bipartisan Budget Act of 2015 replaced the federal Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982, creating a centralized partnership audit regime, and generally transferring the liability for the tax due to the partnership.

All partnerships with tax years beginning after 2017 are subject to this new regime unless an eligible partnership elects out. For California purposes, taxable years beginning on or after January 1, 2018, partnerships are required to report each change or correction made by the IRS, to the FTB, for the reviewed year within six months after the date of each final federal determination, and will generally be liable for the tax due.

Paperless Schedule K-1 – The FTB discontinued the Paperless Schedules K-1 (565) program due to the increasing support of our business e-file program. For more information regarding the California business e-file program, go to ftb.ca.gov and search for business efile.

Business e-file – California law requires any business entity that files an original or amended tax return that is prepared using tax preparation software to electronically file (e-file) their tax return with the FTB. For more information, go to ftb.ca.gov and search for business efile.

Web Pay – Partnerships can make payments online with Web Pay for Businesses. Partnerships can make an immediate payment or schedule payments up to a year in advance. For more information, go to ftb.ca.gov/pay. Do not file form FTB 3587, Payment Voucher for LP, LLP, and REMIC e-filed Returns.

Credit Card – Partnerships can use a Discover, MasterCard, Visa, or American Express card to pay business taxes. Go to officialpayments.com. ACI Payments, Inc. (formerly Official Payments) charges a convenience fee for using this service. Do not file form FTB 3587.

Electronic Funds Withdrawal (EFW) – Partnerships can make an extension payment using tax preparation software. Check with your software provider to determine if they support EFW for extension payments.

Payments and Credits Applied to Use Tax – If a partnership includes use tax on its income tax return, payments and credits will be applied to use tax first, then towards franchise or income tax, interest, and penalties. For more information, see General Information U, California Use Tax and Specific Instructions.

Like-Kind Exchanges – The TCJA amended IRC Section 1031 limiting the nonrecognition of gain or loss on like-kind exchanges to real property held for productive use or investment. California conforms to this change under the TCJA for exchanges initiated after January 10, 2019.

California Like-Kind Exchanges – California requires taxpayers who exchange real property located in California for like-kind property located outside of California under IRC Section 1031, to file an annual information return with the FTB. For more information, get form FTB 3840, California Like-Kind Exchanges, or go to ftb.ca.gov and search for like kind.

Apportioning Trade or Business – “Apportioning trade or business” means a distinct trade or business whose business income is required to be apportioned because it has income derived from sources within this state and from sources outside this state. An apportioning trade or business can be conducted in many forms, including, but not limited to, the following:

1. A corporation that is a taxpayer.
2. A combined reporting group that includes at least one taxpayer member.
3. A nonunitary division of a member of a combined reporting group that includes at least one taxpayer member.
4. A partnership that is partially owned by but not unitary with either (1) a partner that is a corporation that is a taxpayer, or (2) a member of a combined reporting group that includes at least one taxpayer member.
5. A disregarded entity that is not unitary with an owner that is either (1) a corporation that is a taxpayer, or (2) a member of a combined reporting group that includes at least one taxpayer member.
6. A sole proprietorship that is operated by an individual who is not a resident of California.
7. A partnership that is operated by one or more individual(s) who are not residents of California.

For more information, get Schedule R, Apportionment and Allocation of Income.

Gross Receipts – R&TC Section 25120 was amended to add the definition of gross receipts. For a complete definition of “gross receipts”, refer to R&TC Section 25120(f), or go to ftb.ca.gov and search for 25120.

Foreign Reduced Withholding – The FTB began applying Federal Treasury Regulation 1.1446-6 procedures to reduce or eliminate withholding of California tax on effectively connected taxable income (ECTI) from California sources allocable to a foreign partner or member. The foreign partner must first sign and send federal Form 8804-C, Certificate of Partner-Level Items to Reduce Section 1446 Withholding, to the partnership or LLC. The foreign partner or member must sign and send Form 589, Nonresident Reduced Withholding Request, to the FTB along with a signed copy of federal Form 8804-C. The FTB will review the request within 21 business days. If the request is approved, the partnership or LLC should remit the reduced withholding amount to the FTB along with Form 592-A, Payment Voucher for Foreign Partner or Member Withholding.

Single-Sales Factor Formula – R&TC Section 25128.7 requires all business income of an apportioning trade or business, other than an apportioning trade or business under R&TC Section 25128(b), to apportion its business income to California using the single-sales factor formula. For more information, get Schedule R, or go to ftb.ca.gov and search for single sales factor.

Market Assignment – R&TC Section 25136 requires all taxpayers to assign sales, other than sales of tangible personal property, using market assignment. For more information, get Schedule R or go to ftb.ca.gov and search for market assignment.

Doing Business – A taxpayer is doing business if it actively engages in any transaction for the purpose of financial or pecuniary gain or profit in California or if any of the following conditions are satisfied:

• The taxpayer is organized or commercially domiciled in California.
• The sales, as defined in R&TC Section 25120(e) or (f), of the taxpayer in California, including sales by the taxpayer’s agents and independent contractors, exceed the lesser of $690,144 or 25% of the taxpayer’s total sales.
• The real property and tangible personal property of the taxpayer in California exceed the lesser of $69,015 or 25% of the taxpayer’s total real property and tangible personal property.
• The amount paid in California by the taxpayer for compensation, as defined in R&TC Section 25120(c), exceeds the lesser of $69,015 or 25% of the total compensation paid by the taxpayer.

In determining the amount of the taxpayer’s sales, property, and payroll for doing business purposes, include the taxpayer’s pro-rata share of amounts from partnerships and S corporations. These amounts are reported on the partner’s Schedule K-1 on Table 2, Part C.

Partnerships and LLCs are considered doing business in California if they have a general partner or member doing business on their behalf in California. Likewise, general partners and members are considered doing business in California if the partnership or LLC, respectively, is doing business in this state. For more information, see R&TC Section 23101 or go to ftb.ca.gov and search for doing business.

Backup Withholding – With certain limited exceptions, payers that are required to withhold and remit backup withholding to the IRS are also required to withhold and remit to the FTB on income sourced to California. If the payee has backup withholding, the payee must contact the FTB to provide a valid Taxpayer Identification Number (TIN), before filing the tax return. Failure to provide a valid TIN may result in a denial of the backup withholding credit. For more information, go to ftb.ca.gov and search for backup withholding.

Domestic Limited Partnership Revival – California law requires a cancelled domestic limited partnership to accompany the certificate of revival filed with the California Secretary of State (SOS) with written confirmation obtained from the FTB that all required tax returns have been filed by the partnership. Also, in addition to payment of taxes, interest and penalties, fees must be paid as well. This new law further authorizes the FTB to assess a specialized tax service fee for an expedited domestic limited partnership revival confirmation letter request. The fee is:

• $100 until December 31, 2010.
• $56 on or after January 1, 2011, as set by regulation.

Partnership Converting to a Corporation – IRS Revenue Ruling 2009-15 was released, which explains that in certain situations a partnership that converts to a corporation under Federal Regulation Section 301.7701-3(c)(1)(i) or under a state law formless conversion statute is eligible to make an S election effective for the corporation’s first taxable year.

Conversion to an LLC

A partnership that converts to an LLC during the year must file two California returns. Even if the partners/members and the business operations remain the same, the partnership should file Form 565 for the beginning of the year to the date of change. For the remainder of the year, the newly converted LLC would file Form 568. See General Information I, Accounting Periods, for further instructions.

Paid Preparer Authorization

A partnership can designate a paid preparer to discuss the tax return with the FTB. For more information, see General Information M, Signatures, included in this booklet.

Dissolving or Cancelling/Tax Clearance Certificate Process

Limited Partnerships (LP) or Limited Liability Partnerships (LLP) are not required to obtain a Tax Clearance Certificate prior to the dissolution or cancellation of the LP or LLP. For more information, see General Information P, Cancelling a Limited Partnership (LP) or Limited Liability Partnership (LLP).

Providing California and Federal Returns

The FTB may request copies of California or federal returns that are subject to or related to a federal examination. Generally, the California statute of limitations is four years from the return due date or from the date filed, whichever is later. However, the statute is extended in situations where an individual or a business entity is under examination by the IRS. For additional information concerning the extended statute of limitation due to a federal examination, see General Information J, Amended Return.

The FTB recommends keeping copies of returns and records that verify income, deductions, adjustments, or credits reported, for at least the minimum time required under the statute of limitations. However, some records should be kept much longer. For example, partners should keep records substantiating their basis in a partnership and property owners should keep records to figure the basis of property.

Federal/State Differences

California tax law generally conforms to federal tax law in the area of partnerships (IRC Subchapter K – Partners and Partnerships). However, there are some differences:

• In general, California does not conform to the ARPA.
• California does not conform to the CAA, 2021, temporary expansion for qualified charitable contributions under the CARES Act through 2021 and full deduction for business meals provided by a restaurant paid or incurred during 2021-2022.

The TCJA signed into law on December 22, 2017 made changes to the IRC. In general, California R&TC does not conform to the changes. California taxpayers continue to follow the IRC as of the specified date of January 1, 2015, with modifications. The following is a non-exhaustive list of the TCJA changes:

• California does not conform to the expanded definition of IRC Section 179 property for certain depreciable tangible personal property related to furnishing lodging and for qualified real property for improvements to nonresidential real property.
• California does not conform to the deferral and exclusion of capital gains reinvested or invested in qualified opportunity zone funds.
• California does not conform to the exclusion of a patent, invention, model or design, and secret formula or process from the definition of capital asset.
• California does not conform to the new federal deduction for qualified business income of pass-through entities under IRC section 199A.
• California does not conform to the gain or loss of foreign persons from sale or exchange of interests in partnership engaged in a trade or business within the United States.
• California does not conform to the modification of the definition of substantial built-in loss in the case of the transfer of partnership interests.
• California does not conform to charitable contribution and foreign taxes being taken into account in determining limitation on allowance of partner’s share of loss.
• California does not conform to IRC Section 951A, which relates to global intangible low-taxed income.
• The change to IRC Section 163(j), which limits business interest deductions.

Additional federal/state differences may occur for the following:

• California does not conform to the qualified small business stock deferral and gain exclusion under IRC Section 1045 and IRC Section 1202.
• IRC Section 168(k) relating to the depreciation deduction for certain assets.
• California does not conform to the extent of suspension of income limitations on percentage depletion for production from marginal wells. The percentage depletion deduction, which may not exceed 65% of the taxpayer’s taxable income, is restricted to 100% of the net income derived from the oil or gas well property.
• An $800 annual tax is generally imposed on LPs, LLCs classified as partnerships for tax purposes, LLPs, and REMICs that are partnerships or are classified as partnerships for tax purposes.
• Distributions to certain nonresident partners are subject to withholding for California tax.
• A deduction for taxes paid to other states is not allowed.
• California follows federal law by requiring partnerships to use a required taxable year. However, California does not conform to the federal required payment provision.
• California law has specific provisions concerning the distributive share of partnership taxable income allocable to California, with special apportionment formulas for professional partnerships.
• California law modifies the federal definitions for unrealized receivables and substantially appreciated inventory items.
• California has not conformed to the provisions relating to the TEFRA.
• California has not adopted the federal definition of small partnerships, as defined in IRC Section 6231.

This list is not intended to be all-inclusive for the federal and state differences. For additional information, consult R&TC.

Revised Uniform Partnership Act (RUPA)

California has enacted RUPA which applies to partnerships formed after January 1, 1997. RUPA applies to all partnerships after January 1, 1999. RUPA governs the formation, operation, and liquidation of partnerships in California. However, the R&TC governs the taxation of partnerships doing business in California.

California Disclosure Obligations

If the partnership was involved in a reportable transaction, including a listed transaction, the partnership may have a disclosure requirement. Attach federal Form 8886, Reportable Transaction Disclosure Statement, to the back of the California return along with any other supporting schedules. If this is the first time the reportable transaction is disclosed on the return, send a duplicate copy of federal Form 8886 to the address below:

Mail Tax Shelter Filing ABS 389 MS F340 Franchise Tax Board PO Box 1673 Sacramento, CA 95812-9900

The FTB may impose penalties if the partnership fails to file federal Form 8886, federal Form 8918, Material Advisor Disclosure Statement, or any other required information. A material advisor is required to provide a reportable transaction number to all taxpayers and material advisors for whom the material advisor acts as a material advisor.

For more information, go to ftb.ca.gov and search for disclosure obligation.

Claim of Right

If the partnership had to repay an amount that was included in income in an earlier year, under a claim of right, the partnership may be able to deduct the amount repaid from its income for the year in which it was repaid. Or, if the amount the partnership repaid is more than $3,000, the partnership may be able to take a credit against its tax for the year in which it was repaid. For more information, see the Repayments section of federal Pub. 525, Taxable and Nontaxable Income.

California Tax Information on the Internet

You can download, view, and print California tax forms and publications at ftb.ca.gov/forms.

Federal Tax Information on the Internet

The IRS has federal forms and publications available to download, view, and print at irs.gov.

State Agencies’ Websites

Access other California state agency websites at ca.gov.

Joint Agency Website

For additional business tax information, go to taxes.ca.gov, sponsored by the Board of Equalization (BOE), California Department of Tax and Fee Administration (CDTFA), Employment Development Department (EDD), the FTB, and the IRS.

B. Purpose

Form 565 is an information return for calendar year 2022 or fiscal years beginning in 2022. Use Form 565 to report income, deductions, gains, losses, etc., from the operation of a partnership.

C. Definitions

General Partnership

A general partnership is only composed of general partners. Any partnership that does not satisfy state law requirements to be a limited partnership is a general partnership.

Limited Partnership (LP)

A partnership formed by two or more persons under the laws of this state and having one or more general partners and one or more limited partners. Limited partnerships are required to register with the California SOS.

Limited Liability Partnership (LLP)

California law authorizes the formation of LLPs with activities limited to either the practice of architecture, public accountancy, engineering, land surveying, law, and related services. California also recognizes out‑of‑state LLPs doing business in California. California extended the repeal date until January 1, 2026.

An LLP is a partnership, other than a limited partnership, that has a Certificate of Registration on file with the California SOS as described in Corporation Code Section 16951.

Real Estate Mortgage Investment Conduit (REMIC)

A special tax vehicle for entities that issue multiple classes of investor interests backed by a fixed pool of mortgages.

For additional information get the instructions for federal Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return, federal Publication 938, Real Estate Mortgage Investment Conduits (REMICs) Reporting Information, (And Other Collateralized Debt Obligations (CDOs)).

Additional Definitions

For definitions of a partnership, general partner, limited partner, nonrecourse loans, apportionment, unitary, etc., see the Partner’s Instructions for the Schedule K-1 (565) and the instructions for federal Form 1065, U.S. Return of Partnership Income.

D. Who Must File

A partnership (including REMICs classified as partnerships) that engages in a trade or business in California or has income from a California source must file Form 565. See definition of “doing business” in General Information A, Important Information.

LPs and LLPs

LPs and LLPs (both foreign, non-U.S., and domestic U.S.) doing business in California, that have a certificate on file, or are registered with the California SOS (whether or not doing business in California) must file a return and pay the $800 annual tax.

The LP is still required to file Form 565 if the LP is registered in California and both of the following apply:

• It is not doing business in California.
• It does not have California source income.

If the LP meets both of these, then it may be eligible for the reduced filing program. The LP’s filing requirement will be satisfied by doing all of the following:

1. Completing Form 565 with all supplemental schedules.
2. Completing and attaching California Schedule(s) K-1 (565) for partners with California addresses.
3. Writing “SB 1106 Filing” in black or blue ink at the top of Form 565, Side 1.
4. Entering the total number of partners in Question L, Side 2, of Form 565.

Partnerships (except for those organized or registered in California) that do not do business in California and that do not receive income from California sources are not required to file Form 565. However, resident partners of a nonresident partnership may be required to furnish a copy of federal Form 1065.

LLCs

LLCs may be classified for tax purposes as a partnership, a corporation, or a disregarded entity. The LLC must file the appropriate California tax return for its classification. LLCs classified as a:

• Partnership file Form 568, see below for more information on LLCs classified as partnerships.
• General corporation file Form 100.
• S corporation file Form 100S.
• Disregarded entities, see General Information R, Check-the-Box Regulations.

If your LLC is classified as a partnership, it must file Form 568 if any of the following apply:

• The LLC does business in California.
• The LLC is organized in California.
• The LLC is organized in another state or foreign country, but registered with the California SOS.
• The LLC has income from California sources.

Exception: Nonregistered foreign (i.e., not organized in California) LLCs and LPs (excluding disregarded entities/single member LLCs) that are not doing business, but are deriving income from California or filing to report an election on behalf of a California resident file Form 565 instead of Form 568.

Nonregistered foreign LLCs that are members of an LLC doing business in California or general partners in a limited partnership doing business in California are considered to be doing business in California and should file Form 568. (See Exceptions to Filing Form 568 in the 2022 Form 568 Limited Liability Company Tax Booklet, General Information D, Who Must File).

Nonregistered foreign partnerships that are a member of an LLC doing business in California or a general partner of a partnership doing business in California are considered doing business in California and should file Form 565.

Other Partnerships and Organizations

Certain publicly traded partnerships (PTPs) treated as corporations under IRC Section 7704 must file Form 100, California Corporation Franchise or Income Tax Return.

A qualifying syndicate, pool, joint venture, or similar organization may elect under IRC Section 761(a) (which California follows) not to be treated as a partnership for state income tax purposes and will not be required to file Form 565 except for the year of election. If Form 565 is filed, a copy of the operating agreement and all amendments must be attached to the return, unless a copy has been previously filed with the FTB.

Religious and apostolic organizations that are exempt from income tax under R&TC Section 23701k are not required to file Form 565. However, Form 565 should be prepared and attached to Form 199, California Exempt Organization Annual Information Return.

E. When and Where to File

A partnership must file Form 565 and pay the $800 annual tax (if required) by the 15th day of the 3rd month (fiscal year) or March 15, 2023 (calendar year), following the close of its taxable year.

When the due date falls on a weekend or holiday, the deadline to file and pay without penalty is extended to the next business day.

Due to the federal Emancipation Day holiday observed on April 17, 2023, tax returns filed and payments mailed or submitted on April 18, 2023, will be considered timely.

PAYMENTS

• Mail Form 565 with payment (LPs, LLPs, and REMICs only) to: Mail Franchise Tax Board PO Box 942857 Sacramento, CA 94257-0501
• E-filed returns: Pay electronically using Web Pay, credit card, EFW, or mail form FTB 3587, Payment Voucher for LP, LLP and REMIC e-filed returns, with payment to: Mail Franchise Tax Board PO Box 942857 Sacramento, CA 94257-0531

Using black or blue ink, make the check or money order payable to the “Franchise Tax Board.” Write the partnership’s FEIN, California SOS file number, and “2022 Form 565” on the check or money order.

Note: California SOS file number is 12 digits long.

Make all checks or money orders payable in U.S. dollars and drawn against a U.S. financial institution.

Do not attach a copy of the return with the balance due payment if the partnership already filed a return for the same taxable year.

REFUNDS

• Mail Form 565 requesting a refund to: Mail Franchise Tax Board PO Box 942857 Sacramento, CA 94257-0500

RETURN WITHOUT PAYMENT or PAID ELECTRONICALLY

• Mail Form 565 without a payment or paid electronically to: Mail Franchise Tax Board PO Box 942857 Sacramento, CA 94257-0500

Extensions

California does not require the filing of written extensions. If a partnership needs more time to file Form 565 by the return’s due date, the partnership is granted an automatic seven month extension.

However, the automatic extension does not extend the time to pay the $800 annual tax.

If the partnership is filing the return under extension, see form FTB 3538, Payment for Automatic Extension for LPs, LLPs, and REMICs, included in this booklet. Send form FTB 3538 and the tax payment to the FTB by the 15th day of the 3rd month following the close of the taxable year.

Electronic Funds Withdrawal

Partnerships can make an extension payment using tax preparation software. Check with your software provider to determine if they support EFW for extension payments.

Private Delivery Services

California law conforms to federal law regarding the use of certain designated private delivery services to meet the “timely mailing as timely filing/paying” rule for tax returns and payments. See the instructions for federal Form 1065 for a list of designated delivery services. If a private delivery service is used, address the return to:

Mail Franchise Tax Board Sacramento, CA 95827

Caution: Private delivery services cannot deliver items to PO boxes. If you will be using one of these services to mail any item to the FTB, Do not use an FTB PO box.

F. Annual Tax

The $800 annual tax applies to all LPs, LLPs, REMICs, and LLCs, if any of the following apply to the entity:

• It is doing business in California.
• It is registered in California.
• It is organized in California.

A general partner in a limited partnership doing business in California is also considered doing business in California. A member of an LLC doing business in California is also considered doing business in California.

The annual tax cannot be deducted as an expense by the partnership or deducted from the partner’s distributive share.

An LP that is filing ONLY to report California source income is NOT subject to the annual tax if all of the following apply:

• It is not doing business in California.
• It is not registered in California.
• It is not organized in California.

For taxable years beginning on or after January 1, 2021 and before January 1, 2024, LPs, LLPs, and LLCs that organize, register, or file with the Secretary of State to do business in California are exempt from the annual tax for their first taxable year.

Enter the annual tax payment made for the 2022 taxable year on the applicable line of Form 565.

G. Penalties and Interest

Failure to File a Timely Return or Provide Information

Unless failure is due to reasonable cause, a penalty will be assessed against the partnership if it is required to file a partnership return and one of the following occur:

• It fails to file the return on time, including extensions.
• It files a return, including Schedules K-1 (565), that fails to show all the information required.

The amount of the penalty for each month, or part of a month (for a maximum of 12 months) that the failure continues, is $18 multiplied by the total number of partners in the partnership during any part of the taxable year for which the return is due. Interest will be charged on the penalty from the date the notice of tax due is sent by the FTB to the date the return is filed.

For “small partnerships,” as defined in IRC Section 6231, the federal exception to the imposition of penalties for failure to file partnership returns, does not apply for California purposes. For more information, see R&TC Section 19172.

Failure to Pay Total Tax by Due Date

For LPs, LLPs, and REMICs that must pay the $800 annual tax with Form 565, a penalty for late payment of tax may be assessed. Any LP, LLP, or REMIC that fails to pay the $800 annual tax by the original due date is assessed a penalty of 5 percent of the unpaid tax, plus 0.5 percent for each month or part of a month (not to exceed 40 months) the tax remains unpaid. This penalty cannot exceed 25 percent of the unpaid tax. Interest will be due and payable on the late payment.

Interest

Interest is due and payable on any tax due if not paid by the original due date. Interest is also due on some penalties. The automatic extension of time to file does not stop interest from accruing. California follows federal rules for the calculation of interest. Get FTB Pub. 1138, Business Entity Refund/Billing Information, for more information.

Other Penalties/Fees

A penalty may also be charged if a payment is returned for insufficient funds. In addition, fees may be charged for the cost of collections.

H. Accounting Methods

Compute ordinary income or loss by the accounting method regularly used to maintain the partnership’s books and records. This method must clearly reflect the partnership’s income or loss.

Partnerships given permission to change their accounting method for federal purposes should see IRC Section 481 for information relating to the adjustments required.

Generally, a partnership may not use the cash method of accounting if the partnership has a corporate partner, average annual gross receipts of more than $5 million, or is a tax shelter. For exceptions, see IRC Section 448.

The mark-to-market accounting method is required for securities dealers. The IRC Section 481 adjustment is taken into account ratably over five years beginning with the first income year.

I. Accounting Periods

Partnership returns normally must be filed for an accounting period that includes 12 full months. A short period return must be filed if the partnership is created or terminated within the taxable year. In that case, write “Short Period” in black or blue ink at the top of Form 565, Side 1.

For information on the required taxable year of a partnership, get the instructions for federal Form 1065.

J. Amended Return

If, after the partnership files its return, it becomes aware of changes it must make, the partnership should file an amended Form 565 and an amended paper Schedule K-1 (565) for each affected partner, if applicable. Check the “Amended return” box on Form 565, Side 1, Item H(3) and on Schedule K-1 (565), Side 1, Item H(2). Give a corrected Schedule K-1 (565) labeled “Amended” to each affected partner. If the partnership originally filed a group nonresident partner Form 540NR, California Nonresident or Part-Year Resident Income Tax Return, the partnership should file an amended Form 540NR.

Attach a statement that identifies the line number of each amended item, the corrected amount or treatment of the item, and an explanation of the reason(s) for each change.

If the partnership’s federal return is changed for any reason, the federal change may affect the partnership’s California return. This would include changes made because of an examination. The partnership must file an amended return within six months of the final federal adjustments. The partnership should attach a copy of the federal Revenue Agent’s Report or other notice of the adjustments to the return. The partnership should inform the partners that they may also be required to file amended returns based on any changes made by the IRS within six months from the date of the final federal adjustments.

K. Required Information Returns

Every partnership must file information returns if, in the course of its trade or business any of the following occur:

• The partnership makes payments of rents, salaries, wages, annuities, or other fixed or determinable income during one taxable year totaling $600 or more to one person.
• The partnership pays an individual or one payee interest and dividends totaling $10 or more.
• The partnership receives cash payments over $10,000.

Payments of any amount by a broker, dealer, or barter exchange agent must also be reported.

Partnerships must report payments made to California residents by providing copies of federal Form 1099 (series).

If the partnership has nonresident partners, see the reporting and withholding requirements on Form 592, Resident and Nonresident Withholding Statement; Form 592-B; Form 592-F and Form 592-PTE. Get FTB Pub. 1017, Resident and Nonresident Withholding Guidelines, for more information.

Partnerships must submit a copy of federal Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, within 15 days after the date of the transaction.

Partnerships must report interest paid on municipal bonds issued by a state other than California or a municipality other than a California municipality and that are held by California taxpayers. Entities paying interest to California taxpayers on these types of bonds are required to report interest payments totaling $10 or more paid after January 1, 2019. Information returns will be due June 1, 2020. Get form FTB 4800 MEO, Interest and Interest-Dividend Payment Reporting Requirement Letter, for more information.

Partnerships must use form FTB 3834, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts, to report interest due or to be refunded under the look-back method on long-term contracts.

If you are filing form FTB 3834 to compute the interest due or to be refunded under the look-back method, attach a copy of form FTB 3834 to Form 565.

Any information returns required for federal purposes under IRC Sections 6038, 6038A, 6038B, and 6038D are also required for California purposes. Attach the information returns to Form 565 when filed. If the information returns are not provided, penalties may be imposed.

Mail all information returns, unless otherwise noted, separately from Form 565. Information returns should be mailed to:

Mail Franchise Tax Board PO Box 942857 Sacramento, CA 94257-0500

L. Special Items

California law generally follows federal law in the areas of:

• IRC Section 702(a) items
• Elections
• Distributions of unrealized receivables and inventory items
• Partners’ dealings with the partnership
• Contributions to the partnership
• Allocable income of foreign nonresident partners subject to withholding, Forms 592-A, 592-B, and 592-F
• Basis and at-risk rules
• Passive activity limitations
• Net operating loss deductions by a partner (a partnership is not allowed the deduction)
• Publicly traded partnerships (PTPs)
• Long-term contracts
• Installment sales
• Vacation pay
• Amortization of past service costs
• Distributions of contributed property by a partnership
• Recognition of precontribution gain in certain partnership distributions to contributing partners

See the instructions for federal Form 1065 for specific information about these provisions.

M. Signatures

General Partner

Form 565 is not considered a valid return unless it is signed by a general partner. If a receiver, trustee in bankruptcy, or assignee controls the organization’s property or business, that individual must sign the return.

Include a general partner’s phone number and email address in case the FTB needs to contact the partnership for information needed to process this return. By providing this information the FTB will be able to process the return or issue the refund faster.

Paid Preparer’s Information

Anyone who is paid to prepare the partnership return must sign the return and complete the “Paid Preparer’s Use Only” area of the return.

The paid preparer must do all of the following:

• Complete the required preparer information. Tax preparers must provide their preparer tax identification number (PTIN).
• Sign in the space provided for the preparer’s signature.
• Give the partnership a copy of the return in addition to the copy to be filed with the FTB.

An individual who prepares the return and does not charge the partnership should not sign the partnership return.

Paid Preparer Authorization

If the partnership wants to allow the paid preparer to discuss its 2022 Form 565 with the FTB, check the “Yes” box in the signature area of the return. This authorization applies only to the individual whose signature appears in the “Paid Preparer’s Use Only” section of the return. It does not apply to the firm, if any, shown in that section.

If the “Yes” box is checked, the partnership is authorizing the FTB to call the paid preparer to answer any questions that may arise during the processing of its return. The partnership is also authorizing the paid preparer to:

• Give the FTB any information that is missing from the return.
• Call the FTB for information about the processing of the return or the status of any related refund or payments.
• Respond to certain FTB notices about math errors, offsets, and return preparation.

The partnership is not authorizing the paid preparer to receive any refund check, bind the partnership to anything (including any additional tax liability), or otherwise represent the partnership before the FTB.

The authorization will automatically end no later than the due date (without regard to extensions) for filing the partnership’s 2023 tax return. If the partnership wants to expand the paid preparer’s authorization, go to ftb.ca.gov/poa. If the partnership wants to revoke the authorization before it ends, notify the FTB in writing or call 800-852-5711.

N. Group Returns

Nonresidents or Part-Year Residents

Nonresident partners of a partnership doing business or deriving income from sources within California may elect to file a group nonresident return (R&TC Section 18535).

• Group nonresident returns may include less than two nonresident individuals.
• Nonresident individuals with more than $1,000,000 of California taxable income are eligible to be included in group nonresident returns.
• An additional 1% tax will be assessed on resident and nonresident individuals who have California taxable income over $1,000,000.

The laws guiding California’s taxation of nonresidents, former nonresidents, and part-year residents set rules for calculating loss carryovers, deferred deductions, and deferred income, including the tax computation method to recognize those items. Get FTB Pub. 1100, Taxation of Nonresidents and Individuals Who Change Residency, for more information.

Get FTB Pub. 1067, Guidelines for Filing a Group Form 540NR, for more information.

O. Investment Partnerships

Income of nonresident partners, including banks and corporations, derived from “qualifying investment securities” of an “investment partnership” is considered income from sources other than California, except as noted below. Nonresident partners generally will not be taxed on this income. The partnership should inform its nonresident partners if all or a portion of their distributive share of income is from “qualifying investment securities” of an “investment partnership” and whether it is sourced to California. For definitions of qualifying investment securities and investment partnership, see Specific Instructions, Question V, included in this booklet.

However, for apportioning purposes, income from a partnership that is an investment partnership is generally considered business income (see Appeal of Estate of Marion Markus, Cal. St. Bd. of Equal., May 6, 1986). Investment partnerships doing business within and outside California should apportion California source income using California Schedule R.

Investment partnerships doing business solely within California should treat all business income of the investment partnership as California source income.

Investment partnerships that have California source income should fill out column (e) of the Schedule K-1 (565) showing each partner’s distributive share of California source income.

Generally, partners who are nonresident individuals would not record this income as California source income. However, there are two exceptions to the general rule when a nonresident individual may have California source income from an investment partnership. Nonresident individual partners will be taxed on their distributive shares of income from the investment partnership if the income from the qualifying investment securities is interrelated with either of the following:

• Any other business activity of the nonresident partner.
• Any other entity in which the nonresident partner owns an interest that is separate and distinct from the investment activity of the partnership and that is conducted in California.

Corporations that are partners in an investment partnership are generally not taxed on their distributive share of partnership’s income, provided that the income from the partnership is the corporation’s only California source income. However, the corporation will be taxed on its distributive share of California source income of the partnership if either of the following apply:

• The corporation participates in the management of the investment activities of the investment partnership.
• The corporation has derived income from or attributable to sources within California other than income from the investment partnership.

P. Cancelling a Limited Partnership (LP) or Limited Liability Partnership (LLP)

LPs and LLPs are required to pay the $800 annual tax and file Form 565 until the appropriate papers are filed with the California SOS.

The annual tax will not be assessed if the LP or LLP meet the following requirements:

1. The LP or LLP files a timely Final Partnership Return of Income for the preceding taxable year, including extension.
2. The LP or LLP did not do business in California after the final taxable year.
3. The LP or LLP files the appropriate documents for dissolution with the California SOS within 12 months of the timely filed Final Partnership Return of Income.

Limited Partnerships (LPs)

In order to terminate an LP, the following steps must be taken:

1. File a timely Final Partnership Return of Income with the FTB and pay the $800 annual tax for the taxable year of the final return.
2. File Form LP-4/7, Certificate of Cancellation, with the California SOS. Contact the California SOS for more details.

The Form LP-4/7’s effective date will stop the assessment of the $800 annual tax for future taxable years. If Form LP-4/7 is filed after the taxable year ending date, a subsequent year’s return and an additional $800 tax may be required. However, if the LP does no business after the end of the taxable year for which the final annual return is filed, and the LP files its termination documents with the California SOS before 12 months from the date the final return was timely filed, the LP will not owe the annual tax for subsequent years.

Example – An LP files a timely 2022 return marked final on March 15, 2023, and pays the $800 annual tax for 2022. The LP does no business after 2022. The LP files its termination documents with the California SOS before March 15, 2024. The LP does not owe the $800 annual tax for 2023.

Limited Liability Partnerships (LLPs)

In order to terminate an LLP, the following steps must be taken:

1. File a timely Final Partnership Return of Income with the FTB and pay the $800 annual tax for the taxable year of the final return.
2. File Form LLP-4, Notice of Change of Status, with the California SOS. Contact the California SOS for more details.

The Form LLP-4’s effective date (the date Form LLP-4 is received by the California SOS) will stop the assessment of the $800 annual tax for future taxable years. If Form LLP-4 is filed after the taxable year ending date, a subsequent year return and an additional $800 may be required.

Additional Information

For more information on how to cancel your partnership, contact:

Where to File: Completed forms along with the applicable fees, if any, can be mailed to:

LPs and LLPs – California Secretary of State Business Entities Filings Unit PO Box 944260 Sacramento, CA 94244-2600

or delivered in person (drop off) to the Sacramento office:

In Person California Secretary of State Business Entities Filings Unit 1500 11th Street Sacramento, CA 95814

This form is filed only in the Sacramento office.

Telephone Number: 916-657-5448

Office hours are Monday through Friday, 8 a.m. to 5 p.m. (excluding state holidays).

Website: sos.ca.gov

If the partnership is being terminated or cancelled to convert to another type of business entity, be sure to file the appropriate forms with the California SOS.

Get FTB Pub. 1038, Guide to Dissolve, Surrender, or Cancel a California Business Entity, for more information.

Q. Withholding Requirements

Foreign (non-U.S.) Nonresident Partners

As described in IRC Section 1446 and modified by R&TC Section 18666, if a partnership has any income or gain from a trade or business within California, and if any portion of that income or gain is allocable under IRC Section 704 to a foreign (non-U.S.) nonresident partner, the partnership is required to withhold tax on the allocable amount.

State and Federal Differences Regarding Foreign (non-U.S.) Nonresident Partners

California generally conforms to IRC Section 1446 and corresponding federal rulings and procedures. The main differences between California and federal laws in this area are:

1. The California withholding rate is 8.84% for C corporations and 12.3% for individuals, partnerships, and fiduciaries.
2. Income attributable to the disposition of California real property is subject to withholding under R&TC Section 18662.

Domestic (U.S.) Nonresident Partners

A partnership is required to withhold funds for income or franchise taxes when it makes a distribution of income to a domestic (U.S.) nonresident partner (R&TC Section 18662). This includes prior year income that should have been, but was not, previously reported as income from California sources on the partner’s California income tax return. However, withholding is not required if distributions of income from California sources to the partner are $1,500 or less during the calendar year or if the FTB directs the payer not to withhold.

Domestic (U.S.) nonresident partners include individuals who are nonresidents of California and corporations that are not qualified to do business in California or do not have a permanent place of business in California. Domestic (U.S.) nonresident partners also include nonresident estates, trusts, LLCs, and partnerships that do not have a permanent place of business in California. Foreign nonresident partners covered under R&TC Section 18666 are not domestic nonresident partners.

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Partnerships with income from within and outside California must make a reasonable estimate of the ratio, to be applied to the distributions, that approximates the ratio of California source income to total income. The ratio for the prior year will generally be accepted as reasonable in determining the California part of the distribution subject to the withholding. Partnerships are required to withhold at a rate of 7 percent of distributions (including property) of income from California sources made to domestic nonresident partners.

The FTB has administrative authority to allow reduced withholding rates, including waivers, when requested in writing. These authorizations may be one-time, annual, or for a longer period. Waivers or reduced withholding rates will normally be approved when distributions are made by PTPs and on distributions to brokerage firms, tax-exempt organizations, and tiered partnerships.

No withholding is required if the distribution is a return of capital or does not represent taxable income for the current or prior years. Although a waiver is not required in this situation, if upon examination the FTB determines that withholding was required, the partnership may be liable for the withholding and penalties.

Send waiver requests and inquiries to:

Mail: Withholding Services and Compliance MS F182 Franchise Tax Board PO Box 942867 Sacramento, CA 94267-0651 Telephone: 888-792-4900 or 916-845-4900

Waivers may also be submitted online. Go to ftb.ca.gov and search for 588 online.

Report withholding on Forms 592, 592-B, 592-F, and 592-PTE. Withholding payments are remitted with Forms 592-A, 592-Q, and 592-V, Payment Voucher for Resident and Nonresident Withholding. For more information, get FTB Pub. 1017.

The taxable income of nonresident partners is the distributive share of California sourced partnership income, not the distributed amount.

R. Check-the-Box Regulations

California generally conforms to the federal entity classification regulations (commonly known as “check-the-box” regulations). These regulations allow certain unincorporated entities to choose tax treatment as a partnership, a corporation, or an entity disregarded as separate from its owner.

Generally, any election made for federal purposes under the federal “check-the-box” regulations is considered the California election. No separate election is allowed. If federal Form 8832, Entity Classification Election, is filed with the federal return, a copy should be attached to the electing entity’s California return for the year in which the election is effective. The entity should file the appropriate California return.

An “eligible entity” may choose its classification. An eligible entity is a business entity that is not a trust, a corporation organized under a federal or state statute, a foreign entity specifically listed as a per se corporation, or other special business entities. Other special business entities under the IRC include PTPs, REMICs, financial asset securitization investment trusts (FASITs), or regulated investment companies (RICs). An eligible entity with two or more owners will be a partnership (for tax purposes) unless it elects to be taxed as a corporation. An eligible entity with a single owner will be disregarded for tax purposes, unless the entity elects to be taxed as a corporation. If the separate existence of an entity is disregarded, its activities are treated as activities of the owner and are reported on the appropriate California return.

IMPORTANT: There is an exception to the general rule that an eligible business entity is classified the same for California as for federal income tax purposes. If an eligible business entity was properly classified for California income tax purposes as an association taxable as a corporation for any income year prior to January 1, 1997, it will continue to be classified as such until it makes an irrevocable election to be classified or disregarded the same as it is for federal. The exception does not apply to a business entity which, during the 60 month period preceding January 1, 1997, was appropriately classified as an association taxable as a corporation and met all of the following conditions:

• The business entity was not doing business in California.
• The business entity did not derive income from sources within California.
• The business entity had no partners who were residents of California.

The eligible business entities to which the exception applies are generally:

1) Business trusts that were classified as corporations under California law, but were classified as partnerships for federal tax purposes for taxable years beginning before January 1, 1997; and 2) Previously existing foreign single member limited liability companies (SMLLCs) that were classified as corporations under California law but claimed to be partnerships for federal tax purposes for taxable years beginning before January 1, 1997.

These business trusts and previously existing foreign SMLLCs will continue to be classified as corporations for California tax purposes and must continue to file Form 100, unless they make an irrevocable election to be classified or disregarded the same as they are for federal tax purposes. See form FTB 3574, Special Election for Business Trusts and Certain Foreign Single Member LLCs, and Cal. Code Regs., tit. 18 sections 23038(a)-(b).

S. Substitute Schedules

The LLC needs approval from the FTB to use a substitute Schedule K-1 (565). The substitute schedule must include the Partner’s Instructions for Schedule K-1 (565) or other prepared specific instructions. For more information and access to form FTB 1096, Agreement to Comply with FTB Pub. 1098 Annual Requirements and Specifications; or FTB Pub. 1098, Annual Requirements and Specifications for the Development and Use of Substitute, Scannable, and Reproduced Tax Forms, email the FTB’s Substitute Forms Program at SubstituteForms@ftb.ca.gov.

T. Property Subject to IRC Section 179 Recapture

California will follow the revised federal instructions (with some exceptions) for reporting the sale, exchange, or disposition of property for which an IRC Section 179 expense deduction was claimed in prior years by a partnership, LLC, or S corporation.

If there is gain from the sale, exchange, or disposition of property for which an IRC Section 179 expense deduction was claimed in a prior year, special rules apply. Partners should follow the instructions in federal Form 4797, Sales of Business Property.

The gain on property subject to the IRC Section 179 recapture should be reported on the Schedule K (565) and Schedule K-1 (565) as supplemental information as instructed on the federal Form 4797.

The partnership must provide all of the following information with respect to a disposition of business property if an IRC Section 179 expense deduction was claimed in prior years:

1. Description of the property.
2. Date the property was acquired and placed in service.
3. Date the property was sold or other disposition.
4. Gross sales price or amount realized.
5. Cost or other basis plus expense of sale (not including the entity’s basis reduction in the property due to IRC Section 179 expense deduction).
6. Depreciation allowed or allowable (not including the IRC Section 179 expense deduction).
7. Amount of IRC Section 179 expense deduction (if any).
8. An indication if the disposition is from a casualty or theft.
9. If this is an installment sale, compute the installment amount by using the method provided in form FTB 3805E, Installment Sale Income.

U. California Use Tax

General Information

Use tax has been in effect in California since July 1, 1935. It applies to purchases of property from out-of-state sellers and is similar to sales tax paid on purchases made in California. If the partnership has not already paid all use tax due to the California Department of Tax and Fee Administration, it may be able to report and pay the use tax due on its state income tax return. However, partnerships required to hold a California seller’s permit or to otherwise register with the California Department of Tax and Fee Administration for sales and use tax purposes may not report use tax on their state income tax return. See the information below and the instructions for line 32 of the income tax return.

In general, partnerships must pay California use tax on purchases of merchandise for use in California, made from out-of-state sellers, for example, by telephone, online, by mail, or in person.

Partnerships must pay California use tax on taxable items if:

• The seller does not collect California sales or use tax, and
• The partnership uses, gifts, stores, or consumes the item in California.

Example: The partnership purchases a conference table from a company in North Carolina. The company ships the table from North Carolina to the partnership’s address in California for the partnership’s use, and does not charge California sales or use tax. The partnership owes use tax on the purchase.

However, not all purchases require the partnership to pay use tax. For example, the partnership would include purchases of office equipment, but not exempt purchases of food products or prescription medicine.

For more information on nontaxable and exempt purchases, the partnership may refer to Publication 61, Sales and Use Taxes: Exemptions and Exclusions, on the California Department of Tax and Fee Administration’s website at cdtfa.ca.gov.

For more information about California use tax, please refer to the California Department of Tax and Fee Administration’s website at cdtfa.ca.gov and type “Find Information About Use Tax” in the search bar.

Complete the Use Tax Worksheet to calculate the amount due.

Extensions to File. If the partnership requests an extension to file its tax return, wait until the partnership files its tax return to report the purchases subject to use tax and to make the use tax payment.

Interest, Penalties, and Fees. Failure to timely report and pay use tax due may result in the assessment of interest, penalties, and fees.

Application of Payments. For purchases made during taxable years starting on or after January 1, 2015, payments and credits reported on an income tax return will be applied first to the use tax liability, instead of income tax liabilities, penalties, and interest.

Changes in Use Tax Reported. Do not file an Amended Partnership Return of Income to revise the use tax previously reported. If the partnership has changes to the amount of use tax previously reported on the original tax return, contact the California Department of Tax and Fee Administration.

For assistance with use tax questions, go to the California Department of Tax and Fee Administration’s website at cdtfa.ca.gov or call their Customer Service Center at 800-400-7115 (CRS:711) (for hearing and speech disabilities). For California income tax information, contact the Franchise Tax Board at ftb.ca.gov.

Specific Instructions

Form 565

Fill In All Applicable Lines and Schedules

Enter any items specially allocated to the partners on the applicable line of the partner’s Schedule K-1 (565) and the total amounts on the applicable lines of Schedule K (565). Do not enter these items directly on Form 565, Side 1, Schedule A or Schedule D (565). Do not apply the apportionment factor to the items on Schedule K (565).

Whole numbers should be shown on the return and accompanying schedules.

Name, Address, FEIN, and California SOS File Number

The partnership may use its legal or trade name on all California returns and other documents filed. Print the partnership’s legal or trade name, address, FEIN, and California SOS file number.

• Federal employer identification number (FEIN) (9 digits)
• California SOS file number (12 digits) or enter the FTB assigned identification number (9 digits) in the CA SOS file number field.
• Partnership name (use the legal name filed with the California SOS) and address, include Private Mail Box (PMB) number, if applicable.

Use the Additional information field for “Owner/Representative/Attention” name and other supplemental address information only.

Foreign Address

If the partnership has a foreign address, follow the country’s practice for entering the city, county, province, state, country, and postal code, as applicable, in the appropriate boxes. Do not abbreviate the country name.

Item G – Total Assets at End of Taxable Year

See the instructions for Question P before completing this item.

If the partnership is required to complete this item, enter the total assets at the end of the partnership’s taxable year. This is determined by the accounting method regularly used to maintain the partnership’s books and records. If there are no assets at the end of the taxable year, enter $0.

Item H(2) – Final Return

If the partnership is filing a final year tax return, check the “Final Return” box on Form 565, Side 1, Item H(2), and check the “A final Schedule K-1 (565)” box for Item H(1) on Schedule K-1 (565). Attach a statement that explains the reason for the termination or liquidation of the partnership.

Item H(4) Protective Claim

Check the box if this Form 565 is being filed as a protective claim for refund. A protective claim is a claim for refund filed before the expiration of the statute of limitations for which a determination of the claim depends on the resolution of some other disputed issues, such as pending state or federal litigation or audit. For more information on how to file a protective claim, go to ftb.ca.gov and search for protective claim.

Question I

All partnerships must answer all three questions. The questions provide information regarding changes in control or ownership of legal entities owning or under certain circumstances leasing California real property (R&TC Section 64). (Real property includes land, buildings, structures, fixtures – see R&TC Section 104).

If any of the answers are “Yes,” a Statement of Change in Control and Ownership of Legal Entities must be filed with the State of California; failure to do so within 90 days of the event date will result in penalties. The form for this statement is form BOE-100-B, filed with the California State Board of Equalization. Get this form and information from the BOE website (boe.ca.gov) by searching for Legal Entity Ownership Program (LEOP).

There may be a change in ownership or control if, during this year, one of the following occurred with respect to this partnership (or any legal entity in which it holds a controlling or majority interest):

• The percentage of partnership interests transferred to or owned or controlled by, one person or one legal entity cumulatively exceeded 50%.
• The total partnership interests transferred to or held by one irrevocable trust or trust beneficiary cumulatively exceeded 50%.
• This partnership, (or any legal entity in which it holds a controlling or majority interest), cumulatively acquired ownership or control of more than 50% of the partnership or other ownership interests in any legal entity.
• As of the end of this year, cumulatively more than 50% of the total partnership interests have been transferred in one or more transactions since an interest in California real property was transferred to the partnership that was excluded from property tax reassessment under R&TC Section 62(a)(2) which established an original co-owners’ interest status.

For purposes of these questions, leased real property is a leasehold interest in taxable real property: (1) leased for a term of 35 years or more (including renewal options), if not leased from a government agency; or (2) leased for any term, if leased from a government agency. For partnerships, ownership interest is measured by a partner’s interest in both the capital and profits interests in the partnership.

R&TC Section 64(e) requires this information for use in determining whether a change in ownership has occurred under Section 64(c) and (d); it is used by the LEOP.

Income

Line 1 through Line 12

California’s reporting requirements are generally the same as the federal reporting requirements. Follow the instructions for federal Form 1065 and only include trade or business activity income on line 1 through line 12. However, for California tax purposes, business income of the partnership is computed using the rules set forth in R&TC Section 25120. Therefore, certain income that may be portfolio income for federal purposes may be business income for California sourcing purposes. Do not include rental activity income or portfolio income on these lines. Rental activity income and portfolio income are separately reported on Schedule K (565) and Schedule K-1 (565). Rental real estate activities are also reported on federal Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation. Attach a copy of federal Form 8825 to Form 565. Use California amounts and attach a statement reconciling any differences between federal and California amounts.

Use worldwide amounts determined under California law when completing these lines.

Form 565, line 4 through line 11 have been separated to report total gains and total losses. Net amounts are no longer reported. For example, the partnership is required to report a $100 Other Income item and a <$20> Other Loss item. The $100 Other Income item must be reported on Line 10 and the <$20> Other Loss item loss must be reported as a negative number on Line 11.

Line 6 – Total Farm Profit Line 7 – Total Farm Loss

Enter on line 6 the partnership’s total farm profit from federal Schedule F (Form 1040), Profit or Loss from Farming, line 34, Net farm profit or (loss). Enter on line 7 the partnership’s total farm loss from federal Schedule F (Form 1040), line 34. Attach federal Schedule F to Form 565. If the amount includable for California purposes is different from the amount on federal Schedule F, enter the California amount and attach a note explaining the difference.

Line 8 – Total Gain from Schedule D-1 Line 9 – Total Loss from Schedule D-1

Include only ordinary gains (losses) from the sale, exchange, or involuntary conversion of assets used in a trade or business activity. Ordinary gains (losses) from the sale, exchange, or involuntary conversion of rental activity assets must be reported separately on Schedule K (565) and Schedule K-1 (565).

A partnership that is a partner in another partnership must include on Schedule D-1, Sales of Business Property, its share of ordinary gains (losses) from sales, exchanges, or involuntary conversions (other than casualties or thefts) of the other partnership’s trade or business assets.

Deductions

Line 13 through Line 22

California’s reporting requirements are generally the same as the federal reporting requirements. Follow the instructions for federal Form 1065 and only include trade or business activity deductions on line 13 through line 21. Include amounts for repairs, rents, and taxes on line 21. Do not include any rental activity expenses or deductions that are allocable to portfolio income on these lines. Rental activity deductions and deductions allocable to portfolio income are separately reported on Schedule K (565) and Schedule K-1 (565).

Use worldwide amounts determined under California law when completing these lines.

Federal reporting requirements for organization expenses, syndication expenses, and uniform capitalization rules apply for California.

For taxable years beginning on or after January 1, 2014, California does not allow a business expense deduction for any fine or penalty paid or incurred by an owner of a professional sports franchise assessed or imposed by the professional sports league that includes that franchise. If the partnership deducted the fine or penalty for federal purposes, do not include the deduction for California purposes.

Claim of Right. To claim as a deduction, enter the amount on line 21. If you elect to take the credit instead of the deduction, remember to use the California tax rate, and add the credit amount to the total on line 31, Total payments. To the left of this total, write “IRC 1341” and the amount of the credit.

Line 17a – Depreciation and Amortization

Enter on line 17a the total depreciation and amortization claimed on assets used in a trade or business activity. Complete and attach form FTB 3885P, Depreciation and Amortization, included in this booklet, to figure depreciation and amortization. Transfer the total from form FTB 3885P, line 6, to Form 565, Side 1, line 17a, or federal Form 8825, line 14, or as appropriate (use California amounts). See the instructions for form FTB 3885P for more information.

Do not include any expense deduction for recovery property (IRC Section 179) on this line. This expense is not deducted by the partnership. Instead, it is passed through separately to the partners and is reported on line 12 of Schedule K (565) and Schedule K-1 (565).

Line 24 – Tax

Enter the $800 annual tax required for LPs, LLPs, and REMICs. See General Information F, Annual Tax, for further details on the annual tax requirements.

Line 25 – Pass-Through Entity Elective Tax

Enter the total amount of elective tax from form FTB 3804, Part I, Elective Tax, line 3.

Line 26 – Partnership Level Tax

Use this line to report the Partnership Level Tax (PLT) for California purposes resulting from changes or corrections made by IRS under its centralized partnership audit regime. PLT is typically reported on an amended return. See R&TC Section 18622.5(d)(1)(A) for how to compute the PLT for state tax purposes.

Line 28 – Withholding (Form 592-B and/or 593)

If taxes were withheld from payment to the partnership, the partnership can either allocate the entire withholding credit to all its partners or claim a portion (not to exceed the total tax due) and allocate the remaining portion to all its partners. If the partnership claims any of the amount withheld, attach Form 592-B or Form 593, Real Estate Withholding Statement, to the front lower portion of the partnership return. The partnership must file Forms 592, 592-F, or 592-PTE, and 592-B to allocate any remaining withholding credit to its partners. For more information, get FTB Pub. 1017.

The above explanation does not apply to the nonconsenting nonresident member’s tax paid by an LLC on behalf of the nonresident partner. The nonconsenting nonresident members’ tax is not related to the partnership withholding on nonresident partners. Therefore, the tax cannot be claimed using Form 592, 592-F, 592-PTE, and 592-B; and cannot be claimed by the partnership on this line. The partnership will allocate the entire amount paid by the LLC on its behalf to all of its partners on Schedule K (565) and Schedule K-1 (565), line 15e.

Line 30 – Amount Paid with form FTB 3893

Enter the amount of payment with form FTB 3893.

Line 32 – Use Tax

As explained under Use Tax General Information U, California use tax applies to purchases of merchandise from out-of-state sellers (for example, purchases made by telephone, online, by mail, or in person) where sales or use tax was not paid and those items were used in California. For questions on whether a purchase is taxable, go to the California Department of Tax and Fee Administration’s website at cdtfa.ca.gov, or call their Customer Service Center at 800-400-7115 (CRS:711) (for hearing and speech disabilities).

Note: The following businesses are required to report purchases subject to use tax directly to the California Department of Tax and Fee Administration and may not report use tax on their income tax return:

• Businesses that have, or are required to hold, a California seller’s permit.
• Businesses that receive $100,000 or more per year in gross receipts.
• Businesses that are otherwise registered or required to be registered with the California Department of Tax and Fee Administration to report use tax.

A partnership that is not required to report purchases subject to use tax directly to the California Department of Tax and Fee Administration may, with some exceptions, report use tax on its Partnership Return of Income. To report use tax on the tax return, complete the Use Tax Worksheet.

Note: A partnership may not report use tax on its income tax return for certain types of transactions. These types of purchases are listed in the instructions for completing Worksheet, Line 1.

If the partnership owes use tax but does not report it on the income tax return, the partnership must report and pay the tax to the California Department of Tax and Fee Administration. For information on how to report use tax directly to the California Department of Tax and Fee Administration, go to their website at cdtfa.ca.gov and type “Find Information About Use Tax” in the search bar.

Failure to timely report and pay the use tax due may result in the assessment of interest, penalties, and fees.

Use Tax Worksheet

Round all amounts to the nearest whole dollar.

1. Enter purchases from out-of-state sellers made without payment of California sales/use tax. See worksheet instructions.
2. Enter the applicable sales and use tax rate. See worksheet instructions.
3. Multiply line 1 by the tax rate on line 2. Enter result here.
4. Enter any sales or use tax paid to another state for purchases included on line 1. See worksheet instructions.
5. Total Use Tax Due. Subtract line 4 from line 3. Enter the amount here and on line 32. If the amount is less than zero, enter -0-.

Worksheet, Line 1, Purchases Subject to Use Tax

Report purchases of items that would have been subject to sales tax if purchased from a California retailer unless your receipt shows that California tax was paid directly to the retailer. For example, generally, purchases of clothing would be included, but not exempt purchases of food products or prescription medicine. For more information on nontaxable and exempt purchases, visit the California Department of Tax and Fee Administration’s website at cdtfa.ca.gov.

• Include handling charges.
• Do not include any other state’s sales or use tax paid on the purchases.
• Enter only purchases made during the year that correspond with the tax return the partnership is filing.

Note: Do not report the following types of purchases on the partnership’s income tax return:

• Vehicles, vessels, and trailers that must be registered with the Department of Motor Vehicles.
• Mobile homes or commercial coaches that must be registered annually as required by the Health and Safety Code.
• Vessels documented with the U.S. Coast Guard.
• Aircraft.
• Rental receipts from leasing machinery, equipment, vehicles, and other tangible personal property to its customers.
• Cigarettes and tobacco products when the purchaser is registered with the California Department of Tax and Fee Administration as a cigarette and/or tobacco products consumer.

Worksheet, Line 2, Sales and Use Tax Rate

Enter the sales and use tax rate applicable to the place in California where the property is used, stored, or otherwise consumed. If the partnership does not know the applicable city or county sales and use tax rate, please go to the California Department of Tax and Fee Administration’s website at cdtfa.ca.gov and type “City and County Sales and Use Tax Rates” in the search bar, or call their Customer Service Center at 800-400-7115 (CRS:711) (for hearing and speech disabilities).

Worksheet, Line 4, Credit for Tax Paid to Another State

This is a credit for tax paid to other states on purchases reported on Line 1. The partnership can claim a credit up to the amount of tax that would have been due if the purchase had been made in California. For example, if the partnership paid $8.00 sales tax to another state for a purchase, and would have paid $6.00 in California, the partnership can only claim a credit of $6.00 for that purchase.

Line 37 – Penalties and Interest

Enter penalties and interest. See General Information G, Penalties and Interest.

Questions

Question J

Check only one box for this question. The partnership checks the box that best describes its business type. For definitions of general partnership, limited partnership, real estate mortgage investment conduit, and limited liability partnership, see General Information C, Definitions, and the instructions for federal Form 1065.

Doing Business – A taxpayer is doing business if it actively engages in any transaction for the purpose of financial or pecuniary gain or profit in California or if any of the following conditions are satisfied:

• The taxpayer is organized or commercially domiciled in California.
• The sales, as defined in R&TC Section 25120(e) or (f), of the taxpayer in California, including sales by the taxpayer’s agents and independent contractors, exceed the lesser of $690,144 or 25% of the taxpayer’s total sales.
• The real property and tangible personal property of the taxpayer in California exceed the lesser of $69,015 or 25% of the taxpayer’s total real property and tangible personal property.
• The amount paid in California by the taxpayer for compensation, as defined in R&TC Section 25120(c), exceeds the lesser of $69,015 or 25% of the total compensation paid by the taxpayer.

In determining the amount of the taxpayer’s sales, property, and payroll for doing business purposes, include the taxpayer’s pro-rata share of amounts from partnerships and S corporations. These amounts are reported on the partner’s Schedule K-1 on Table 2, Part C.

For more information, see R&TC Section 23101 or go to ftb.ca.gov and search for doing business.

Line Item 6 of Question J is for other types of entities not previously mentioned on line 1 through line 5. If your entity is not a general partnership, LP, REMIC, or LLP, then check the box for line item 6 only. In the space provided, write in the type of entity.

Item K – Principal Business Activity Code (PBA)

California uses the six-digit PBA code from the Principal Business Activity Codes chart included in this booklet.

For example, if, as its principal business activity, the partnership (a) purchases raw materials, (b) subcontracts out for labor to make a finished product from the raw materials, and (c) retains title to the goods, the partnership is considered to be a manufacturer and must enter “Manufacturer” in item C and enter in item I one of the codes (311110 through 339900) listed under “Manufacturing” on the list, Codes for Principal Business Activity.

Question L

Enter the maximum number of partners in the partnership during the taxable year. The number of Schedules K-1 (565) attached to Form 565 must equal the number of partners entered in Question L. Do not use abbreviations or terms such as “Various.”

Question P

Check the “Yes” box if all of the following conditions are met:

1. The partnership’s total receipts for the taxable year were less than $250,000.
2. The partnership’s total assets at the end of the taxable year were less than $1 million.
3. Schedules K-1 (Form 1065) are filed with the return and furnished to the partners on or before the due date (including extensions) for the partnership return.

If Question P is answered “Yes,” the partnership is not required to complete Schedules L, M-1, M-2, or Item G on Side 1 of Form 565 or Item J on Schedule K-1 (565).

Question U

California requires taxes to be withheld from certain payments or allocations of income and sent to the FTB (R&TC Sections 18662 and Section 18666). If upon examination, the FTB determines that tax withholding was required, the partnership can be liable for the tax and penalties.

The reference to Forms 592, 592-A, 592-B, 592-F, and 592-PTE relates to withholding done by the partnership. If you need additional information concerning partnership withholding, see General Information K, Required Information Returns, and General Information Q, Withholding Requirements.

Question V – Investment Partnership

An “investment partnership” is a partnership that meets the following two criteria:

1. No less than 90% of the cost of the partnership’s total assets consist of:
   • Qualifying investment securities
   • Deposits at banks or other financial institutions
   • Office equipment and office space reasonably necessary to carry on the activities of an investment partnership
2. No less than 90% of the partnership’s gross income is from interest, dividends, and gains from the sale or exchange of qualifying investment securities defined in R&TC Sections 17955 and Section 23040.1.

Qualifying investment securities include all of the following:

• Common and preferred stock, as well as debt securities convertible into common stock.
• Bonds, debentures, and other debt securities.
• Foreign and domestic currency deposits or equivalent and securities convertible into foreign securities.
• Mortgage-backed or asset-backed securities secured by governmental agencies.
• Repurchase agreements and loan participations.
• Foreign currency exchange contracts and forward and futures contracts on foreign currencies.
• Stock and bond index securities and futures contracts, and other similar securities.
• Regulated futures contracts.
• Options to purchase or sell any of the preceding qualified investment securities, except regulated futures contracts.

Qualifying investment securities do not include an interest in a partnership, unless the partnership qualifies as an investment partnership. See R&TC Section 17955 and Section 23040.1 and General Information O, Investment Partnerships, for more information.

Question X

Federal Form 8886, Reportable Transaction Disclosure Statement, must be attached to any return on which the partnership has claimed or reported income from, or a deduction, loss, credit or other tax benefit attributable to, participation in a reportable transaction. If the partnership is required to file this form with the federal return, attach a copy to the partnership’s Form 565. Do not attach copies of federal Schedules K-1 (1065).

A material advisor is required to provide a reportable transaction number to all taxpayers and material advisors for whom the material advisor acts as a material advisor.

A Reportable Transaction is any transaction as defined in R&TC Section 18407 and Treas. Reg. 1.6011-4 and includes, but is not limited to:

• A Confidential Transaction, which is a transaction offered to a taxpayer under conditions of confidentiality and for which the taxpayer has paid a minimum fee.
• A transaction with contractual protections which is a transaction that provides the taxpayer with the right to a full or partial refund of fees if all or part of the intended tax consequences from the transaction are not sustained.
• A loss transaction under IRC Section 165, which is a transaction resulting in a loss of at least $10 million in any one-year or $20 million in any combination of taxable years for a partnership that has only corporations as partners, (looking through partners that are themselves partnerships); or, $2 million in any one-year or $4 million in any combination of taxable years for all other partnerships.
• A transaction with a significant book-tax difference (entered into prior to August 3, 2007). Beginning January 6, 2006, this transaction was no longer required to be disclosed on federal Form 8886. See IRS Notice 2006-06.
• A transaction where the taxpayer is claiming a tax credit of greater than $250,000 and held the asset for less than 45 days (entered into prior to August 3, 2007).
• A transaction of interest, which is a transaction that is the same as or substantially similar to one of the types of transactions that has been identified by the IRS as a transaction of interest (entered into on or after November 2, 2006).
• A Listed Transaction, which is a specific reportable transaction, or one that is substantially similar, that has been identified by the IRS or the FTB as a tax avoidance transaction.

Question CC

Check the “Yes” or “No” box to indicate if the partnership is deferring any income from the disposition of assets. If “Yes,” enter the four-digit year in which the assets were disposed (ex. 2022) on line CC (2). If there are multiple years, write “see attached” on the line and attach a schedule listing the years. This question is applicable if the partnership is deferring any income from a disposition of assets in the current taxable year or prior taxable years.

Question DD

Check the box for the type(s) of previously deferred income the partnership is reporting. If there are multiple sources of income, check the box for the appropriate items and attach a schedule listing the income type and year of disposition. If the partnership is reporting “Other” types of previously deferred income, check the box for “Other” and attach a schedule listing the income type and year of disposition. This question is applicable if the partnership is reporting previously deferred income in the current taxable year or prior taxable years.

Question EE

Partnerships doing business under a name other than that entered on Side 1 of Form 565 must enter the doing business as (DBA) name in Question EE. If the partnership is doing business under multiple DBA’s attach a schedule listing all DBA’s. Leave Question EE blank if the partnership is not using DBA’s to conduct business.

Question FF

Check the “Yes” or “No” box to indicate if the partnership operated as another entity type such as a Corporation, S Corporation, General Partnership, Limited Partnership, LLC, or Sole Proprietorship in the previous five (5) years. If “Yes,” enter prior FEIN(s) if different, business name(s), and entity type(s) for prior returns filed with the FTB and/or IRS on line FF (2). If there are multiple entries, write “see attached” on the line and attach a schedule listing the prior FEINs, business names, and entity types.

Question GG

Check “Yes” or “No” if the partnership previously operated outside California. Check “Yes” or “No” if this is the partnership’s first year of doing business in California.

Question JJ

Check the applicable box if activities were aggregated for at-risk purposes or grouped for passive activity purposes. Get the instructions for federal Form 1065, under At-Risk Limitations and Grouping Activities, for more information.

Question KK – Do Not Round Cents to Dollars

On line (3), do not round cents to the nearest whole dollar. Enter the amounts with dollars and cents as actually remitted.

Schedule K (565) and Schedule K-1 (565) – Partner’s Shares of Income, Deductions, Credits, etc.

Purpose of Schedules

Schedule K (565) is a summary schedule for the partnership’s income, deductions, credits, etc., and Schedule K-1 (565) shows each partner’s distributive share. The line items for both of these schedules are the same unless otherwise noted.

One copy of each Schedule K-1 (565) must be attached to Form 565 when it is filed with the FTB. For alternative methods of filing Schedules K-1 (565), see General Information S, Substitute Schedules.

Be sure to give each partner a copy of their respective Schedule K-1 (565). Also include a copy of the Partner’s Instructions for Schedule K-1 (565) or specific instructions for each item reported on the partner’s Schedule K-1 (565). These items should be provided to the partner on or before the due date of the Form 565.

See the Schedule K Federal/State Line References chart, in this booklet, and the instructions for Schedule K (565) and Schedule K-1 (565), when completing California Schedule K (565) and Schedule K-1 (565).

Other Loan Forgiveness

Under federal law, the CAA, 2021 allows deductions for eligible expenses paid for with covered loan amounts. California law conforms to this federal provision, with modifications. For California purposes, if you are an ineligible entity and deducted eligible expenses for federal purposes, enter the total amount of those expenses deducted on the applicable line(s) as a column (c) adjustment.

Paycheck Protection Program Loans Forgiveness

Under federal law, the CAA, 2021 allows deductions for eligible expenses paid for with covered loan amounts. California law conforms to this federal provision with modifications. For California purposes, if you are an ineligible entity and deducted eligible expenses for federal purposes, enter that amount on the applicable line(s) as a column (c) adjustment.

Also, the ARPA expands PPP eligibility to include “additional covered nonprofit entities” which includes certain Code 501(c) nonprofit organizations and Internet-only news publishers and Internet-only periodical publishers. California law does not conform to this expansion of PPP eligibility. If you met the PPP eligibility requirements and excluded the amount from gross income for federal purposes, enter that amount on the applicable line(s) as a column (c) adjustment.

Shuttered Venue Operator Grant

Under federal law, the CAA, 2021 allows deductions for eligible expenses paid for with grant amounts. California law conforms to this federal provision, with modifications. For California purposes, if you are an ineligible entity and deducted eligible expenses for federal purposes, enter the total amount of those expenses deducted on the applicable line(s) as a column (c) adjustment.

Special Reporting for R&TC Section 41

Beginning in taxable year 2020, partners, members, shareholders, or beneficiaries of pass-through entities conducting a commercial cannabis activity licensed under the California Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) should file form FTB 4197, Information on Tax Expenditure Items. The FTB uses information from form FTB 4197 for reports required by the California Legislature.

If the partnership conducted a commercial cannabis activity licensed under the California MAUCRSA, or received flow-through income from another pass-through entity in that business, attach a schedule to the Schedule K-1 (565) showing the breakdown of the following information:

• The partner’s share of total deductions related to the cannabis business, including deductions from Ordinary Income.
• The partner’s share of total credits related to the cannabis business.

Get form FTB 4197 for more information.

Schedule K (565) Only

In column (b), enter the amounts from federal Schedule K (1065). In column (c), enter the adjustments resulting from differences between California and federal law (not adjustments relating to California source income). In column (d) on Schedule K (565), enter the worldwide income computed under California law. For partners to comply with the requirements of IRC Section 469, trade or business activity income (loss), rental activity income (loss), and portfolio income (loss) must be considered separately by the partners. Rental activity income (loss) and portfolio income (loss) are not reported on Form 565, Side 1 so that these amounts are not combined with trade or business activity income (loss). Schedule K (565) is used to report the totals of these (and other) amounts.

Apportioning Partnerships Only

Once the Schedule K (565) has been completed, apportioning partnerships should also complete Schedule R before completing its partners’ Schedules K-1 (565).

Compliance with Partnership Filing Requirements

To help ensure the accurate and timely processing of the partnership’s Form 565, verify the following:

• A California approved Schedule K-1 (565) has been attached to Form 565 for each partner identified on Form 565, Side 2, Question L. Partnerships eligible for the reduced filing program, see General Information D, Who Must File.
• The Schedule K-1 (565) contains the partner’s correct name, address, and identifying number in the correct fields.
• Questions A through L of Schedule K-1 (565) are completed.
• The appropriate entity type box (Schedule K-1 (565), Side 1, Question B) is checked for each partner.
• All Schedules K-1 (565) reconcile to Form 565, Schedule K (565).
• The partner’s percentage (Schedule K-1 (565) Question D) is expressed in decimal format and carried to four decimal places (i.e., 33.5432). Do not print fractions, the percentage symbol (%), or use terms such as “Various” or “Formula.”
• Substitute computer-generated Schedule K-1 (565) forms must be approved by the FTB.

Schedule K-1 (565) Only

The partnership completes the entire Schedule K-1 (565) filling out the partner’s and partnership’s information (name, address, identifying numbers), Questions A through L, and the partner’s distributive share of items.

For partners with Private Mail Box (PMB) addresses, include the designation number in the partner’s address area. Precede the number (or letter) with “PMB.”

For each individual partner, enter the partner’s social security number. For all other partners enter the FEIN. However, if a partner is an individual retirement account (IRA), enter the identifying number of the custodian of the IRA. Do not enter the social security number of the person for whom the IRA is maintained.

The partnership files one California Schedule K-1 (565) for each partner by attaching a copy to the partnership return. Do not attach federal Schedules K-1 (1065). These forms are not California approved forms.

Determining the Source of the Partnership’s Income for a Resident Partner

A resident partner should include the entire distributive share of partnership income in their California income. If the partnership is apportioning, the partner may be entitled to a credit for taxes paid to other states. The partner should be referred to the California Schedule S, Other State Tax Credit, for more information.

Determining the Source of the Partnership’s Income for a Nonresident Partner

Business income: Regardless of the classification of income for federal purposes, income from California sources is determined in accordance with California law, (Cal. Code Regs., tit. 18 section 17951-4).

The California source income from a trade or business of a Nonresident Partner is determined as follows:

If the partnership conducts Then A trade or business wholly within California The income from that trade or business is California source income A business within and outside California, but the part within California is so distinct that it can be separately accounted for Only that separate income within California is California source income A single trade or business within and outside California California source income is determined by apportionment

The partnership should apportion business income using the Uniform Division of Income for Tax Purposes Act (R&TC Section 25120 through Section 25139). Special rules apply if the partnership has nonbusiness income.

Nonbusiness Income: Nonbusiness income attributable to real or tangible personal property (such as rents, royalties, gains, or losses) located in California is California source income (Cal. Code Regs., tit. 18 section 17951-3 and R&TC Section 25124 and Section 25125). Enter this information on the appropriate line of Schedule K-1 (565). If the partnership believes it may have a unitary partner, the information should also be entered on Side 4, Table 2, Part B, for that partner.

The source of nonbusiness income attributable to intangible property depends upon the partner’s state of residence or commercial domicile. Individuals generally source this income to their state of residence and corporations to their commercial domicile.

Because the determination of the source of intangible nonbusiness income must be made at the partner level, this income is not entered on Schedule K-1 (565), column (e). It is entered only on Side 4, Table 1.

Completing Schedule K-1 (565)

Questions A through L

See the instructions for federal Form 1065, Specific Instructions, Schedule K-1 Only, Part II, Information About the Partner, for more information on completing Question A through Question L.

Questions A and B, Schedule K-1 (565)

Check the appropriate box to indicate a general or limited partner and the partner’s entity type. An exempt organization should check box 10 regardless of its legal form.

If the partner is a Disregarded Entity (DE) check the DE box and enter the DE owner’s name and TIN.

Question C, Schedule K-1 (565)

Check the appropriate box to indicate if this is a foreign partner.

Questions D and E, Schedule K-1 (565)

Percentages must be four to seven characters in length and have a decimal point before the four final characters. For example, 50 percent is represented as 50.0000, 5 percent as 5.0000, 100 percent as 100.0000. Do not enter fractions, the percentage symbol (%), or use terms such as “Various” or “Formula.”

For more information on completing Questions D and E, get the instructions for federal Form 1065, Specific Instructions, Schedule K-1 Only, Part II, Information About the Partner.

Question F, Schedule K-1 (565)

Enter the reportable transaction or tax shelter registration number(s), if applicable. See instructions for Form 565 Question X for more information.

Question G(1), Schedule K-1 (565)

If the “Yes” box is checked on Form 565, Question S, then check the box for Question G(1) on Schedule K-1 (565).

Question G(2), Schedule K-1 (565)

If the “Yes” box is checked on Form 565, Question V, then check the box for Question G(2) on Schedule K-1 (565).

Question H(1), Schedule K-1 (565)

If the partnership is filing a final year tax return, check the “Final Return” box on Form 565, Side 1, Item H(2), and check the “A final Schedule K-1 (565)” box for Item H(1) on Schedule K-1 (565). Attach a statement that explains the reason for the termination, or liquidation of the partnership.

Question J, Schedule K-1 (565)

Check the appropriate box to indicate whether the partner contributed property with a built-in gain or loss during the tax year. If the “Yes” box is checked, attach a statement that contains the following information. For more information, get the Instructions for federal Form 1065.

Question K, Schedule K-1 (565)

The partnership should report the partner’s share of net unrecognized section 704(c) gains or losses, both at the beginning and at the end of the partnership’s tax year. For more information, get the Instructions for federal Form 1065.

Question L, Schedule K-1 (565)

Beginning in taxable year 2021, all partnerships must report partners’ capital accounts using the tax basis method on California Schedule K-1 (565). Current year net income/loss and other increases/decreases are now separately reported in columns (c) and (d), respectively. For more information on partner tax basis capital account reporting, get the Instructions for the federal Form 1065, Specific Instructions, Schedule K and Schedule K-1, Part II Information about the Partner, Item L.

Beginning capital account balance if tax basis method using California amounts was not previously used

If you did not report partners’ capital accounts utilizing the tax basis method using California amounts last year and did not maintain capital accounts under the tax basis method using California amounts in your books and records, you may refigure a partner’s beginning capital account using the tax basis method, modified outside basis method, modified previously taxed capital method, section 704(b) method, or California modified federal tax basis method, described below, for this year only. The same method must be used to determine each partner’s beginning capital account. All other lines in Question L must be reported using the tax basis method described in the federal Form 1065 instructions using California amounts. Attach a statement to the partners’ Schedules K-1 indicating the method used to determine each partner’s beginning capital account. If the modified previously taxed capital method is used, the statement must also include the method used to determine the partnership’s net liquidity value (fair market value, section 704(b) book value, etc.). The method used to determine the partnership’s net liquidity value must be adopted for all partners in the partnership.

Attach a statement indicating whether the tax basis method used in 2021 was determined using California amounts or federal amounts. If it was determined using California amounts, the same method should be used. The tax basis method is the federal tax basis method (transactional approach), as described in the federal Form 1065 instructions, taking into account all historical California adjustments that affect capital accounts (i.e. CA adjustments to depreciation).

If the tax basis method was determined using federal amounts in 2021, in order to compute the beginning capital account balance, in addition to the tax basis method described above, the following methods may be used to determine the California beginning capital account balance for taxable year 2022 only:

Modified outside basis method

The amount to report as a partner’s beginning capital account under the modified outside basis method is equal to the partner’s California adjusted tax basis in its partnership interest as determined under the principles and provisions of subchapter K including, for example, sections 705, 722, 733, and 742; and subtracting from that basis (1) the partner’s share of partnership liabilities under section 752 and (2) the sum of partner’s section 743(b) adjustments (that is, net section 743(b) adjustments). For purposes of establishing a partner’s beginning capital account, you may rely on the adjusted tax basis information provided by your partners.

Modified previously taxed capital method

The amount to report as a partner’s beginning capital account under the modified previously taxed capital method is equal to the following.

• The amount of cash the partner would receive if you liquidated after selling all of your assets in a fully taxable transaction for cash equal to the fair market value of the assets; increased by
• The amount of tax loss determined without taking into account any section 743(b) basis adjustments (including any remedial allocations under Regulations section 1.704-3(d)) that would be allocated to the partner following such a liquidation (treating all liabilities as nonrecourse); and decreased by
• The amount of tax gain determined without taking into account any section 743(b) basis adjustments (including any remedial allocations under Regulations section 1.704-3(d)) that would be allocated to the partner following such a liquidation (treating all liabilities as nonrecourse). Instead of using the assets’ fair market value, you may determine the partnership’s net liquidity value, and gain or loss, by using such assets’ California book bases as determined under section 704(b), as determined for financial accounting purposes, or on the basis set forth in the partnership agreement for purposes of determining what each partner would receive if the partnership were to liquidate, as determined by partnership management.

Tax gain and loss must be determined using California tax basis.

Section 704(b) method

The amount to report as a partner’s beginning capital account under the section 704(b) method is equal to the partner’s section 704(b) capital account determined using California amounts, minus the partner’s share of section 704(c) built-in gain in the partnership’s assets, plus the partner’s share of section 704(c) built-in loss in the partnership’s assets. Property contributed to a partnership is section 704(c) property if, at the time of the contribution, its fair market value differs from its adjusted tax basis. Section 704(c) property also includes property with differences resulting from revaluations (reverse section 704(c) allocations). For more information see sections 704(b) and 704(c) and Regulations sections 1.704-1 through 1.704-3.

For section 704(c) property use the California tax basis to determine section 704(c) built-in gain or loss.

California modified federal tax basis method

Use the 2022 Federal beginning account balance taking into account all historical California adjustments that affect capital accounts. For this method, include in your statement which method was used for determining the beginning federal capital account balance for taxable year 2020 on the federal return. If the modified previously taxed capital method was used, the statement must also include the method used to determine the partnership’s net liquidity value (fair market value, section 704(b) book value, etc.). The method used to determine the partnership’s net liquidity value must be adopted for all partners in the partnership.

Completing Column (b) through Column (e)

• In column (b), enter the amounts from federal Schedule K-1 (1065).
• In column (c), enter the adjustments resulting from differences between California and federal law for each specific line item.
• In column (d), enter the result of combining column (b) and column (c). This is total income under California law.

Column (e) is used to report California source or apportioned amounts and credits. Include the following items in this column:

For Individuals:

1. Income from separate businesses, trades, or professions conducted wholly within California, Cal. Code Regs., tit. 18 section 17951-4(a).
2. Income from a trade or business conducted within and outside California, when the part of business conducted within California can be separately accounted for, Cal. Code Regs., tit. 18 section 17951-4(b).
3. Nonbusiness income from real and tangible property located in California. Enter the partner’s share of nonbusiness income from real and tangible property located in California in column (e).
4. Income from a trade or business conducted within and outside California. Enter the amount of business income apportioned to California according to Schedule R. This includes intangible income attributable to the business, trade, or profession, Cal. Code Regs., tit. 18 section 17951-4(c) and R&TC Sections 25128 through 25137. Combined business income is then apportioned by the sales factor. Use a three-factor formula consisting of payroll, property, and a single-weighted sales factor if more than 50% of the business receipts of the partnership are from agricultural, extractive, savings and loans, banks, and financial activities. Apportioning partnerships should complete Schedule R and attach it to Form 565.
5. California credits.

For Corporations and Other Business Entities:

1. Income from a trade or business conducted within and outside California. See #4 under For Individuals.
2. Nonbusiness income from real and tangible property located in California. Enter the partner’s share of nonbusiness income from real and tangible property located in California in column (e). If the partnership believes it may have a unitary partner, enter this income in Table 2, Part B.
3. California credits.

For all partners, nonbusiness income from intangible property should not be entered in column (e). Enter this income in Table 1. For more information, see Partner’s Instructions for Schedule K-1 (565).

Column (d) and Column (e) Schedule K-1 (565), column (d), includes the partner’s distributive share of total partnership income, deductions, gains, or losses under California law. Column (e) includes only income, deductions, gains, or losses that are apportioned or sourced to California. The computation of these amounts is a matter of law and regulation. The residency of the partner is not a factor in the computation of amounts to be included in column (d) and column (e).

For a partnership that is doing business wholly within California, column (e) will generally be the same as column (d), except for nonbusiness intangible income (for example, nonbusiness interest, dividends, gains, or losses from sales of securities).

For a partnership that is doing business within and outside California, the amounts in column (d) and column (e) may be different.

If the partnership knows the partner is a resident individual, then the partnership answers “Yes” to Question I on Schedule K-1 (565), and completes column (d) only. Otherwise, the partnership should complete column (e) for all other partners.

Completing Table 1

Complete Table 1 only if the partnership has nonbusiness intangible income. If the partnership has nonbusiness intangible income, but knows that the partner is a resident individual, then the partnership does not need to complete Table 1 for the partner.

Completing Table 2

The partnership will complete Table 2, Parts A to C for unitary partners and Table 2 Part C for all non-unitary partners. Table 2 does not need to be completed for non-unitary individuals.

The Partnership will complete Table 2, Part C to report the partner’s distributive share of property, payroll and sales Total within California.

The partners will use Table 2, Part C to determine if they meet threshold amounts of California property, payroll, and sales for the doing business threshold in California. For more information about doing business, see General Information A, Important Information.

Special Rules for Partners and Partnerships in a Single Unitary Business

Special rules apply if the partnership and a partner are engaged in a single unitary business. In that case, a unitary partner will not use the income information shown in column (e). Instead, the partner’s distributive share of business income is combined with the partner’s own business income. The combined business income is apportioned using an apportionment formula that consists of an aggregate of the partner’s share of the apportionment factors from the partnership and the partner’s apportionment factors, Cal. Code Regs., tit. 18 section 25137-1. The determination of whether a single sales factor or a three-factor apportionment formula applies to the combined income will be made at the partner level. The partner’s distributive share of business income and property, payroll, and sales factors are entered in Table 2.

If the partnership knows that all of the partners are unitary with the partnership, the partnership need not complete column (e) for any of the Schedules K-1 (565) or attach a Schedule R. For further information, see Partner’s Instructions for Schedule K-1 (565).

Special Rules for Partners and Partnerships in a Non-Unitary Business

If the apportioning trade or business conducted by a partner is not unitary with the apportioning trade or business of the partnership, the partnership apportions its business income separately using Schedules R-1, R-2, R-3, and R-4 only. The different items of business income as apportioned to California are entered in column (e).

Special Reporting Requirements for Passive Activities

If items of income (loss), deduction, or credit from more than one activity are reported on Schedule K-1 (565), the partnership must attach a statement to Schedule K-1 (565) for each activity that is a passive activity to the partner. Rental activities are passive activities to all partners; trade or business activities are passive activities to limited partners and to general partners who do not materially participate in the activity. The statement must include all the information explained in the instructions for federal Schedule K-1 (1065).

Completing Table 3

Complete Table 3 for partners that are partnerships or LLCs. Enter only amounts used to determine income (loss) derived from and attributable to California sources.

Include the partner’s distributive share of the cost of goods sold and deductions, as adjusted for California law, from any ordinary income (loss) of your trade or business. These amounts are on Side 1 of Form 565. The California law adjustments are on Schedule K (565), line 1, column (c). Also, enter the partner’s distributive share of total gross rents from property located in California from federal Form 8825. Even if your pass-through entity partners are not LLCs, you must enter this information. LLCs in tiered entity structures that include your partnership’s activities may use this information to complete Schedule IW, Limited Liability Company (LLC) Income Worksheet, and determine the LLC fee.

If your partnership owns pass-through entities and received Schedule K-1 (565), Table 3 information, multiply these amounts by the partner’s distributive share percentage and combine the results with the amounts from your return as determined above.

Specific Line Instructions

The California Schedule K (565) generally follows the federal Schedule K (1065). Where California and federal laws are the same, the instructions for California Schedule K (565) refer to the instructions for federal Schedule K (1065).

When completing the California Schedule K (565) and Schedule K-1 (565), refer to the Schedule K Federal/State Line References chart (included in this booklet).

Income

Line 1 through Line 11c

See the instructions for federal Form 1065, Specific Instructions Schedules K and K-1, and Schedule K-1 (565) Income (Loss), line 1 through line 11.

Schedule K (565) must include all income and losses from the partnership activities as determined under California laws and regulations. Any differences reported between the federal and California amounts should be related to differences in the tax laws. Do not apply the apportionment formula to the income or losses on Schedule K (565).

California Venues Grant. For taxable years beginning on or after September 1, 2020 and before January 1, 2030, California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Venues Grant Program that is administered by CalOSBA. Federal law has no similar exclusion. Enter the amount of this type of income on line 11b, column (c).

California Microbusiness COVID-19 Relief Grant. California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Microbusiness COVID-19 Relief Program that is administered by the CalOSBA. Federal law has no similar exclusion. Enter the amount of this type of income on line 11b, column (c).

Qualified Opportunity Zone Funds. The TCJA established Opportunity Zones. IRC Sections 1400Z-1 and 1400Z-2 provide a temporary deferral of inclusion of gross income for capital gains reinvested in a qualified opportunity fund, and exclude capital gains from the sale or exchange of an investment in such funds. California does not conform to the deferral and exclusion of capital gains reinvested or invested in federal opportunity zone funds under IRC Sections 1400Z-1 and 1400Z-2, and has no similar provisions. If, for California purposes, gains from investment in qualified opportunity zone property had been included in income during previous taxable year, do not include the gain in the current year income.

Thomas and Woolsey Wildfires Exclusion. California law allows a qualified taxpayer an exclusion from gross income for any amount received in settlement from Southern California Edison for claims relating to the 2017 Thomas Fire or the 2018 Woolsey Fire. If any amount was included for federal purposes, exclude that amount for California purposes on line 11b, column (c).

Fire Victims Trust Exclusion. California law allows a qualified taxpayer an exclusion from gross income for any amount received from the Fire Victims Trust. If any amount was included for federal purposes, exclude that amount for California purposes on line 11b, column (c).

Turf replacement water conservation program. California law allows an exclusion from gross income for any amount received as a rebate, voucher, or other financial incentive issued by a public water system, local government, or state agency for participation in a turf replacement water conservation program. If any amount was included for federal purposes, exclude that amount for California purposes on line 11b, column (c).

Small Business and Nonprofit COVID-19 Supplemental Paid Sick Leave Relief Grant. California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Small Business and Nonprofit COVID-19 Supplemental Paid Sick Leave Relief Grant Program that is established by Section 12100.975 of the Government Code. If any amount was included for federal purposes, exclude that amount for California purposes on 11b, column (c).

Financial Incentive for Seismic Improvement. California law allows an income exclusion for loan forgiveness, grants, credits, rebates, vouchers, or other financial incentive issued by the California Residential Mitigation Program or California Earthquake Authority to assist a residential property owner or occupant with expenses paid, or obligations incurred, for earthquake loss mitigation. If any amount was included for federal purposes, exclude that amount for California purposes on line 11b, column (c).

IRC Section 951A income. California does not conform to IRC Section 951A. If, for federal purposes, global intangible low-taxed income (GILTI) was included make an adjustment on line 11b, column (c).

Small Business COVID-19 Relief Grant Program. California allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the COVID-19 Relief Grant under Executive Order No. E 20/21-182 and the California Small Business COVID-19 Relief Grant Program established by Section 12100.83 of the Government Code. If any amount was included for federal purposes, exclude that amount for California purposes.

Line 10 – Enter on line 10, the amount shown on Schedule D-1, Sales of Business Property, line 7. Do not include specially allocated ordinary gains and losses or net gains or losses from involuntary conversions due to casualties or thefts. Instead, report them on line 11b or line 11c.

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If the partnership has more than one activity and the amount on line 10 is a passive activity amount to the partner, attach a statement to Schedule K-1 (565) that identifies to which activity the IRC Section 1231 gain (loss) relates.

Deductions

Line 12 through Line 13

See the instructions for federal Form 1065, Specific Instructions Schedules K and K-1 and Schedule K-1 (565), Deductions, line 12, and line 13a through line 13e.

California follows the revised federal instructions for reporting the sale, exchange or disposition of property for which an IRC Section 179 expense deduction was claimed in prior years by a partnership.

Line 13a – Charitable Contributions

Enter the total amount of charitable contributions made by the partnership during its taxable year on Schedule K (565) and each partner’s distributive share on Schedule K-1 (565). Attach an itemized list to both schedules showing the amount subject to the 50 percent, 30 percent, and 20 percent limitations.

For taxable years beginning after December 31, 2017, and before January 1, 2026, the 50 percent limitation under IRC Section 170(b) for cash contributions to public charities and certain private foundations is increased to 60 percent for federal purposes. California does not conform. The limitation for California is 50 percent.

Partners are allowed a deduction for contributions to qualified organizations as provided in IRC Section 170. California law conforms to the federal law, relating to the denial of the deduction for lobbying activities, club dues, and employee remuneration in excess of one million dollars.

California conforms to IRC Section 170(f)(8) substantiation requirement for charitable contributions.

For taxable years beginning on or after January 1, 2017, and before January 1, 2028, do not include any amounts taken into account for the College Access Tax credit as a contribution deduction.

Line 13b – Investment Interest Expense

This line must be completed whether or not a partner is subject to the investment interest rules. Enter the interest paid or accrued to purchase or carry property held for investment. Property held for investment includes property that produces portfolio income (interest, dividends, annuities, royalties, etc.). Therefore, interest expense allocable to portfolio income should be reported on line 13b of Schedule K (565) and Schedule K-1 (565), rather than line 13d of Schedule K (565) and Schedule K-1 (565).

Property held for investment includes a partner’s interest in a trade or business activity that is not a passive activity to the partnership and in which the partner does not materially participate. An example would be a partner’s working interest in an oil and gas property (i.e., the partner’s interest is not limited) if the partner does not materially participate in the oil and gas activity. Investment interest does not include interest expense allocable to a passive activity. For more information, get form FTB 3526, Investment Interest Expense Deduction.

Line 14

The information reported on line 14 of the federal Schedule K (1065), and federal Schedule K-1 (1065), does not apply to California and therefore there is no line 14.

Credits

California line numbers are different from federal line numbers in this section.

Line 15a – Total Withholding, Schedule K-1 (565) only

If taxes were withheld by the partnership or if there is a pass-through withholding credit from another entity, or backup withholding, the partnership must provide each affected partner (including California residents) a completed Form 592-B. Partners must attach Form 592-B to the front of their California return to claim withheld amounts. Schedule K-1 (565) may not be used to claim this withholding credit.

Line 15b through Line 15d

These lines relate to rental activities. Use line 15f to report credits related to trade or business activities.

Line 15b – Low-Income Housing Credit

A credit may be claimed by owners of residential rental projects providing low-income housing (IRC Section 42). Generally, the credit is effective for buildings placed in service after 1986. Get form FTB 3521, Low-Income Housing Credit, for more information.

Line 15c – Credits Other Than Line 15b Related To Rental Real Estate Activities

Report any information that the partners need to figure credits related to a rental real estate activity, other than the low-income housing credit. Attach to each partner’s Schedule K-1 (565) a statement showing the amount to be reported and the applicable form on which the amount should be reported.

Line 15d – Credits Related to Other Rental Activities

Use this line to report information that the partners need to figure credits related to a rental activity. Attach to each partner’s Schedule K-1 (565) a statement showing the amount to be reported and the applicable form on which the amount should be reported.

Line 15e – Nonconsenting Nonresident Member’s Tax Allocated to All Partners

If income tax was paid by an LLC on behalf of a member that is a partnership because the general partner in the partnership did not sign form FTB 3832, Limited Liability Company Nonresident Members’ Consent, the amount paid is entered on the member’s Schedule K-1 (568), line 15e. This credit is allocated to all partners according to their partnership interest. Partners must attach a copy of the Schedule K-1 (568), previously issued to their partnership by the LLC as well as the Schedule K-1 (565) issued by their partnership, to their California tax return to claim their share of the tax paid by the LLC on their partnership’s behalf.

Line 15f – Other Credits

Attach a statement showing each partner’s allocable share of any credit or credit information that is related to a trade or business activity.

Credits that can be reported on line 15f include:

• California Competes Tax Credit. Get form FTB 3531.
• California Motion Picture and Television Production. Get form FTB 3541.
• College Access Tax Credit. Get form FTB 3592.
• Disabled Access Credit for Eligible Small Businesses. Get form FTB 3548.
• Donated Agricultural Products Transportation Credit. Get form FTB 3547.
• Enhanced Oil Recovery Credit. Get form FTB 3546.
• Homeless Hiring Credit. Get form FTB 3831.
• Natural Heritage Preservation Credit. Get form FTB 3503.
• New California Motion Picture and Television Production Credit. Get form FTB 3541.
• New Donated Fresh Fruits or Vegetables Credit. Get form FTB 3814.
• New Employment Credit. Get form FTB 3554.
• Pass-Through Entity Elective Tax Credit. The Pass-Through Entity Elective Tax Credit is not a pass-through item but should still be reported on Schedule K-1 (565), line 15f and attached schedule. Get form FTB 3804-CR.
• Prison Inmate Labor Credit. Get form FTB 3507.
• Program 3.0 California Motion Picture and Television Production Credit. Get form FTB 3541.
• Research Credit. Get form FTB 3523.
• Soundstage Filming Credit. Get form FTB 3541.
• State Historic Rehabilitation Credit. Get form FTB 3835.

All of the above credit forms are available at ftb.ca.gov/forms.

Line 15f may also include the distributive share of net income taxes paid to other states by the partnership. Subject to limitations of R&TC Section 18001 and R&TC Section 18006, partners may claim a credit against their individual income tax for net income taxes paid by the partnership to another state. The amount of tax paid must be supported by a schedule of payments and evidence of tax liability by the partnership to the other states. Refer partners to the California Schedule S for more information.

Line 16

The information reported on line 16 of the federal Schedule K (1065) and federal Schedule K-1(1065), Foreign Transactions, does not apply to California and therefore there is no line 16.

Alternative Minimum Tax (AMT) Items

Line 17a through Line 17f

Enter each partner’s distributive share of income and deductions that are adjustments and tax preference items. Get Schedule P (100, 100W, 540, 540NR, or 541), Alternative Minimum Tax and Credit Limitations, to determine amounts and for other information.

California law conforms to the existing federal law eliminating the deduction for contributions of appreciated property as an item of tax preference. As a result, taxpayers no longer need to include in their computation of Alternative Minimum Taxable Income the amount by which any allowable deduction for contributions of appreciated property exceeds the taxpayer’s adjusted basis in the contributed property.

For additional information, see instructions for federal Schedule K (1065), Alternative Minimum Tax (AMT) Items, line 17a through line 17f. For differences between federal and California law for AMT, see R&TC Section 17062.

Tax-Exempt Income and Nondeductible Expenses

Line 18a through Line 18c – Tax-exempt Income and Nondeductible Expenses

Enter on Schedule K (565) the amounts of tax-exempt interest income, other tax-exempt income, and nondeductible expenses from federal Schedule K (1065) lines 18a, 18b, and 18c. Enter on Schedule K-1 (565) the amounts of tax-exempt income, other tax-exempt income, and nondeductible expenses, from federal Schedule K-1 (1065), box 18. The partnership should give each partner a description and the amount of the partner’s share for each item applicable to California in this category.

Distributions

Line 19a and Line 19b – Distributions

Enter on Schedule K (565) the amounts of cash and marketable securities, and other property from federal Schedule K (1065), line 19a and line 19b. Enter on Schedule K-1 (565) the amounts of cash and marketable securities, and other property from federal Schedule K-1 (1065), box 19.

Other Information

Line 20a and Line 20b – Investment Income and Investment Expenses

These lines must be completed whether or not a partner is subject to the investment interest rules.

Enter on line 20a only the investment income included on line 5, line 6, line 7, and line 11a of Schedule K (565) and Schedule K-1 (565). Enter on line 20b only investment expenses included on line 13d of Schedule K (565) and Schedule K-1 (565).

If items of investment income or expenses are included in the amounts that are required to be passed through separately to the partner on Schedule K-1 (565), items other than the amounts included on line 5 through line 9, line 11a, and line 13d of Schedule K-1 (565), give each partner a statement identifying these amounts.

Investment income includes gross income from property held for investment, gain attributable to the disposition of property held for investment, and other amounts that are gross portfolio income. Investment income and investment expenses generally do not include any income or expenses from a passive activity.

Property subject to a net lease is not treated as investment property because it is subject to the passive loss rules. Do not reduce investment income by losses from passive activities.

Investment expenses are deductible expenses (other than interest) directly connected with the production of investment income. Get the instructions for form FTB 3526 for more information.

Line 20c – Other Information

If the partnership completed the credit recapture portion of FTB 3531, California Competes Tax Credit – Enter only the recaptured amount used. Get the instructions for form FTB 3531, Part III, Credit Recapture, for more information.

See the instructions for the federal Schedule K (1065), line 20c, Other Items and Amounts. For credit recaptures attach a schedule including credit recapture names and amounts.

The gain on property subject to the IRC Section 179 Recapture should be reported on the Schedule K as supplemental information as instructed on the federal Form 4797.

The partnership must provide all of the following information with respect to a disposition of business property if an IRC Section 179 expense deduction was claimed in prior years:

1. Description of the property.
2. Date the property was acquired.
3. Date the property was sold.
4. Gross sales price.
5. Cost or other basis plus expense of sale (not including the partnership’s basis reduction in the property due to IRC Section 179 expense deduction).
6. Depreciation allowed or allowable (not including the IRC Section 179 expense deduction).
7. Amount of IRC Section 179 expense deduction (if any) passed through to each partner for the property and the partnership’s taxable year(s) in which the amount was passed through.
8. An indication if the disposition is from a casualty or theft.
9. If this is an installment sale, any information needed to complete form FTB 3805E.

Line 21 – More Than One At-Risk Activity, Schedule K-1 (565) only

If the partnership conducted more than one at-risk activity, the partnership is required to provide certain information separately for each at-risk activity to its partners. Get the Instructions for federal Form 1065, Specific Instructions, Schedule K and Schedule K-1, Part III, Line 22.

Line 22 – More Than One Passive Activity, Schedule K-1 (565) only

If the partnership conducted more than one activity (determined for purposes of the passive activity loss and credit limitations), the partnership is required to provide information separately for each activity to its partners. Get the Instructions for federal Form 1065, Specific Instructions, Schedule K and Schedule K-1, Part III, Line 23.

Supplemental Information

The partnership may need to report supplemental information that is not specifically requested on the Schedule K-1 (565) separately to each partner. If the partnership has supplemental information not included in lines 1 through 20b, write, “See attached” on line 20c, column (b) and column (d) and provide a schedule with the details.

Partners may need to obtain the amount of their proportionate interest of aggregate gross receipts, less returns and allowances, from the partnership.

The gain or loss on property subject to the IRC Section 179 Recapture should be reported on Schedule K-1 (565) as supplemental information as instructed on the federal Form 4797.

The partnership must provide all of the following information with respect to a disposition of business property if an IRC Section 179 expense deduction was claimed in prior years:

1. Description of the property.
2. Date the property was acquired.
3. Date the property was sold.
4. The partner’s pro-rata share of the gross sales price.
5. The partner’s pro-rata share of the cost or other basis plus expense of sale (not including the entity’s basis reduction in the property due to IRC Section 179 expense deduction).
6. The partner’s pro-rata share of the depreciation allowed or allowable (not including the IRC Section 179 expense deduction).
7. The partner’s pro-rata share of the amount of IRC 179 expense deduction (if any) passed through to the partner for the property and the partnership’s taxable year(s) in which the amount was passed through.
8. An indication if the disposition is from a casualty or theft.
9. If this is an installment sale, any information needed to complete form FTB 3805E. The partnership also must separately report the partner’s pro-rata share of all payments in future taxable years. (Installment payments received for installment sales made in prior taxable years should be reported in the same manner used in prior taxable years.)

Alternative minimum taxable income does not include income, positive and negative adjustments, and preference items attributed to any trade or business of a qualified taxpayer who has aggregate gross receipts, less returns and allowances, during the taxable year of less than $1,000,000 from all trades or businesses in which the taxpayer is an owner or has an ownership interest. The partnership should provide the partner’s proportionate interest of aggregate gross receipts on Schedule K-1 (565), line 20c.

For purposes of R&TC Section 17062(b)(4), “aggregate gross receipts, less returns and allowances” means the sum of all of the following:

• The gross receipts of the trades or businesses which the taxpayer owns.
• The proportionate interest of the gross receipts of the trades or businesses which the taxpayer owns.
• The proportionate interest of the pass-through entity’s gross receipts in which the taxpayer holds an interest.

“Aggregate gross receipts” means the sum of gross receipts from the production of business income, within the meaning of R&TC Section 25120(a) and (c), and the gross receipts from the production of nonbusiness income as defined in R&TC Section 25120(d).

R&TC Section 25120 was amended to add the definition of gross receipts. For a complete definition of “gross receipts”, refer to R&TC Section 25120(f), or go to ftb.ca.gov and search for 25120.

For purposes of this section, “pass-through entity” means a partnership (as defined by R&TC Section 17008), an S corporation, a regulated investment company (RIC), a real estate investment trust (REIT), and a REMIC. See R&TC Section 17062 for more information.

Also show on line 20c a statement showing each of the following:

1. Each partner’s distributive share of business income apportioned to an EZ, LAMBRA, MEA, or TTA.
2. Each partner’s distributive share of business capital gain or loss included in 1 above.

Analysis – Schedule K (565) Only

Line 21a through Line 21b(2)

For the instructions for line 21a through line 21b(2) of Schedule K (565), see the instructions for federal Schedule K (1065), Analysis of Net Income (Loss).

Other Partner Information – Schedule K-1 (565) Only

Table 1

Enter the partner’s share of nonbusiness income from intangibles. Because the source of this income must be determined at the partner level, do not enter income in this category in column (e). If the income (loss) for an income item is a mixture of income (loss) in different subclasses (for example, short-term and long-term capital gain), attach a supplemental schedule providing a breakdown of income in each subclass.

Enter nonbusiness income from intangibles in Table 1 net of related expenses.

Table 2

The partnership will complete Table 2, Parts A to C for unitary partners and Table 2, Part C for all non-unitary partners. Table 2 does not need to be completed for non-unitary individuals.

The final determination of unity is made at the partner level. If the partnership and the partner are unitary, or if the partnership is uncertain as to whether it is unitary with the partner, it should furnish the information in Table 2.

Part A. Enter the partner’s distributive share of the partnership’s business income. The partner will then add that income to its own business income and apportion the combined business income.

Cal Code Regs., tit. 18 section 25120 defines “business income” as income arising from transactions and activity in the regular course of the taxpayer’s trade or business and includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the taxpayer’s regular trade or business operations. In essence, all income which arises from the conduct of trade or business operations of a taxpayer is business income.

Part B. Enter the partner’s share of nonbusiness income from real and tangible property that is located in California. This income has a California source, and should also be included on the appropriate line in column (e).

Nonbusiness income is all income other than business income.

Part C. Enter the partner’s distributive share of the partnership’s property, payroll, and sales factors.

The partnership will complete Table 2, Part C to report the partner’s distributive share of property, payroll and sales Total within California.

The partners will use Table 2, Part C to determine if they meet threshold amounts of California property, payroll, and sales for the doing business threshold in California. For more information about doing business, see General Information A, Important Information.

Table 3

Complete Table 3 for partners that are partnerships or LLCs. Enter only amounts used to determine income (loss) derived from and attributable to California sources.

Include the partner’s distributive share of the cost of goods sold and deductions, as adjusted for California law, from any ordinary income (loss) of your trade or business. These amounts are on Side 1 of Form 565. The California law adjustments are on Schedule K (565), line 1, column (c). Also, enter the partner’s distributive share of total gross rents from property located in California from federal Form 8825. Even if your pass-through entity partners are not LLCs, you must enter this information. LLCs in tiered entity structures that include your partnership’s activities may use this information to complete Schedule IW and determine the LLC fee.

If your partnership owns pass-through entities and received Schedule K-1 (565), Table 3 information, multiply these amounts by the partner’s distributive share percentage and combine the results with the amounts from your return as determined above.

Schedule A – Cost of Goods Sold

California’s reporting requirements are generally the same as the federal reporting requirements. Follow the instructions for federal Form 1125-A, Cost of Goods Sold.

Schedule L – Balance Sheets

California’s reporting requirements are the same as the federal reporting requirements. The amounts reported on the balance sheet should agree with the books and records of the partnership and should include all amounts whether or not subject to taxation. Attach a statement explaining any differences between federal and state amounts or any differences between the balance sheet and the partnership’s books and records. Follow the instructions for federal Form 1065, Schedule L.

Domestic partnerships with 10 or fewer partners may not have to complete Schedule L. See the instructions for Question P for the specific requirements to qualify for this exception.

Schedule M-1, Reconciliation of Income (Loss) per Books With Income (Loss) per Return, and Schedule M-2, Analysis of Partners’ Capital Accounts

Domestic partnerships with 10 or fewer partners may not have to complete Schedule M-1, Schedule M-2, or Item L on Schedule K-1 (565). See the instructions for Question P for the specific requirements to qualify for this exception.

If the partnership is required to complete Schedule M-1 and Schedule M-2, the amounts shown should agree with the partnership’s books and records and the balance sheet amounts. Attach a statement explaining any differences.

Use worldwide amounts determined under California law when completing Schedule M-1. Also, the amounts on Schedule M-2 should equal the total of the amounts reported in Item L, columns (c), (d), and (e), of all the partners’ Schedules K-1 (565). If the sum of all partners’ schedules K-1 do not equal the corresponding M-2 lines attach a statement explaining the difference.

Net Income (Loss) Reconciliation for Certain Partnerships. For taxable years beginning on or after January 1, 2014, the IRS allows partnerships with at least $10 million but less than $50 million in total assets at tax year end to file Schedule M-1 (Form 1065) in place of Schedule M-3 (Form 1065), Parts II and III. However, Schedule M-3 (Form 1065), Part I, is required for these partnerships. For California purposes, the partnership must complete the California Schedule M-1, and attach either of the following:

• A copy of the federal Schedule M-3 (Form 1065) and related attachments to the California Partnership Return of Income.
• A complete copy of the federal return.

The FTB will accept the federal Schedule M-3 (Form 1065) in a spreadsheet format if more convenient.

Schedule K Federal/State Line References

The following chart cross-references the line items on the federal Schedule K (1065) to the appropriate line items on the California Schedule K (565). For more information, see the Specific Line Instructions for Schedule K (565) and Schedule K-1 (565), Partner’s Share of Income, Deductions, Credits, etc, included in this booklet.

Form 565 Codes for Principal Business Activity

This list of principal business activities and their associated codes is designed to classify a business by the type of activity in which it is engaged to facilitate the administration of the California Revenue and Taxation Code. These principal business activity codes are based on the North American Industry Classification System.

Using the list of activities and codes below, determine from which activity the partnership derives the largest percentage of its “total receipts.” Total receipts is defined as the sum of gross receipts or sales plus all other income. If the partnership purchases raw materials and supplies them to a subcontractor to produce the finished product, but retains title to the product, the partnership is considered a manufacturer and must use one of the manufacturing codes (311110-339900).

Once the principal business activity is determined, entries must be made on Form 565, Item K. Enter a description of the principal product or service of the partnership. For the business entity code, enter the six digit code selection from the list below.

Agriculture, Forestry, Fishing, and Hunting

Crop Production

Code 111100 Oilseed & Grain Farming 111210 Vegetable & Melon Farming (including potatoes & yams) 111300 Fruit & Tree Nut Farming 111400 Greenhouse, Nursery, & Floriculture Production 111900 Other Crop Farming (including tobacco, cotton, sugarcane, hay, peanut, sugar beet, & all other crop farming)

Animal Production

112111 Beef Cattle Ranching & Farming 112112 Cattle Feedlots 112120 Dairy Cattle & Milk Production 112210 Hog & Pig Farming 112300 Poultry & Egg Production 112400 Sheep & Goat Farming 112510 Aquaculture (including shellfish & finfish farms & hatcheries) 112900 Other Animal Production

Forestry and Logging

113110 Timber Tract Operations 113210 Forest Nurseries & Gathering of Forest Products 113310 Logging

Fishing, Hunting and Trapping

114110 Fishing 114210 Hunting & Trapping

Support Activities for Agriculture and Forestry

115110 Support Activities for Crop Production (including cotton ginning, soil preparation, planting, & cultivating) 115210 Support Activities for Animal Production (including farriers) 115310 Support Activities for Forestry

Mining

211120 Crude Petroleum Extraction 211130 Natural Gas Extraction 212110 Coal Mining 212200 Metal Ore Mining 212310 Stone Mining & Quarrying 212320 Sand, Gravel, Clay, & Ceramic & Refractory Mineral Mining & Quarrying 212390 Other Nonmetallic Mineral Mining & Quarrying 213110 Support Activities for Mining

Utilities

221100 Electric Power Generation, Transmission & Distribution 221210 Natural Gas Distribution 221300 Water, Sewage, & Other Systems 221500 Combination Gas & Electric

Construction

Construction of Buildings

236110 Residential Building Construction 236200 Nonresidential Building Construction

Heavy and Civil Engineering Construction

237100 Utility System Construction 237210 Land Subdivision 237310 Highway, Street, & Bridge Construction 237990 Other Heavy & Civil Engineering Construction

Specialty Trade Contractors

238100 Foundation, Structure, & Building Exterior Contractors (including framing carpentry, masonry, glass, roofing, & siding) 238210 Electrical Contractors 238220 Plumbing, Heating, & Air-Conditioning Contractors 238290 Other Building Equipment Contractors 238300 Building Finishing Contractors (including drywall, insulation, painting, wallcovering, flooring, tile, & finish carpentry) 238900 Other Specialty Trade Contractors (including site preparation)

Manufacturing

Food Manufacturing

311110 Animal Food Mfg 311200 Grain & Oilseed Milling 311300 Sugar & Confectionery Product Mfg 311400 Fruit & Vegetable Preserving & Specialty Food Mfg 311500 Dairy Product Mfg 311610 Animal Slaughtering and Processing 311710 Seafood Product Preparation & Packaging 311800 Bakeries, Tortilla & Dry Pasta Mfg 311900 Other Food Mfg (including coffee, tea, flavorings, & seasonings)

Beverage and Tobacco Product Manufacturing

312110 Soft Drink & Ice Mfg 312120 Breweries 312130 Wineries 312140 Distilleries 312200 Tobacco Manufacturing

Textile Mills and Textile Product Mills

313000 Textile Mills 314000 Textile Product Mills

Apparel Manufacturing

315100 Apparel Knitting Mills 315210 Cut & Sew Apparel Contractors 315250 Cut & Sew Apparel Mfg (except Contractors) 315990 Apparel Accessories & Other Apparel Mfg

Leather and Allied Product Manufacturing

316110 Leather & Hide Tanning & Finishing 316210 Footwear Mfg (including rubber & plastics) 316990 Other Leather & Allied Product Mfg

Wood Product Manufacturing

321110 Sawmills & Wood Preservation 321210 Veneer, Plywood, & Engineered Wood Product Mfg 321900 Other Wood Product Mfg

Paper Manufacturing

322100 Pulp, Paper, & Paperboard Mills 322200 Converted Paper Product Mfg

Printing and Related Support Activities

323100 Printing & Related Support Activities

Petroleum and Coal Products Manufacturing

324110 Petroleum Refineries (including integrated) 324120 Asphalt Paving, Roofing, & Saturated Materials Mfg 324190 Other Petroleum & Coal Products Mfg

Chemical Manufacturing

325100 Basic Chemical Mfg 325200 Resin, Synthetic Rubber, & Artificial & Synthetic Fibers & Filaments Mfg 325300 Pesticide, Fertilizer, & Other Agricultural Chemical Mfg 325410 Pharmaceutical & Medicine Mfg 325500 Paint, Coating, & Adhesive Mfg 325600 Soap, Cleaning Compound, & Toilet Preparation Mfg 325900 Other Chemical Product & Preparation Mfg

Plastics and Rubber Products Manufacturing

326100 Plastics Product Mfg 326200 Rubber Product Mfg

Nonmetallic Mineral Product Manufacturing

327100 Clay Product & Refractory Mfg 327210 Glass & Glass Product Mfg 327300 Cement & Concrete Product Mfg 327400 Lime & Gypsum Product Mfg 327900 Other Nonmetallic Mineral Product Mfg

Primary Metal Manufacturing

331110 Iron & Steel Mills & Ferroalloy Mfg 331200 Steel Product Mfg from Purchased Steel 331310 Alumina & Aluminum Production & Processing 331400 Nonferrous Metal (except Aluminum) Production & Processing 331500 Foundries

Fabricated Metal Product Manufacturing

332110 Forging & Stamping 332210 Cutlery & Handtool Mfg 332300 Architectural & Structural Metals Mfg 332400 Boiler, Tank, & Shipping Container Mfg 332510 Hardware Mfg 332610 Spring & Wire Product Mfg 332700 Machine Shops; Turned Product; & Screw, Nut, & Bolt Mfg 332810 Coating, Engraving, Heat Treating, & Allied Activities 332900 Other Fabricated Metal Product Mfg

Machinery Manufacturing

333100 Agriculture, Construction, & Mining Machinery Mfg 333200 Industrial Machinery Mfg 333310 Commercial & Service Industry Machinery Mfg 333410 Ventilation, Heating, Air-Conditioning, & Commercial Refrigeration Equipment Mfg 333510 Metalworking Machinery Mfg 333610 Engine, Turbine, & Power Transmission Equipment Mfg 333900 Other General Purpose Machinery Mfg

Computer and Electronic Product Manufacturing

334110 Computer & Peripheral Equipment Mfg 334200 Communications Equipment Mfg 334310 Audio & Video Equipment Mfg 334410 Semiconductor & Other Electronic Component Mfg 334500 Navigational, Measuring, Electromedical, & Control Instruments Mfg 334610 Manufacturing & Reproducing Magnetic & Optical Media

Electrical Equipment, Appliance, and Component Manufacturing

335100 Electric Lighting Equipment Mfg 335200 Household Appliance Mfg 335310 Electrical Equipment Mfg 335900 Other Electrical Equipment & Component Mfg

Transportation Equipment Manufacturing

336100 Motor Vehicle Mfg 336210 Motor Vehicle Body & Trailer Mfg 336300 Motor Vehicle Parts Mfg 336410 Aerospace Product & Parts Mfg 336510 Railroad Rolling Stock Mfg 336610 Ship & Boat Building 336990 Other Transportation Equipment Mfg

Furniture and Related Product Manufacturing

337000 Furniture & Related Product Manufacturing

Miscellaneous Manufacturing

339110 Medical Equipment & Supplies Mfg 339900 Other Miscellaneous Manufacturing

Wholesale Trade

Merchant Wholesalers, Durable Goods

423100 Motor Vehicle & Motor Vehicle Parts & Supplies 423200 Furniture & Home Furnishings 423300 Lumber & Other Construction Materials 423400 Professional & Commercial Equipment & Supplies 423500 Metal & Mineral (except Petroleum) 423600 Household Appliances & Electrical and Electronic Goods 423700 Hardware, Plumbing, & Heating Equipment & Supplies 423800 Machinery, Equipment, & Supplies 423910 Sporting & Recreational Goods & Supplies 423920 Toy & Hobby Goods & Supplies 423930 Recyclable Materials 423940 Jewelry, Watch, Precious Stone, & Precious Metals 423990 Other Miscellaneous Durable Goods

Merchant Wholesalers, Nondurable Goods

424100 Paper & Paper Products 424210 Drugs & Druggists’ Sundries 424300 Apparel, Piece Goods, & Notions 424400 Grocery & Related Products 424500 Farm Product Raw Materials 424600 Chemical & Allied Products 424700 Petroleum & Petroleum Products 424800 Beer, Wine, & Distilled Alcoholic Beverages 424910 Farm Supplies 424920 Book, Periodical, & Newspapers 424930 Flower, Nursery Stock, & Florists’ Supplies 424940 Tobacco Products & Electronic Cigarettes 424950 Paint, Varnish, & Supplies 424990 Other Miscellaneous Nondurable Goods

Wholesale Trade & Brokers

425120 Wholesale Trade Agents & Brokers

Retail Trade

Motor Vehicle and Parts Dealers

441110 New Car Dealers 441120 Used Car Dealers 441210 Recreational Vehicle Dealers 441222 Boat Dealers 441227 Motorcycle, ATV, & All Other Motor Vehicle Dealers 441300 Automotive Parts, Accessories, & Tire Retailers

Building Material and Garden Equipment and Supplies Dealers

444110 Home Centers 444120 Paint & Wallpaper Retailers 444140 Hardware Retailers 444180 Other Building Material Dealers 444200 Lawn & Garden Equipment & Supplies Retailers

Food and Beverage Retailers

445110 Supermarkets & Other Grocery Retailers (except convenience) 445131 Convenience Retailers 445132 Vending Machine Operators 445230 Fruit & Vegetable Retailers 445240 Meat Retailers 445250 Fish & Seafood Retailers 445291 Baked Goods Retailers 445292 Confectionery & Nut Retailers 445298 All Other Specialty Food Retailers 445320 Beer, Wine, & Liquor Retailers

Furniture and Home Furnishings Retailers

449110 Furniture Retailers 449121 Floor Covering Retailers 449122 Window Treatment Retailers 449129 All Other Home Furnishings Retailers

Electronics and Appliance Retailers

449210 Electronics & Appliance Retailers (including computers)

General Merchandise Retailers

455110 Department Stores 455210 Warehouse Clubs, Supercenters, & Other General Merch. Retailers

Health and Personal Care Retailers

456110 Pharmacies & Drug Retailers 456120 Cosmetics, Beauty Supplies, & Perfume Retailers 456130 Optical Goods Retailers 456190 Other Health & Personal Care Retailers

Gasoline Stations & Fuel Dealers

457100 Gasoline Stations (including convenience stores with gas) 457210 Fuel Dealers (including Heating Oil & Liquefied Petroleum)

Clothing and Accessories Retailers

458110 Clothing & Clothing Accessories Retailers 458210 Shoe Retailers 458310 Jewelry Retailers 458320 Luggage & Leather Goods Retailers

Sporting, Hobby, Book, Musical Instrument & Miscellaneous Retailers

459110 Sporting Goods Retailers 459120 Hobby, Toys, & Game Retailers 459130 Sewing, Needlework, & Piece Goods Retailers 459140 Musical Instrument & Supplies Retailers 459210 Book Retailers & News Dealers (including newsstands) 459310 Florists 459410 Office Supplies & Stationery Retailers 459420 Gift, Novelty, & Souvenir Retailers 459510 Used Merchandise Retailers 459910 Pet & Pet Supplies Retailers 459920 Art Dealers 459930 Manufactured (Mobile) Home Dealers 459990 All Other Miscellaneous Retailers (including tobacco, candle, & trophy retailers)

Nonstore Retailers

Nonstore retailers sell all types of merchandise using such methods as Internet, mail-order catalogs, interactive television, or direct sales. These types of Retailers should select the PBA associated with their primary line of products sold. For example, establishments primarily selling prescription and non-prescription drugs, select PBA code 456110 Pharmacies & Drug Retailers.

Transportation and Warehousing

Air, Rail, and Water Transportation

481000 Air Transportation 482110 Rail Transportation 483000 Water Transportation

Truck Transportation

484110 General Freight Trucking, Local 484120 General Freight Trucking, Long-distance 484200 Specialized Freight Trucking

Transit and Ground Passenger Transportation

485110 Urban Transit Systems 485210 Interurban & Rural Bus Transportation 485310 Taxi Service 485320 Limousine Service 485410 School & Employee Bus Transportation 485510 Charter Bus Industry 485990 Other Transit & Ground Passenger Transportation

Pipeline Transportation

486000 Pipeline Transportation

Scenic & Sightseeing Transportation

487000 Scenic & Sightseeing Transportation

Support Activities for Transportation

488100 Support Activities for Air Transportation 488210 Support Activities for Rail Transportation 488300 Support Activities for Water Transportation 488410 Motor Vehicle Towing 488490 Other Support Activities for Road Transportation 488510 Freight Transportation Arrangement 488990 Other Support Activities for Transportation

Couriers and Messengers

492110 Couriers & Express Delivery Services 492210 Local Messengers & Local Delivery

Warehousing and Storage

493100 Warehousing & Storage (except lessors of miniwarehouses & self-storage units)

Information

Motion Picture and Sound Recording Industries

512100 Motion Picture & Video Industries (except video rental) 512200 Sound Recording Industries

Publishing Industries

513110 Newspaper Publishers 513120 Periodical Publishers 513130 Book Publishers 513140 Directory & Mailing List Publishers 513190 Other Publishers 513210 Software Publishers

Broadcasting & Content Providers & Telecommunications

516100 Radio & Television Broadcasting Stations 516210 Media Streaming, Social Networks, & Other Content Providers 517000 Telecommunications (including Wired, Wireless, Satellite, Cable & Other Program Distribution, Resellers, Agents, Other Telecommunications, & Internet Service Providers)

Data Processing, Web Search Portals, & Other Information Services

518210 Computing Infrastructure Providers, Data Processing, Web Hosting & Related Services 519200 Web Search Portals, Libraries, Archives, & Other Info. Services

Finance and Insurance

Depository Credit Intermediation

522110 Commercial Banking 522130 Credit Unions 522180 Saving Institutions & Other Depository Credit Intermediation

Nondepository Credit Intermediation

522210 Credit Card Issuing 522220 Sales Financing 522291 Consumer Lending 522292 Real Estate Credit (including mortgage bankers & originators) 522299 Intl, Secondary Market, & Other Nondepos. Credit Intermediation

Activities Related to Credit Intermediation

522300 Activities Related to Credit Intermediation (including loan brokers, check clearing, & money transmitting)

Securities, Commodity Contracts, and Other Financial Investments and Related Activities

523150 Investment Banking & Securities Intermediation 523160 Commodity Contracts Intermediation 523210 Securities & Commodity Exchanges 523900 Other Financial Investment Activities (including portfolio management & investment advice)

Insurance Carriers and Related Activities

524110 Direct Life, Health, & Medical Insurance Carriers 524120 Direct Insurance (except Life, Health, & Medical) Carriers 524210 Insurance Agencies & Brokerages 524290 Other Insurance Related Activities (including third-party administration of insurance and pension funds)

Funds, Trusts, and Other Financial Vehicles

525100 Insurance & Employee Benefit Funds 525910 Open-End Investment Funds (Form 1120-RIC) 525920 Trusts, Estates, & Agency Accounts 525990 Other Financial Vehicles (including mortgage REITS & closed-end investment funds)

“Offices of Bank Holding Companies” and “Offices of Other Holding Companies” are located under Management of Companies (Holding Companies)

Real Estate and Rental and Leasing

Real Estate

531110 Lessors of Residential Buildings & Dwellings (including equity REITs) 531120 Lessors of Nonresidential Buildings (except Miniwarehouses) (including equity REITs) 531130 Lessors of Miniwarehouses & Self-Storage Units (including equity REITs) 531190 Lessors of Other Real Estate Property (including equity REITs) 531210 Offices of Real Estate Agents & Brokers 531310 Real Estate Property Managers 531320 Offices of Real Estate Appraisers 531390 Other Activities Related to Real Estate

Rental and Leasing Services

532100 Automotive Equipment Rental & Leasing 532210 Consumer Electronics & Appliances Rental 532281 Formal Wear & Costume Rental 532282 Video Tape & Disc Rental 532283 Home Health Equipment Rental 532284 Recreational Goods Rental 532289 All Other Consumer Goods Rental 532310 General Rental Centers 532400 Commercial & Industrial Machinery & Equipment Rental & Leasing

Lessors of Nonfinancial Intangible Assets (except copyrighted works)

533110 Lessors of Nonfinancial Intangible Assets (except copyrighted works)

Professional, Scientific, and Technical Services

Legal Services

541110 Offices of Lawyers 541190 Other Legal Services

Accounting, Tax Preparation, Bookkeeping, and Payroll Services

541211 Offices of Certified Public Accountants 541213 Tax Preparation Services 541214 Payroll Services 541219 Other Accounting Services

Architectural, Engineering, and Related Services

541310 Architectural Services 541320 Landscape Architecture Services 541330 Engineering Services 541340 Drafting Services 541350 Building Inspection Services 541360 Geophysical Surveying & Mapping Services 541370 Surveying & Mapping (except Geophysical) Services 541380 Testing Laboratories & Services

Specialized Design Services

541400 Specialized Design Services (including interior, industrial, graphic, & fashion design)

Computer Systems Design and Related Services

541511 Custom Computer Programming Services 541512 Computer Systems Design Services 541513 Computer Facilities Management Services 541519 Other Computer Related Services

Other Professional, Scientific, and Technical Services

541600 Management, Scientific, & Technical Consulting Services 541700 Scientific Research & Development Services 541800 Advertising, Public Relations, & Related Services 541910 Marketing Research & Public Opinion Polling 541920 Photographic Services 541930 Translation & Interpretation Services 541940 Veterinary Services 541990 All Other Professional, Scientific, & Technical Services

Management of Companies (Holding Companies)

551111 Offices of Bank Holding Companies 551112 Offices of Other Holding Companies

Administrative and Support and Waste Management and Remediation Services

Administrative and Support Services

561110 Office Administrative Services 561210 Facilities Support Services 561300 Employment Services 561410 Document Preparation Services 561420 Telephone Call Centers 561430 Business Service Centers (including private mail centers & copy shops) 561440 Collection Agencies 561450 Credit Bureaus 561490 Other Business Support Services (including repossession services, court reporting, & stenotype services) 561500 Travel Arrangement & Reservation Services 561600 Investigation & Security Services 561710 Exterminating & Pest Control Services 561720 Janitorial Services 561730 Landscaping Services 561740 Carpet & Upholstery Cleaning Services 561790 Other Services to Buildings & Dwellings 561900 Other Support Services (including packaging & labeling services, & convention & trade show organizers)

Waste Management and Remediation Services

562000 Waste Management & Remediation Services

Educational Services

611000 Educational Services (including schools, colleges, & universities)

Health Care and Social Assistance

Offices of Physicians and Dentists

621111 Offices of Physicians (except mental health specialists) 621112 Offices of Physicians, Mental Health Specialists 621210 Offices of Dentists

Offices of Other Health Practitioners

621310 Offices of Chiropractors 621320 Offices of Optometrists 621330 Offices of Mental Health Practitioners (except Physicians) 621340 Offices of Physical, Occupational & Speech Therapists, & Audiologists 621391 Offices of Podiatrists 621399 Offices of All Other Miscellaneous Health Practitioners

Outpatient Care Centers

621410 Family Planning Centers 621420 Outpatient Mental Health & Substance Abuse Centers 621491 HMO Medical Centers 621492 Kidney Dialysis Centers 621493 Freestanding Ambulatory Surgical & Emergency Centers 621498 All Other Outpatient Care Centers

Medical and Diagnostic Laboratories

621510 Medical & Diagnostic Laboratories

Home Health Care Services

621610 Home Health Care Services

Other Ambulatory Health Care Services

621900 Other Ambulatory Health Care Services (including ambulance services & blood & organ banks)

Hospitals

622000 Hospitals

Nursing and Residential Care Facilities

623000 Nursing & Residential Care Facilities

Social Assistance

624100 Individual & Family Services 624200 Community Food & Housing, & Emergency & Other Relief Services 624310 Vocational Rehabilitation Services 624410 Childcare Services

Arts, Entertainment, and Recreation

Performing Arts, Spectator Sports, and Related Industries

711100 Performing Arts Companies 711210 Spectator Sports (including sports clubs & racetracks) 711300 Promoters of Performing Arts, Sports, & Similar Events 711410 Agents & Managers for Artists, Athletes, Entertainers, & Other Public Figures 711510 Independent Artists, Writers, & Performers

Museums, Historical Sites, and Similar Institutions

712100 Museums, Historical Sites, & Similar Institutions

Amusement, Gambling, and Recreation Industries

713100 Amusement Parks & Arcades 713200 Gambling Industries 713900 Other Amusement & Recreation Industries (including golf courses, skiing facilities, marinas, fitness centers, & bowling centers)

Accommodation and Food Services

Accommodation

721110 Hotels (except Casino Hotels) & Motels 721120 Casino Hotels 721191 Bed & Breakfast Inns 721199 All Other Traveler Accommodation 721210 RV (Recreational Vehicle) Parks & Recreational Camps 721310 Rooming & Boarding Houses Dormitories, & Workers’ Camps

Food Services and Drinking Places

722300 Special Food Services (including food service contractors & caterers) 722410 Drinking Places (Alcoholic Beverages) 722511 Full-Service Restaurants 722513 Limited-Service Restaurants 722514 Cafeterias, Grill buffets, & Buffets 722515 Snack & Non-alcoholic Beverage Bars

Other Services

Repair and Maintenance

811110 Automotive Mechanical & Electrical Repair & Maintenance 811120 Automotive Body, Paint, Interior, & Glass Repair 811190 Other Automotive Repair & Maintenance (including oil change & lubrication shops & car washes) 811210 Electronic & Precision Equipment Repair & Maintenance 811310 Commercial & Industrial Machinery & Equipment (except Automotive & Electronic) Repair & Maintenance 811410 Home & Garden Equipment & Appliance Repair & Maintenance 811420 Reupholstery & Furniture Repair 811430 Footwear & Leather Goods Repair 811490 Other Personal & Household Goods Repair & Maintenance

Personal and Laundry Services

812111 Barber Shops 812112 Beauty Salons 812113 Nail Salons 812190 Other Personal Care Services (including diet & weight reducing centers) 812210 Funeral Homes & Funeral Services 812220 Cemeteries & Crematories 812310 Coin-Operated Laundries & Drycleaners 812320 Drycleaning & Laundry Services (except Coin-Operated) 812330 Linen & Uniform Supply 812910 Pet Care (except Veterinary) Services 812920 Photofinishing 812930 Parking Lots & Garages 812990 All Other Personal Services

Religious, Grantmaking, Civic, Professional, and Similar Organizations

813000 Religious, Grantmaking, Civic, Professional, & Similar Organizations (including condominium and homeowners associations)

Other

999999 Unclassified Establishments (unable to classify)

How to Get California Tax Information

Automated Phone Service

Use our automated service to get recorded answers to many of your questions about California taxes and to order California business entity tax forms and publications. This service is available in English and Spanish to callers with touch-tone telephones. Have paper and pencil ready to take notes.

Telephone: 800-338-0505 from within the United States 916-845-6500 from outside the United States

General Phone Service

Telephone assistance is available year-round from 8 a.m. until 5 p.m. Monday through Friday, except holidays. Hours subject to change.

Telephone: 800-852-5711 from within the United States 916-845-6500 from outside the United States California Relay Services: 711 or 800-735-2929 for persons with hearing or speaking limitations. IRS: 800-829-4933 call the IRS for federal tax questions

Asistencia En Español:

Asistencia telefónica está disponible durante todo el año desde las 8 a.m. hasta las 5 PM de lunes a viernes, excepto días feriados. Las horas están sujetas a cambios.

Teléfono: 800-852-5711 dentro de los Estados Unidos 916-845-6500 fuera de los Estados Unidos Servicio de Retransmisión de California: 711 o 800-735-2929 para personas con limitaciones auditivas o del habla. IRS: 800-829-4933 para preguntas sobre impuestos federales

Letters

If you write to us, be sure your letter includes your FEIN, California SOS file number, your daytime and evening telephone numbers, and a copy of the notice. Send your letter to:

Mail Franchise Tax Board PO Box 942857 Sacramento, CA 94257-0500

We will respond to your letter within ten weeks. In some cases, we may need to call you for additional information. Do not attach your letter to your California tax return.

Where to Get Tax Forms and Publications

By Internet

You can download, view, and print California tax forms and publications at ftb.ca.gov/forms.

Our California Tax Service Center website offers California business tax information and forms for the BOE, CDTFA, EDD, FTB, and IRS at taxes.ca.gov.

You can also download, view, and print federal forms and publications at irs.gov.

By phone

Call our automated phone service at the number listed on this page and follow the recorded instructions.

By mail

Allow two weeks to receive your order. If you live outside California, allow three weeks to receive your order. Write to:

Mail Tax Forms Request Unit MS D120 Franchise Tax Board PO Box 307 Rancho Cordova, CA 95741-0307

In person

Many post offices and libraries provide free California tax booklets during the filing season.

Employees at libraries and post offices cannot provide tax information or assistance.

Your Rights As A Taxpayer

The FTB’s goals include making certain that your rights are protected so that you have the highest confidence in the integrity, efficiency, and fairness of our state tax system. For more information get FTB 4058, California Taxpayers’ Bill of Rights – Information for Taxpayers. See “Where To Get Income Tax Forms and Publications”. To request FTB 4058 by phone, enter code 943.

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