Table 2, Part B, reflects the member’s share of nonbusiness income from real and tangible property wholly sourced or allocable to California. This is added to apportioned business income and nonbusiness intangible income allocated to California and becomes a part of California taxable income. Portfolio income (loss), referred to as “portfolio” income (loss) in these instructions, is generally not subject to the passive activity limitations of IRC Section 469. Portfolio income includes interest, dividend, royalty income and gain or loss on the sale of property held for investment. Generally, amounts reported on line 8, line 9, and line 11a, are gains or losses attributable to the disposition of property held for investment and are, therefore, classified as portfolio income (loss). However, if an amount reported on line 8, line 9, or line 11a, column (d), is a passive activity amount, the LLC should identify the amount.

Line 22 – More than one activity for passive activity purposes

Amounts entered on this line are the deductions that are clearly and directly allocable to portfolio income (other than investment interest expense and expenses from a REMIC). If you have an amount on Schedule K-1 (568), line 13e, column (c), enter this amount on Schedule CA (540), Part II, line 21 or on Schedule CA (540NR), Part III, line 21. If any of the line 13e amounts should not be reported on Schedule CA (540 or 540NR), the LLC should identify these amounts. The LLC will provide information on your share of the IRC Section 179 deduction and of the cost of the LLC’s IRC Section 179 property so that you can compute this limitation. Your IRC Section 179 deduction is also limited to your taxable income from all of your trades or businesses.

Line 11a – Other Portfolio Income (Loss)

The LLC will complete Table 2, Parts A to C for unitary members and Table 2, Part C for all non-unitary members. Table 2 does not need to be completed for non-unitary individuals. If you have an amount on Schedule K-1 (568), line 6, column (c), report this amount on Schedule CA (540), Part I, Section A, line 3, or on Schedule CA (540NR), Part II, Section A, line 3, column B or column C, whichever is applicable.

Questions and Items

• The different items of business income as apportioned to CA are entered in column (e).
• If applicable, the LLC will attach a schedule for line 2 to identify such amounts.
• Use these amounts, if any, to adjust line 20a and line 20b to determine your total investment income and total investment expenses from this LLC.
• When the partnership has more than one activity for at-risk purposes, it will check this box and attach a statement.
• However, do not combine the prior-year amounts with any amounts shown on this Schedule K-1 (568) to get a net figure.
• Federal and California law allows spouses that are the sole owners of an eligible business entity (including an LLC) to be treated as two owners or one owner, for purposes of applying rules to determine the classification of that entity for tax purposes.

If there is an amount on Schedule K-1 (568), line 4c, Total guaranteed payments, column (c), enter this amount on Schedule CA (540), Part I, Section B, line 8z, or on Schedule CA (540NR), Part II, Section B, line 8z, column B or column C, whichever is applicable. If this is a passive activity for the member, then the member must also complete the passive activity form. Use federal Form 8582, Passive Activity Loss Limitations, for federal purposes and form FTB 3801 for California purposes. K – Beginning in taxable year 2021, all LLCs must report members’ capital accounts using the tax basis method on California Schedule K-1 (568). 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, get the Partner’s Instructions for federal Schedule K-1 (Form 1065).

Inconsistent Treatment of Items

California does not conform to the deduction for qualified business income of pass-through entities under IRC Section 199A. The income data contained in Table 1 is not reflected in column (e) of Schedule K-1 (568) because the source of such income must be determined at the member level. The member must make a determination whether the nonbusiness intangible income is from a California source. When the partnership has more than one activity for at-risk purposes, it will check this box and attach a statement. For more information, get the instructions for federal Schedule K-1 (Form 1065), line 22.

• Combine these totals with investment income and expenses from all other sources to determine the amount to enter on form FTB 3526, line 1.
• If you have credits that are passive activity credits, complete form FTB 3801-CR (corporations use form FTB 3802), in addition to the credit forms referenced.
• You cannot claim the low-income housing credit on any qualified low‑income housing project for which any person was allowed any benefit under Section 502 of the federal Tax Reform Act of 1986.
• The member must determine the source of such income by applying the rules described above.
• I – If you have contributed property with a built-in gain or loss during the tax year, the Limited Liability Company will check the “Yes” box and will attach a statement.

The LLC can include on line 15f your distributive share of net income taxes paid to other states by the LLC. Subject to the limitations of R&TC Section 18006, members may claim a credit against their individual tax for net income taxes paid by the LLC to another state. The amount of tax paid is required to be supported by a copy of the return filed with the other state and evidence of the payment of the tax. This line is used to report information you need to compute pass- through credits and other items that are not includable on line 15a through line 15d but are related to the trade or business activity. The LLC should provide a schedule and/or statement explaining any items.

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

• K – Beginning in taxable year 2021, all LLCs must report members’ capital accounts using the tax basis method on California Schedule K-1 (568).
• Information from the Schedule K‑1 (568) should be used to complete your California tax return.
• For more information, see the instructions for federal Schedule K-1 (Form 1065).
• Portfolio income includes interest, dividend, royalty income and gain or loss on the sale of property held for investment.
• For more information about unitary business principles, get FTB Pub.
• Portfolio income (loss), referred to as “portfolio” income (loss) in these instructions, is generally not subject to the passive activity limitations of IRC Section 469.

For more information about unitary business principles, get FTB Pub. The member’s share of the LLC’s business income is entered on Table 2, Part A. recording transactions The member then adds that income to its own business income and apportions the combined business income using the revised factor described below. If the LLC paid or accrued interest debts it incurred to buy or hold investment property, the amount of interest you can deduct may be limited. For more information and the special provisions that apply to investment interest expense, get form FTB 3526, Investment Interest Expense Deduction, and federal Pub. The LLC will provide a schedule that shows which contributions were subject to the 50 percent, 30 percent, and 20 percent limitations.

The Bookkeeping for Veterinarians Franchise Tax Board (FTB) uses information from form FTB 4197 for reports required by the California Legislature. However, the passive activity credit limitations of IRC Section 469 may limit the amount of credit. Credits from passive activities are generally limited to tax attributable to passive activities. If, in addition to this passive activity income, you have a passive activity loss from this LLC or from any other source, report the income on form FTB 3801 or form FTB 3802.