Form 568 Instructions Details

Do you own a business in California? If so, it's important to understand the 2016 Ca Form 568. This document is used to report your business income and expenses to the state of California, and it's due by May 15th. In this blog post, we'll explain what you need to know about the 2016 Ca Form 568. We'll also provide a simple guide on how to complete the form. So if you're looking for information on the 2016 Ca Form 568, you've come to the right place! Stay tuned for our next post, where we'll discuss some of the common mistakes businesses make when completing this form.

This figure contains details about 2016 ca form 568. Prior to fill out the form, it is definitely worth reviewing more about it.

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Form Name2016 Ca Form 568
Form Length64 pages
Fillable?No
Fillable fields0
Avg. time to fill out16 min
Other namesca form 568, form 568 instructions, form 568, form ca 568 instructions

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CALIFORNIA

FORMS & INSTRUCTIONS

Members of the Franchise Tax Board

Betty T. Yee, Chair

George Runner, Member

Keely Bosler, Member

568

2018

Limited Liability Company Tax Booklet

This booklet contains:

Form 568, Limited Liability Company Return of Income

FTB 3537 (LLC), Payment for Automatic Extension for LLCs

FTB 3522, LLC Tax Voucher

FTB 3536 (LLC), Estimated Fee for LLCs

FTB 3832, Limited Liability Company Nonresident Members’ Consent

FTB 3885L, Depreciation and Amortization Schedule D (568), Capital Gain or Loss

Schedule EO (568), Pass-Through Entity Ownership

Schedule K-1 (568), Member’s Share of Income, Deductions, Credits, etc.

For more information regarding e-ile, go to ftb.ca.gov and search for business eile.

Table of Contents

What’s New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Speciic Instructions for Form 568 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Instructions for Schedule IW, LLC Income Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Instructions for Schedule K (568) and Schedule K-1 (568) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Schedule K Federal/State Line References Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Form 568 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Schedule IW, Limited Liability Company (LLC) Income Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Schedule K-1 (568) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Member’s Instructions for Schedule K-1 (568) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Schedule EO (568) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Instructions for Schedule EO (568) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Schedule D (568). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Instructions for Schedule D (568) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 FTB 3885L and Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 FTB 3832 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Instructions for FTB 3832 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 FTB 3537 (LLC) and Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 FTB 3522 and Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 FTB 3536 (LLC) and Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Codes for Principal Business Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 How to Get California Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Business e-file

Business e-ile is available for the following returns:

Form 568, Limited Liability Company Return of Income

Form 565, Partnership Return of Income

Form 100, California Corporation Franchise or Income Tax Return, including combined reports

Form 100W, California Corporation Franchise or Income Tax Return – Water’s-Edge Filers, including combined reports

Form 100S, California S Corporation Franchise or Income Tax Return

Form 100X, Amended Corporation Franchise or Income Tax Return

Form 199, California Exempt Organization Annual Information Return

For more information, go to ftb.ca.gov and search for business eile.

Page 2 Form 568 Booklet 2018

2018 Instructions for Form 568, Limited Liability Company 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 or 540NR), and the Business Entity tax booklets.

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.

What’s New

Federal Tax Reform – The Tax Cuts and Jobs Act (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 speciied date of January 1, 2015, with modiications.

New Partnership Audit Regime – For federal purposes, the Bipartisan Budget Act of 2015 replaced the Tax Equity and Fiscal Responsibility Act 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 Internal Revenue Service (IRS), to the Franchise Tax Board (FTB), for the reviewed year within six months after the date of each inal federal determination, and will generally be liable for the tax due.

New Deduction for Pass-Through Income – For tax years beginning after December 31, 2017, and before January 1, 2026, California does not conform to the TCJA additions of the IRC Sec. 199A, Qualiied Business Income.

Deferred Foreign Income – Under IRC Section 965, U.S. shareholders of speciied foreign corporations may have to include certain deferred foreign income on its income tax return. California does not conform. If you reported IRC 965 inclusions and deductions on Form 1065, U.S. Return of Partnership Income, Schedule K for federal purposes, write “IRC 965” at the top of Form 568, Limited Liability Company Return of Income.

Global Intangible Low-Taxed Income (GILTI) under section 951A – Under federal law, U.S. shareholders of controlled foreign corporations must include GILTI in taxable income every year. California does not conform.

New Employment Credit – The sunset date for the New Employment Credit is extended until taxable years beginning before January 1, 2026. For more information, go to ftb.ca.gov and search for nec or get form FTB 3554, New Employment Credit.

California Competes Tax Credit – The sunset date for the California Competes Tax Credit is extended until taxable years beginning before January 1, 2030. For more information, go to the GO-Biz website at business.ca.gov or ftb.ca.gov and search for ca competes or get form FTB 3531, California Competes Tax Credit.

Qualiied 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 qualiied 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.

Like-Kind Exchanges – The TCJA amended IRC Section 1031 limiting its application to real property that is not primarily held for sale. Additionally, under the TCJA, exchanges of personal property and intangible property do not qualify for non-recognition of gain or loss as like-kind exchanges. California does not conform to the amendments under the TCJA. For California purposes, IRC Section 1031 as of January 1, 2015, applies.

Schedule K-1 (1065-B) and its instructions – Public Law 114-74, Title XI, sec. 1101(b) repealed the electing large partnership rules for partnership tax years beginning after 2017. As a result, Schedule K-1 (Form 1065-B) and its instructions will be obsolete after 2017.

Technical Terminations – The TCJA repealed the IRC Section 708(b)(1)

(B)rule providing for technical terminations of partnerships. California law does not conform to the federal repeal of the technical terminations of a partnership. For California purposes, two short period returns are still required.

Depreciation Limitation – California does not conform to the TCJA modiication to depreciation limitations on luxury automobiles (IRC Section 280F). See FTB 3885L, Depreciation and Amortization, for more information.

General Information

AImportant Information

LLCs Classiied as Partnerships File Form 568

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

Partnership ile Form 568, Limited Liability Company Return of Income.

General corporation ile Form 100, California Corporation Franchise or Income tax Return.

S corporation ile Form 100S, California S Corporation Franchise or Income Tax Return.

Disregarded entities, see General Information S, Check-the-Box Regulations.

LLCs classiied as partnerships should not ile Form 565, Partnership Return of Income.

The LLC will ile Form 565 only if it meets an exception. For more information, see the exceptions in General Information D, Who Must File.

Paperless Schedule K-1Effective January 1, 2018, the FTB discontinued the Paperless Schedules K-1 (568) program due to the increasing support of our business e-ile program. For more information regarding the California business e-ile program, go to ftb.ca.gov and search for business eile.

Extension Due Date – For taxable years beginning on or after

January 1, 2017, the extension period for a limited liability company (LLC) classiied as a partnership to ile its tax return has changed from six months to seven months. See General Information E, When and Where to File, for more information.

Return Due Date Change – For taxable years beginning on or after

January 1, 2016, the due date for an LLC classiied as a partnership to ile its tax return changed to the 15th day of the 3rd month following the close of the taxable year. For the return due date for a single member LLC (SMLLC), see General Information E, When and Where to File.

Information Return Due Date Change – Beginning on or after January 1, 2016, for withholding on foreign (non-U.S.) partners or members, the due date

to ile Form 592-F, Foreign Partner or Member Annual Return, changed to the 15th day of the 3rd month following the close of the partnership’s or LLC’s taxable year. The due date to provide Form 592-B, Resident and Nonresident Withholding Tax Statement, to each foreign (non-U.S.) partner or member changed to the 15th day of the 3rd month following the close of the partnership’s or LLC’s taxable year. Get Form 592-F and Form 592-B for more information.

Penalty for Non-Registered, Suspended, or Forfeited LLC – For taxable years beginning January 1, 2013, the FTB will assess a $2,000 penalty against a non-qualiied foreign LLC that is doing business within the state while not registered to do business within the state, or while suspended or forfeited.

Business e-ileFor taxable years beginning on or after January 1, 2014, California law requires any business entity that iles an original or amended tax return that is prepared using tax preparation software to electronically ile (e-ile) their tax return with the FTB. For more information, go to ftb.ca.gov and search for business eile.

Form 568 Booklet 2018 Page 3

Web Pay – LLCs can make payments online using Web Pay for Businesses. LLCs 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 ile form FTB 3588, Payment Voucher for LLC e-iled Returns.

Credit Card – LLCs can use a Discover, MasterCard, Visa, or American Express card to pay business taxes. Go to oficialpayments.com.

Oficial Payments Corp. charges a convenience fee for using this service. Do not ile form FTB 3588.

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

Payments and Credits Applied to Use Tax – For taxable years beginning on or after January 1, 2015, if an LLC includes use tax on its income tax return, payments and credits will be applied to use tax irst, then towards franchise or income tax, interest, and penalties. For more information, see General Information W, California Use Tax and Speciic Instructions.

Like-Kind Exchanges – For taxable years beginning on or after

January 1, 2014, California requires taxpayers who exchange property located in California for like-kind property located outside of California under IRC Section 1031, to ile 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:

(A)A corporation that is a taxpayer.

(B)A combined reporting group that includes at least one taxpayer member.

(C)A nonunitary division of a member of a combined reporting group that includes at least one taxpayer member.

(D)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.

(E)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.

(F)A sole proprietorship that is operated by an individual who is not a resident of California.

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

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 inancial or pecuniary gain or proit in California or if any of the following conditions are satisied:

yThe taxpayer is organized or commercially domiciled in California.

yThe sales as deined 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 $583,867 or 25% of the taxpayer’s total sales.

yThe real property and tangible personal property of the taxpayer in California exceed the lesser of $58,387 or 25% of the taxpayer’s total real property and tangible personal property.

yThe amount paid in California by the taxpayer for compensation, as deined in R&TC Section 25120(c), exceeds the lesser of $58,387 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 member’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 Identiication Number (TIN), before iling 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.

Suspension/Forfeiture – LLCs are suspended or forfeited for failure to ile or failure to pay. See General Information V, Suspension/Forfeiture, for more information.

Estimated Fee for LLCs

The LLC must estimate the fee it will owe for the year and make an estimated fee payment by the 15th day of the 6th month of the current taxable year. LLCs will use form FTB 3536, Estimated Fee for LLCs, to remit the estimated fee. A penalty will apply if the LLC’s estimated fee payment is less than the fee owed for the year. The penalty is equal to 10% of the amount of the LLC fee owed for the year over the amount of the timely estimated fee payment. A penalty will not be imposed if the estimated fee paid by the due date is equal to or greater than the total amount of the fee of the LLC for the preceding taxable year.

The LLC fee remains due and payable by the due date of the LLC’s return. LLCs will use form FTB 3536 to pay by the due date of the LLC’s return, any amount of LLC fee owed that was not paid as a timely estimated fee payment. If the taxable year of the LLC ends prior to the 15th day of the 6th month of the taxable year, no estimated fee payment is due, and the LLC fee is due on the due date of the LLC’s return. See General Information F, Limited Liability Company Tax and Fee, for more information.

LLC Fee

The LLC fee is based on total California source income rather than on worldwide total income. For more information, see Schedule IW, LLC Income Worksheet Instructions, included in this booklet.

Series LLC

A series LLC is a single LLC that has separate allocations of assets each within its own series. When iling form FTB 3522, LLC Tax Voucher, write “Series LLC # ___” after the name for each series. In addition, write “Series LLC” in red on the top right margin of the voucher. Only the irst series to pay tax or ile a return may use a California Secretary of State (SOS) ile number. On all other series, enter zeros for the entity identiication number on the irst voucher and we will assign a number and notify each series. Get FTB 3556 LLC MEO, Limited Liability Company Filing Information, for more information.

Paid Preparer Authorization

An LLC can designate a paid preparer to discuss the tax return with the FTB. For more information see General Information M, Signatures.

Business Entity Name and Identiication Number

In order to expedite processing, be sure to use the business entity name as it appears with the California SOS and a valid California identiication number.

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 due date of the return or from the date iled, whichever is later. However, the statute is extended in situations in which an individual or a business entity is under examination by the IRS. For more information concerning the extended statute of limitations, 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, members should keep

Page 4 Form 568 Booklet 2018

records substantiating their basis in an LLC and LLCs should keep records to igure the basis of its assets.

Federal/State Differences

For LLCs classiied as partnerships, 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:

The Federal TCJA of 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 speciied date of January 1, 2015, with modiications. The following is a non-exhaustive list of the TCJA changes:

yCalifornia does not conform to the modiications to like kind exchanges.

yCalifornia does not conform to the expanded deinition of IRC Section

179 property for certain depreciable tangible personal property related to furnishing lodging and for qualiied real property for improvements to nonresidential real property.

yCalifornia does not conform to the deferral and exclusion of capital gains reinvested or invested in qualiied opportunity zone funds.

yCalifornia does not conform to the exclusion of a patent, invention, model or design, and secret formula or process from the deinition of capital asset.

yCalifornia does not conform to federal expansion of those rules for taxpayers that can use the cash method of accounting.

yCalifornia does not conform to the federal repeal of the technical terminations of partnerships.

yCalifornia does not conform to the new federal deduction for qualiied business income of pass-through entities under IRC section 199A.

yCalifornia 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.

yCalifornia does not conform to the modiication of the deinition of substantial built-in loss in the case of the transfer of partnership interests.

yCalifornia does not conform to charitable contribution and foreign taxes being taken into account in determining limitation on allowance of partner’s share of loss.

yCalifornia does not conform to IRC Section 951A, which relates to global intangible low-taxed income.

yCalifornia does not conform to IRC Section 965, which relates to treatment of deferred foreign income.

yThe change to IRC Section 163(j), which limits business interest deduction to 30%.

Additional federal/state differences may occur for the following:

yCalifornia does not conform to the qualiied small business stock deferral and gain exclusion under IRC Section 1045 and IRC Section 1202.

yIRC Section 168(k) relating to the depreciation deduction for certain assets.

yCalifornia 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.

yAn $800 annual tax is generally imposed on limited partnerships (LPs), LLCs, limited liability partnerships (LLPs), and real estate mortgage investment conduits (REMICs) that are partnerships or classiied as partnerships for tax purposes.

yDistributions to certain nonresident partners are subject to withholding for California tax.

yDeductions for taxes paid to other states are not allowed.

yCalifornia follows federal law by requiring partnerships to use a required taxable year. However, California does not conform to the federal required payment provision.

yCalifornia law has speciic provisions concerning the distributive share of partnership taxable income allocable to California, with special apportionment formulas for professional partnerships.

yCalifornia law modiies the federal deinitions for unrealized receivables and substantially appreciated inventory items.

yCalifornia has not conformed to the provisions relating to the Tax Equity and Fiscal Responsibility Act (TEFRA).

yCalifornia has not adopted the federal deinition of small partnerships, as deined in IRC Section 6231.

This list is not intended to be all-inclusive of the federal and state differences. For more information, consult California’s R&TC.

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 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 irst taxable year.

LLC Taxed as a Corporation

If an LLC elects to be taxed as a corporation for federal tax purposes, the LLC must ile Forms 100/100S/100-ES/100W, form FTB 3539, and/or form FTB 3586 and enter the California corporation number, FEIN, and California SOS ile number, if applicable, in the space provided. The FTB will (1) assign an identiication number to an LLC that iles as a corporation, and (2) notify the LLC with the identiication number upon receipt of the irst estimated tax payment, tax payment, or the irst tax return. The LLC will be subject to the applicable provisions of the Corporation Tax Law and should be considered a corporation for purpose of all instructions unless otherwise indicated.

Conversion to an LLC

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

California Disclosure Obligations

If the LLC was involved in a reportable transaction, including a listed transaction, the LLC may have a disclosure requirement. Attach the federal Form 8886, Reportable Transaction Disclosure Statement, to the back of the California return along with any other supporting schedules. If this is the irst time the reportable transaction is disclosed on the return, send a duplicate copy of the federal Form 8886 to the address on this page. The FTB may impose penalties if the LLC fails to ile 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.

TAX SHELTER FILING ATSU 398 MS F385 FRANCHISE TAX BOARD PO BOX 1673 SACRAMENTO CA 95812-9900

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

Claim of Right

If the LLC had to repay an amount that was included in income in an earlier year, under a claim of right, the LLC may be able to deduct the amount repaid from its income for the year in which it was repaid. Or, if the amount the LLC repaid is more than $3,000, the LLC 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 Publication 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.

BIntroduction

LLCs combine traditional corporate and partnership characteristics. LLC members are afforded all of the following:

yLimited liability with the extent of a member’s liability limited to the member’s equity investment.

yFlexible management alternatives.

yLiberal membership qualiication requirements.

Form 568 Booklet 2018 Page 5

LLCs classiied as partnerships for tax purposes generally will determine their California income, deductions, and credits under the Personal Income Tax Law. They will be subject to an annual tax as well as the LLC fee based on total California income. See General Information F, Limited Liability Company Tax and Fee, and Schedule IW instructions included in this booklet, for more information.

LLCs organized in California are vested with all the rights and powers enjoyed by a natural person in carrying out business affairs. However, California law does not allow the formation or registration of LLCs (foreign or domestic)

in California to render any type of professional service for which a license, certiication, or registration is required under the Business and Professions Code or the Chiropractic Act, with the exception of insurance agents and insurance brokers.

California law requires LLCs not organized in the state of California to register with the California SOS before entering into any intrastate business in California. The laws of the state or foreign country in which the LLC is organized generally govern the internal affairs of the LLC. The California SOS may not deny recognition of an LLC because the laws of the organization’s home state or foreign country differ from California’s laws, except in the case of professional service LLCs, which are not allowed to register as LLCs in California.

For more information about organizing and registering an LLC, contact:

BUSINESS ENTITIES SECTION CALIFORNIA SECRETARY OF STATE PO BOX 944228

SACRAMENTO CA 94244-2280 Telephone: 916.657.5448

or go to sos.ca.gov.

CPurpose

Use Form 568 to:

yDetermine the amount of the LLC fee (including a disregarded entity’s fee) based on total California income.

yReport the LLC fee.

yReport the annual tax.

yReport and pay any nonconsenting nonresident members’ tax.

yReport income, deductions, gains, losses, etc., from the operation of a multiple member LLC that has elected to be classiied as a partnership.

Use Form 568 as the return for calendar year 2018 or any iscal year beginning in 2018.

DWho Must File

An LLC may be classiied for tax purposes as a partnership, a corporation, or a disregarded entity. The LLC should ile the appropriate California return.

Form 568 must be iled by every LLC that is not taxable as a corporation if any of the following apply:

yThe LLC is doing business in California.

yThe LLC is organized in California.

yThe LLC is organized in another state or foreign country, but registered with the California SOS.

yThe LLC has income from California sources (Nonregistered foreign LLCs, see Exceptions to Filing Form 568, below).

An LLC is not required to ile a tax return and is not subject to the annual tax and LLC fee if both the following are true:

yThe LLC’s taxable year is 15 days or less.

yThe LLC did not conduct business in the state during the 15 day period.

Registration

LLCs that are formed in California, are required to ile articles of organization with the California SOS before doing business in this state.

LLCs organized under the laws of another state or foreign country are required to register with the California SOS before entering into intrastate business in California.

Nonregistered foreign (i.e., not organized in California) LLCs that are members of an LLC doing business in California or general partners in a limited partnership doing business in California are considered doing business in California.

Regardless of where the trade or business of the LLC is primarily conducted, an LLC is considered to be doing business in California if any of its members, managers, or other agents are conducting business in California on behalf of the LLC.

Exceptions to Filing Form 568:

yThe LLC elected to be taxed as a corporation for federal tax purposes.

yThe LLC is a single member limited liability company (SMLLC) that was treated as an association taxable as a corporation prior to January 1, 1997, for California tax purposes, and did not elect to change that tax treatment in the current taxable year.

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

yA single-member, nonregistered foreign (i.e., not organized in California) LLC classiied as disregarded which is not doing business in California, need not ile Form 565 or Form 568.

LLCs classiied as a general corporation ile Form 100, California Corporation Franchise or Income Tax Return. LLCs classiied as an S corporation ile Form 100S, California S Corporation Franchise or Income Tax Return.

For LLCs classiied as disregarded entities, see General Information S, Check-the-Box Regulations.

The LLC is still required to ile Form 568 if the LLC is registered in California even if both of the following apply:

yThe LLC is not actively doing business in California.

yThe LLC does not have California source income.

The LLC’s iling requirement will be satisied by doing all of the following:

1.Completing Form 568 with all supplemental schedules.

2.Completing and attaching California Schedules K-1 (568) for members with California addresses.

3.Writing “SB 1106 Filing” in red at the top of Form 568, Side 1.

4.Entering the total number of members in Question K on Side 2 of the Form 568.

Certain publicly traded partnerships treated as corporations under IRC Section 7704 must ile Form 100.

A resident member of an out-of-state LLC taxed as a partnership not required to ile Form 568, may be required to furnish a copy of federal Form 1065, U.S. Return of Partnership Income, to substantiate the member’s share of LLC income or loss.

E When and Where to File

An LLC must ile Form 568, pay any nonconsenting nonresident members’ tax, and pay any amount of the LLC fee owed that was not paid as an estimated fee with form FTB 3536, by the original due date of the LLC’s return.

For LLCs classiied as partnerships, the original due date of the return is the 15th day of the 3rd month following the close of the taxable year.

SMLLCs

yFor SMLLCs owned by pass-through entities (S corporations, partnerships, and LLCs classiied as partnerships), the original due date of the return is the 15th day of the 3rd month following the close of the taxable year.

yFor all other SMLLCs, the original due date of the return is the 15th day of the 4th month following the close of the taxable year of the owner.

For more information, see R&TC Section 18633.5.

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

PAYMENTS

yMail Form 568 with payment to:

FRANCHISE TAX BOARD PO BOX 942857 SACRAMENTO CA 94257-0501

yE-Filed returns: Pay electronically using Web Pay, credit card, EFW, or mail form FTB 3588, Payment Voucher for LLC e-iled Returns, with payment to:

FRANCHISE TAX BOARD PO BOX 942857 SACRAMENTO CA 94257-0531

Page 6 Form 568 Booklet 2018

Using black or blue ink, make the check or money order payable to the

Franchise Tax Board.” Write the LLC’s California SOS ile number, FEIN, and “2018 Form 568” on the check or money order.

Note: The California SOS ile number is 12 digits long.

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

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

REFUNDS

yMail Form 568 requesting a refund to:

FRANCHISE TAX BOARD

PO BOX 942857

SACRAMENTO CA 94257-0500

RETURN WITHOUT PAYMENT or PAID ELECTRONICALLY

yMail Form 568 without a payment or paid electronically to:

FRANCHISE TAX BOARD

PO BOX 942857

SACRAMENTO CA 94257-0500

Extensions

California does not require the iling of written applications for extensions. All LLCs in good standing that are classiied as partnerships have an automatic seven month extension to ile. If the LLC cannot ile its Form 568 by the return’s due date, the LLC is granted an automatic seven month extension unless the LLC is suspended or forfeited.

SMLLCs disregarded for tax purposes will follow the owners original due date and extended due date of the return.

However, the automatic extension does not extend the time to pay the LLC fee or nonconsenting nonresident members’ tax.

If the LLC is iling the return under extension, see form FTB 3537, Payment for Automatic Extension for LLCs, included in this booklet, to submit the required payments.

Electronic Funds Withdrawal

LLCs can make an annual tax, estimated fee, or extension payment using tax preparation software. Check with your software provider to determine if they support EFW for annual tax, estimated fee, or extension payments.

Annual Limited Liability Company Tax

If the 2018 annual tax of $800 was not paid on or before the 15th day of the 4th month after the beginning of the taxable year (iscal year) or April 15, 2018 (calendar year), the tax should be sent using the 2018 form FTB 3522, as soon as possible. (Do not use the 2019 form FTB 3522 included in this booklet).

If the LLC’s taxable year is 15 days or less and it did not conduct business in the state during the 15 day period, see the instructions for Exceptions to Filing Form 568 in General Information D, Who Must File, in this booklet.

Also see General Information G, Penalties and Interest, for the additional amount that is now due. To assure proper application of the tax payment to the LLC account, do not send the $800 annual tax with Form 568.

The 2019 $800 annual tax is due on or before the 15th day of

the 4th month after the beginning of the 2019 taxable year (iscal year)

or April 15, 2018 (calendar year). The payment is sent with form FTB 3522. Do not mail the $800 annual tax with Form 568. When the due date falls on a weekend or holiday, the deadline to ile and pay without penalty is extended to the next business day.

For newly-formed LLCs, the $800 annual tax payment is due and payable by the 15th day of the 4th month after the LLC registers with the California SOS, not the date it begins doing business. Any portion of a month from the registration date is considered a full month for calculating the annual tax payment due date.

Example: LLC1, a newly-formed LLC, organizes as an LLC and registers with the California SOS on June 15, 2018. LLC1 begins doing business in California on August 15, 2018. Since LLC1 registered on June 15, 2018, the annual LLC tax is due by September 15, 2018 (by the 15th day of the 4th month). LLC1’s annual tax payment for taxable year 2019 is due by April 15, 2019. If LLC1 elects a iscal year (June 1, 2019 – May 31, 2020) the annual tax payment for taxable year 2019, is due by September 15, 2019. The annual tax payment is due with form FTB 3522.

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 iling/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:

FRANCHISE TAX BOARD

SACRAMENTO CA 95827

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

F Limited Liability Company Tax and Fee

The deinition of limited liability company has been revised to exclude certain title holding companies that are tax exempt provided that they are treated as partnerships or disregarded entities for tax purposes. As such they are not liable for the annual LLC tax and fee.

Enter all payment types (overpayment from prior year, annual tax, fee, etc.) made for the 2018 taxable year on the applicable line of Form 568.

Annual Limited Liability Company Tax

LLCs are subject to an $800 annual tax if they are doing business in California or have articles of organization accepted, or a certiicate of registration issued by the California SOS. The annual tax is prepaid for the privilege of doing business in California, and is due and payable on or before the 15th day of the 4th month after the beginning of the taxable year. The annual tax must be paid for each taxable year until the appropriate papers are iled. See General Information Q, Cancelling a Limited Liability Company, for more information.

Use form FTB 3522 to submit the $800 annual tax payment. Using black or blue ink, make the check or money order payable to the “Franchise Tax Board.” Write the LLC’s California SOS ile number, FEIN, and “2019 FTB 3522” on the check or money order.

If the 15th day of the 4th month of an existing foreign LLC’s taxable year has passed before the existing foreign LLC commences business in California or registers with the California SOS, the annual tax should be paid immediately after commencing business or registering with the California SOS.

Limited Liability Company Fee

In addition to the annual tax, every LLC must pay a fee if the total California annual income is equal to or greater than $250,000. For more information, see Schedule IW instructions included in this booklet.

The LLC must estimate the fee it will owe for the year and make an estimated fee payment by the 15th day of the 6th month of the current taxable year. LLCs use form FTB 3536, to remit the estimated fee. A penalty will apply

if the LLC’s estimated fee payment is less than the fee owed for the year. The penalty is equal to 10% of the amount of the LLC fee owed for the year over the amount of the timely estimated fee payment. A penalty will not be imposed if the estimated fee paid by the due date is equal to or greater than the total amount of the fee of the LLC for the preceding taxable year.

The LLC fee remains due and payable by the due date of the LLC’s return. LLCs will use form FTB 3536 to pay by the due date of the LLC’s return, any amount of LLC fee owed that was not paid as a timely estimated fee payment. If the taxable year of the LLC ends prior to the 15th day of the 6th month of the taxable year, no estimated fee payment is due, and the LLC fee is due on the due date of the LLC’s return. Use the following chart to compute the fee:

If total California annual income from

 

Form 568, Side 1, line 1 is:

The fee is:

Equal to or over –

but not over –

 

$ 250,000

$ 499,999

$ 900

500,000

999,999

2,500

1,000,000

4,999,999

6,000

5,000,000

and over

11,790

If you have a total California annual income of $250,000 or greater, you must report a fee.

To determine the LLC fee see the Speciic Line Instructions for line 1.

If the FTB determines multiple LLCs were formed for the primary purpose of reducing fees, the LLC’s total income from all sources that are reportable to California could include the aggregate total income of all commonly controlled LLC members. “Commonly controlled” means control of more than 50% of the capital interests or proit interests of the taxpayer and any other LLC or partnership by the same persons.

Form 568 Booklet 2018 Page 7

Series LLCs

If the laws of the state where the LLC is formed provide for the designation of series of interests (for example, a Delaware Series LLC) and: (1) the holders of the interests in each series are limited to the assets of that series upon redemption, liquidation, or termination, and may share in the income only

of that series, and (2) under home state law, the payment of the expenses, charges, and liabilities of each series is limited to the assets of that series, then each series in a series LLC is considered a separate LLC and must ile its own Form 568 and pay its own separate LLC annual tax and fee, if it is registered or doing business in California.

Nonconsenting Nonresident Members’ Tax

Every nonresident member must sign a form FTB 3832, Limited Liability Company Nonresident Members’ Consent. The LLC returns the signed form with Form 568. If a nonresident member fails to sign form FTB 3832, the LLC is required to pay tax on that member’s distributive share of income at the highest marginal rate. Any amount paid by the LLC will be considered a payment made by the nonresident member.

The tax may be reduced by the amount of tax previously withheld and paid by the LLC with respect to each nonconsenting nonresident member.

Reminder: All nonresident members must ile a California tax return. The completion of form FTB 3832 does not satisfy the nonresident member’s California iling requirement. Corporate members are also considered doing business in California and may have additional iling requirements. For more information, get FTB Pub. 1060, Guide for Corporations Starting Business in California. Nonresident individuals may qualify to ile a group Form 540NR, California Nonresident or Part-Year Resident Income Tax Return, and should get FTB Pub. 1067, Guidelines for Filing a Group Form 540NR.

If the LLC’s return is being iled on or before the original due date of the return, the LLC completes the Schedule T, Nonconsenting Nonresident (NCNR) Members’ Tax Liability. See the Speciic Instructions for Schedule T in this booklet for more information.

If the LLC owes NCNR tax and is unable to complete Form 568 on or before the original due date, it must complete form FTB 3537. For more information on when the NCNR members’ tax along with the voucher must be received by, see form FTB 3537.

G Penalties and Interest

Failure to Comply with Filing Requirements

Unless failure is due to a reasonable cause, a penalty will be assessed if the LLC is required to ile a Form 568 and either of the following apply:

yThe LLC fails to ile the return on time, including extensions.

yThe LLC iles a return, including Schedules K-1 (568), 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 twelve months), that the failure continues, is $18 multiplied by the total number of members in the LLC 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 mailed until the date the return is iled.

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

Failure to File a Timely Return

Any LLC that fails to ile Form 568 on or before the extended due date is assessed a penalty. The penalty is 5% of the unpaid tax (which includes the LLC fee and nonconsenting nonresident members’ tax) for each month, or part of the month, the return remains uniled from the due date of the return until iled. The penalty may not exceed 25% of the unpaid tax. If an LLC does not ile its return by the extended due date, the automatic extension will not apply and the late iling penalty will be assessed from the original due date of the return. See R&TC Section 19131 for more information.

Failure to Pay by the Due Date

The failure-to-pay penalty is imposed from the due date of the return or the due date of the payment. Since any amount of the LLC fee due which was not paid as an estimated fee payment, and the nonconsenting nonresident members’ tax are due with the return, the penalty is calculated from the original due date of the return. The annual tax payment date is the 15th day of the 4th month during the taxable year, so the penalty is calculated from this date. The penalty for each item is calculated separately.

The failure-to-pay penalty begins at 5%. Every month or fraction thereof the amount is not paid the penalty increases 0.5%. The penalty continues to increase for 40 months, thereby maximizing at 25%. See R&TC Section 19132 for more information.

If an LLC is subject to both the penalty for failure to ile a timely return and the penalty for failure to pay the total tax by the due date, a combination of the two penalties may be assessed, but the total penalty may not exceed 25% of the unpaid tax. However, the penalty for failure to comply with the iling requirements will be assessed in addition to the penalty for failure to ile a timely return and the penalty for failure to pay the total tax by the due date. The FTB may waive the late payment penalty based on reasonable cause. Reasonable cause is presumed when 90% of the tax is paid by the original due date of the return.

If the LLC underpays the estimated fee, a penalty of 10% will be added to the fee. The underpayment amount will be equal to the difference between the total amount of the fee due for the taxable year less the amount paid by the due date. A penalty will not be imposed if the estimated fee paid by the due date is equal to or greater than the total amount of the fee of the LLC for the preceding taxable year.

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 ile 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 insuficient funds. In addition, fees may be charged for the cost of collection.

H Accounting Methods

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

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

Generally, an LLC may not use the cash method of accounting if the LLC has a corporate member, averages 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 ive years beginning with the irst income year.

IAccounting Periods

LLC returns normally must be iled for an accounting period that includes

12 full months. A short period return must be iled if the LLC is created or terminated within the taxable year. In that case, write “Short Period” in red ink at the top of Form 568, Side 1.

For information on the required taxable year of a partnership that also applies to LLCs, see the instructions for federal Form 1065.

J Amended Return

If, after the LLC iles its return, it becomes aware of changes it must make, the LLC should ile an amended Form 568 and an amended Schedule K-1 (568) for each member, if applicable. Check the amended return box in Item H(3) Form 568, Side 1. Give a corrected Schedule K-1 (568) with box G(2) checked and label “Amended” to each affected member. If the LLC originally iled a Form 540NR group nonresident member return, the LLC should ile an amended Form 540NR.

Attach a statement that identiies 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 LLC’s federal return is changed for any reason, the federal change may affect the LLC’s California return. This would include changes made because of an examination. The LLC must ile an amended return within six months of the inal federal determination if the LLC fee or tax a member owes has been affected. The LLC should attach a copy of the federal Revenue Agent’s Report or other notice of the adjustments to the return. The LLC should inform the

Page 8 Form 568 Booklet 2018

members that they may also be required to ile amended returns within six months from the date of the inal federal determination.

K Required Information Returns

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

yThe LLC makes payments to one person of rents, salaries, wages, annuities, or other ixed or determinable income during one calendar year totaling $600 or more.

yThe LLC pays an individual or one payee interest and dividends totaling $10 or more during one calendar year.

yThe LLC receives cash payments over $10,000.

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

LLCs must report payments made to California residents by providing copies of federal Form 1099 (series). For nonresidents, see the reporting and withholding requirements on Form 592, Resident and Nonresident Withholding Statement; Form 592-B, Resident and Nonresident Withholding Tax Statement; and Form 592-F, Foreign Partner or Member Annual Return. Get FTB Pub. 1017, Resident and Nonresident Withholding Guidelines, for more information.

LLCs 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.

LLCs must report interest paid on municipal bonds that are issued by a state other than California or a municipality other than a California municipality that are held by California taxpayers. Entities paying interest to California taxpayers on these types of bonds are required to report interest payments aggregating $10 or more paid after January 1, 2018. Information returns will be due June 1, 2019. For more information, get form FTB 4800 MEO, Interest and Interest-Dividend Payment Reporting Requirement Letter.

LLCs 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 iling 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 568.

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 the Form 568 when iled. If the information returns are not provided, penalties may be imposed under R&TC Sections 19141.2 and 19141.5.

All information returns, unless otherwise noted, are mailed separately from the Form 568. Information returns should be sent to:

FRANCHISE TAX BOARD PO BOX 942857 SACRAMENTO CA 94257-0500

L Special Items

California LLC tax law generally follows federal partnership tax law for LLCs classiied as partnerships, in all of the following areas:

yIRC Section 702(a) items

yElections

yDistributions of unrealized receivables and inventory

yMembers’ dealings with the LLC

yContributions to the LLC

yIncome of foreign nonresident members subject to withholding, Form 592-A, Form 592-B, and Form 592-F

yBasis and at-risk rules

yPassive activity limitations

yNet operating loss deduction by a member of the LLC (an LLC is not allowed the deduction)

yPublicly traded partnerships

yLong-term contracts

yInstallment sales

yVacation pay

yAmortization of past service costs

yDistributions of contributed property by an LLC

yRecognition of precontribution gain in certain LLC distributions to members

See the instructions for federal Form 1065 for speciic information about these areas.

M Signatures

Form 568 is not considered a valid return unless it is signed by an authorized member or manager of the LLC. If a receiver, trustee in bankruptcy, or assignee controls the organization’s property or business, that individual must sign the return.

Include an authorized member or manager’s phone number and email address in case the FTB needs to contact the LLC 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 LLC return must sign the return and complete the “Paid Preparer’s Use Only” area of the return.

All of the following must be completed by the paid preparer:

yComplete the required preparer information. Tax preparers must provide their preparer tax identiication number (PTIN).

ySign in the space provided for the preparer’s signature.

yGive the LLC a copy of the return in addition to the copy to be iled with the FTB.

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

Paid Preparer Authorization

If the LLC wants to allow the paid preparer to discuss it’s 2018 Form 568 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 irm, if any, shown in that section.

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

yGive the FTB any information that is missing from the return.

yCall the FTB for information about the processing of the return or the status of any related refund or payments.

yRespond to certain FTB notices about math errors, offsets, and return preparation.

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

The authorization will automatically end no later than the due date (without regard to extensions) for iling the LLC’s 2019 tax return. If the LLC wants to expand the paid preparer’s authorization, go to ftb.ca.gov/poa. If the LLC wants to revoke the authorization before it ends, notify the FTB in writing or call 800.852.5711.

N Group Returns

Nonresident Group Returns

Nonresident members of an LLC doing business or deriving income from sources in California may elect to ile a group nonresident return (R&TC Section 18535).

yGroup nonresident returns may include less than two nonresident individuals.

yNonresident individuals with more than $1,000,000 of California taxable income are eligible to be included in group nonresident returns.

yAn additional 1% tax will be assessed on resident and nonresident individuals who have California taxable income over $1,000,000.

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

O Investment Partnerships

Income of nonresident members, including banks and corporations, derived from “qualifying investment securities” of an LLC that qualiies as an “investment partnership” is considered income from sources other than California, except as noted Nonresident individuals or foreign members generally will not be taxed on this income. The LLC should inform its nonresident individuals or foreign members if all or a portion of their distributive share of income is from “qualifying investment securities” of

Form 568 Booklet 2018 Page 9

an “investment partnership” and whether it is sourced to California. See the instructions for Question L, included in this booklet, for deinitions of “investment partnership” and “qualifying investment securities.”

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

LLC investment partnerships that have California source income should show on Schedule K-1 (568), column (e) each member’s distributive share of California source income.

Generally, members 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 LLC investment partnership. Nonresident individual members will be taxed on their distributive shares of income from the “LLC investment partnership” if the income from the qualifying investment securities is interrelated with either of the following:

yAny other business activity of the nonresident member.

yAny other entity in which the nonresident member owns an interest that is separate and distinct from the investment activity of the partnership and that is conducted in California.

Nonresident individual members will be taxed on their distributive share of investment income from an LLC investment partnership if the qualifying securities were purchased with working capital of a trade or business

the nonresident owns an interest in and that is conducted in California (R&TC Section 17955).

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

yThe corporation participates in the management of the investment activities of the LLC investment partnership.

yThe corporation has income derived from or attributable to sources within this state other than income from the LLC investment partnership.

P Nonresident Members

An LLC with multiple members is required to ile form FTB 3832 with Form 568 when one or more of its members is a nonresident of California. Form FTB 3832 is signed by the nonresident individuals and foreign entity members to show their consent to California’s jurisdiction to tax their distributive share of income attributable to California sources.

File form FTB 3832 for either of the following:

yThe irst taxable period for which the LLC became subject to tax with nonresident members.

yAny taxable period during which the LLC had a nonresident member who has not signed a form FTB 3832.

Separate forms for an individual (or groups of individuals) are permissible. The LLC must maintain and have available for examination a form FTB 3832 signed by each nonresident member.

The LLC must pay the tax for every nonresident member that did not sign a form FTB 3832. The LLC is responsible for paying the tax on that nonresident member’s distributive share of income determined at the highest marginal rate for that member. See General Information F, Limited Liability Company Tax and Fee, for more information.

The tax may be reduced by the amount of tax previously withheld and paid by the LLC with respect to each nonconsenting nonresident member.

If the LLC fails to timely pay the tax of such nonresident member, the LLC shall be subject to penalties and interest (R&TC Sections 19132 and 19101). Any amount paid by the LLC on behalf of a nonresident individual or foreign entity member will be considered a payment made by the member.

An LLC may recover from the nonresident member the tax it paid on behalf of the nonresident member.

To claim credit for the tax, the nonresident member needs to attach a copy of the Schedule K-1 (568) to their California income tax return.

Nonresidents or Part-Year Residents

Nonresidents pay tax to California only on their California taxable income. For more information, get FTB Pub. 1100, Taxation of Nonresidents and Individuals Who Change Residency.

CAUTION: The requirements and procedures discussed above are not related to the nonresident withholding requirements discussed under General Information R, Withholding Requirements.

Q Cancelling a Limited Liability Company

In general, LLCs are required to pay the $800 annual tax and ile a California return until the appropriate papers are iled. In order to cancel an LLC, the following steps must be taken:

1.File a timely inal California return (Form 568) with the FTB and pay the $800 annual tax for the taxable year of the inal return.

2.File Form LLC-4/7, Certiicate of Cancellation, with the California SOS. The California SOS also requires a domestic LLC to ile Form LLC-3, Certiicate of Dissolution. Contact the California SOS for more details.

The Form LLC-4/7’s effective date will stop the assessment of the $800 annual tax for future taxable years. If Form LLC-4/7 is iled after the taxable year ending date, a subsequent year return and an additional $800 tax may be required.

The annual tax will not be assessed if the LLC meets all of the following requirements:

yThe LLC iles a timely Final Limited Liability Company Return of Income, for the preceding taxable year, including extension.

yThe LLC did not do business in California after the inal taxable year.

yThe LLC iles the appropriate documents for cancellation with the California SOS within 12 months of the timely iled Final Limited Liability Company Return of Income.

Short Form Cancellation

Domestic LLCs organized in California can ile a Limited Liability Company Form LLC-4/8, Short Form Cancellation Certiicate, if the following requirements are met:

yForm LLC-4/8 is being iled within 12 months from the date the Articles of Organization were iled with the SOS.

yThe domestic LLC has no debts or other liabilities (other than tax liability).

yThe known assets have been distributed to the persons entitled thereto or no known assets have been acquired.

yThe inal tax return or a inal annual tax return has been or will be iled with the FTB.

yThe domestic LLC has not conducted any business from the time of the iling of the Articles of Organization.

yA majority of the managers or members, or if there are no managers or members, the person or a majority of the persons who signed the Articles of Organization, voted to dissolve the domestic LLC.

yIf the domestic LLC received payments for interests from investors, those payments have been returned to those investors.

The LLC must ile SOS Form LLC-4/8, with the SOS. The LLC must include a statement that all of the items above have been completed before the California SOS will cancel the LLC. If available, attach an endorsed SOS iled copy of Form LLC-4/8 to the irst tax return.

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

By mail:

DOCUMENT FILING SUPPORT

 

PO BOX 944228

 

SACRAMENTO CA 94244-2280

In person:

CALIFORNIA SECRETARY OF STATE

 

1500 11TH STREET 3RD FLOOR

 

SACRAMENTO CA 95814

By phone:

916.657.5448

Ofice hours are Monday through Friday, 8 a.m. to 5 p.m.

Website: sos.ca.gov

If the LLC is being cancelled to be converted to another type of business entity, be sure to ile the appropriate forms with the California SOS.

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

Page 10 Form 568 Booklet 2018

Short Period Return

If the LLC is iling a short period return for 2019 and the 2019 forms are not available, the LLC must use the 2018 Form 568 and change the taxable year.

R Withholding Requirements

Foreign (non U.S.) Nonresident Members

As described in IRC Section 1446 and modiied by R&TC Section 18666, if an LLC 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 member, the LLC is required to withhold tax on the allocable amount.

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

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:

a.The California withholding rate is 8.84% for C corporations and 12.3% for individuals, partnerships, LLCs, and iduciaries.

b.Income attributable to the disposition of California real property is subject to withholding under R&TC Section 18662.

Domestic (U.S.) Nonresident Members

An LLC is required to withhold funds for income or franchise taxes when it makes a distribution of income to a domestic (U.S.) nonresident member (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 member’s California income tax return. However, withholding is not required if distributions of income from California sources to the member are $1,500 or less during the calendar year or if the FTB directs the payer not to withhold.

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

LLCs with income from both 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 withholding. LLCs are required to withhold tax at a rate of 7% of distributions (including property) of income from California sources made to domestic nonresident members. For more information, get Schedule R.

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 publicly traded partnerships and on distributions to brokerage irms, tax-exempt organizations, and tiered LLCs.

No withholding of tax 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 tax withholding was required on a distribution, the LLC may be liable for the amount that should have been withheld including interest and penalties.

Send waiver requests and inquiries to:

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

588 online.

Report withholding on Forms 592, 592-B, and 592-F. Withholding payments are remitted with Forms 592-A and 592-V.

The taxable income of nonresident members is the distributive share of California sourced LLC income, not the distributed amount. For more information, get FTB Pub. 1017.

The nonresident withholding requirements and procedures discussed above are not related to the nonconsenting nonresident members’ tax paid by an LLC on behalf of nonresident members as discussed under General Information P, Nonresident Members.

S Check-the-Box Regulations

California generally conforms to the federal entity classiication regulations (commonly known as “check-the-box” regulations). These regulations allow certain unincorporated entities to choose tax treatment as a partnership, a corporation, or a single member LLC (SMLLC)

(SB 1234; Stats. 1997, Ch. 608).

Generally, any elections made for federal purposes under the federal “check- the-box” regulations are treated as California elections. No separate elections are allowed. If federal Form 8832, Entity Classiication Election, is iled 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 ile the appropriate California return.

An “eligible entity” may choose its classiication. An eligible entity is a business entity that is not a trust, a corporation organized under any federal or state statute, a foreign entity speciically listed as a per se corporation, or other special business entities. Other special business entities under the IRC include publicly traded partnerships, REMICs, inancial 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. For tax purposes, an eligible entity with a single owner will be disregarded. If the separate existence of an entity is disregarded, its activities are treated as activities of the owner and reported on the appropriate California return.

Exceptions

The exception to the general rule exists under R&TC Section 23038(b)(2)(C) in the case of an eligible business entity. The exception does not apply

to a business entity which, during the 60 month period preceding

January 1, 1997, was appropriately classiied as an association taxable as a corporation and met all of the following conditions:

yThe business entity was not doing business in California.

yThe business entity did not derive income from sources within California.

yThe business entity had no members who were residents of California.

The eligible business entities are generally:

1)Business trusts that were classiied as corporations under California law, but were classiied as partnerships for federal tax purposes for taxable years beginning before January 1, 1997.

2)Previously existing foreign SMLLCs that were classiied 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 classiied as corporations for California tax purposes and must continue to ile Form 100, unless they make an irrevocable election to be classiied

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).

California regulations make the classiication of business entities under federal regulations (Treas. Reg. Sections 301.7701-1 through 301.7701-3) generally applicable to California. If an eligible entity is disregarded for federal tax purposes, it is also disregarded for state tax purposes, except that an SMLLC must still pay a tax and fee, ile a return, and limit tax credits.

Filing Requirements for Disregarded Entities

An SMLLC is required to complete Form 568, Side 1, Side 2, Side 3,

Side 7 (Schedule IW), and pay the annual tax and LLC fee (if applicable). If a nonresident has not signed the single member LLC consent on Side 3, then the SMLLC is required to complete Schedule T on Side 4.

However, if either of the following two items below are met, Schedule B and Schedule K are also required to be iled:

yThe income or loss amount reported on Schedule B, line 1 or line 3 through line 11, is $3,000,000 or more.

yThe “Total distributive income/payment items,” Schedule K, line 21a, is greater than or equal to $3,000,000 OR less than or equal to $-3,000,000.

Form 568 Booklet 2018 Page 11

Note: If the SMLLC does not meet the 3 million criteria for iling Schedule B (568) and Schedule K (568), the SMLLC is still required to complete Schedule IW.

If Schedule K (568) is required to be iled, disregarded entities should prepare Schedule K (568) by entering the amount of the corresponding Member’s share of Income, Deductions, Credits, etc. attributable to the activities of

the disregarded entity from the member’s federal Form 1040, including Schedules B, C, D, E, F, and Federal Schedule K, or Federal Form 1120 or 1120S (of the owner). SMLLCs do not complete Schedule K-1 (568). The single owner would include the various items of income, deductions, credits, etc., of the SMLLC on the tax return iled by the owner.

Utilization of credits attributable to the SMLLC is limited to the regular tax liability on the income attributable to the activities of the SMLLC. The limitation on the SMLLC’s credits is the difference between: 1) The regular tax liability of the single owner computed with the items of income, deductions, etc., attributable to the SMLLC; and 2) The regular tax liability of the single owner computed without the items of income, deductions, etc., attributable to the SMLLC. It is the responsibility of the single owner to limit the credits on the owner’s tax return. The single owner should be prepared to furnish information supporting the use of any credits attributable to the

SMLLC.

The owner of the SMLLC should perform the following steps to determine the SMLLC’s credit limitation:

yCompute the owner’s tax with the SMLLC income, and the owner’s tax without the SMLLC income.

yComplete Schedule P (100, 100W, 540, 540NR, or 541), up to the line where the credit is to be taken.

yDetermine the credit to be utilized. The amount allowed is the lesser of either of the following:

1.The total credit or the limitation based on the LLC’s business income.

2.The net tax balance that may be offset by credits on Schedule P (100, 100W, 540, 540NR, or 541) on the line above the line where the credit is to be taken.

The following example shows the credit limit calculation for an SMLLC that is owned by a C corporation. The SMLLC has a Research credit of $4,000. The computation of the C corporation’s regular tax liability with the SMLLC income is $5,000. The computation of the C corporation’s regular tax liability without the SMLLC income is $3,000. The difference in tax is $2,000, which is the C corporation’s credit limitation on all LLC credits. The owner of the SMLLC then performs the following steps:

1.Completes Schedule P (100), Side 2, down to line 4, column (c). The amount is $1,000.

2.Enters the limitation amount from Schedule P (100), Side 2, line 4, column (c) in column (f) of the table on this page.

3.Enters the following amounts from the table on this page on the Schedule P (100):

y $4,000 from column (d) of the table on this page, to Schedule P (100), Side 2, line 5, column (a);

y $1,000 from column (f) of the table on this page, to Schedule P (100), Side 2, line 5, column (b);

y $3,000 from column (g) of the table on this page, to Schedule P (100), Side 2, line 5, column (d).

(a)

(b)

(c)

(d)

(e)

(f)

(g)

Credit

Credit

Total prior

Total credit:

Limitation

Credit used

Carry col. (d)

name

amount

year credit

add col. (b)

based on

on Sch P,

minus the

 

 

carry-over

& col. (c) LLC business

but not

smaller of

 

 

 

 

income

greater than

col. (e) or

 

 

 

 

 

col. (d) or

col. (f)

 

 

 

 

 

col. (e)

 

Research

$4,000

0

$4,000

$2,000

$1,000

$3,000

T Substitute Schedules

The LLC needs approval from the FTB to use a substitute Schedule K-1 (568). The substitute schedule must include the Member’s Instructions for Schedule K-1 (568) or other prepared speciic instructions. For more information and access to form FTB 1096, Agreement to Comply with

FTB Pub. 1098 Annual Requirements and Speciications; or FTB Pub. 1098, Annual Requirements and Speciications for the Development and Use of Substitute, Scannable, Absolute Positioning, and Reproduced Tax Forms, email the FTB’s Substitute Forms Program at SubstituteForms@ftb.ca.gov.

U 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. Members should follow the instructions in federal Form 4797, Sales of Business Property.

LLCs should follow the instructions in federal Form 4797 with the exception that the amount of gain on property subject to the IRC Section 179 recapture must be included in the total income for the LLC.

The gain on property subject to the IRC Section 179 recapture should be reported on the Schedule K (568) and Schedule K-1 (568) as supplemental information as instructed on the federal Form 4797.

The LLC 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.

V Suspension/Forfeiture

If an LLC does not ile Form 568 and/or does not pay any tax, penalty, or interest due, its powers, rights, and privileges may be suspended (in the case of a domestic LLC) or forfeited (in the case of a foreign LLC). Also, any contracts entered into during suspension or forfeiture are voidable at the request of any party to the contract other than the suspended or forfeited LLC. Such contracts will remain voidable and unenforceable unless the LLC applies for relief from contract voidability and the FTB grants relief. See R&TC Sections 23301, 23305.1, and 23305.2, for more information.

W 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 LLC 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, LLCs 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 11 of the income tax return.

In general, LLCs 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.

LLCs must pay California use tax on taxable items if:

yThe seller does not collect California sales or use tax, and

yThe LLC uses, gifts, stores, or consumes the item in California.

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

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

Page 12 Form 568 Booklet 2018

For more information on nontaxable and exempt purchases, the LLC 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, 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 on page 15 to calculate the amount due.

Extensions to File. If the LLC requests an extension to ile its tax return, wait until the LLC iles 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 irst to the use tax liability, instead of income tax liabilities, penalties, and interest.

Changes in Use Tax Reported. Do not ile an Amended Limited Liability Company Return of Income to revise the use tax previously reported. If the LLC 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 or (TTY) 711 (for hearing and speech disabilities). For California income tax information, contact the Franchise Tax Board at ftb.ca.gov.

Specific Instructions

Form 568

Fill In All Applicable Lines and Schedules

Enter any items specially allocated to the members on the applicable line of the member’s Schedule K-1 (568) and the total amounts on the applicable lines of Schedule K (568). Do not enter these items directly on Form 568, Side 4, Schedule A or Schedule D (568). Do not apply the apportionment factor to the items on Schedule K (568).

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

Name, Address, California SOS File Number, and FEIN

Before mailing, make sure entries have been made for all of the following:

yCalifornia SOS ile number (12 digits)

yFederal employer identiication number (FEIN) (9 digits)

yLLC legal or trade name (use legal name iled with the California SOS) and address, include Private Mail Box (PMB) number, if applicable.

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

Foreign Address

If the limited liability company 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 Schedule L – Balance Sheets – before completing this item.

If the LLC is required to complete this item, enter the total assets at the end of the LLC’s taxable year. This is determined by the accounting method regularly used to maintain the LLC’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 LLC is iling a inal year tax return, check the “Final Return” box on Form 568, Side 1, Item H(2), and check the “A inal Schedule K-1 (568)” box for Item G(1) on Schedule K-1 (568). Attach a statement that explains the reason for the termination, or liquidation of the partnership, or the reason for iling a short-period return in the case of a technical termination pursuant to IRC Section 708(b)(1)(B) as of January 1, 2015.

California law does not conform to the federal repeal of the technical termination of a partnership.

Item H(4) Protective claim

Check the box if this Form 568 is being iled as a protective claim for refund. A protective claim is a claim for refund iled 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 ile a protective claim, go to ftb.ca.gov and search for protective claim.

Item I – Principal Business Activity (PBA) Code

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 inished 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 J

All LLCs 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, ixtures - 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 iled 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, iled 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 LLC (or any legal entity in which it holds a controlling or majority interest):

yThe percentage of ownership interests transferred to, or owned or controlled by, one person or one legal entity cumulatively exceeded 50%.

yThe total ownership interests transferred to or held by one irrevocable trust or trust beneiciary cumulatively exceeded 50%.

yThis LLC, (or any legal entity in which it holds a controlling or majority interest,) cumulatively acquired ownership or control of more than 50% of the LLC or other ownership interests in any legal entity.

yAs of the end of this year, cumulatively more than 50% of the total ownership interests have been transferred in one or more transactions since an interest in California real property was transferred to the LLC 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 LLC’s, ownership interest is measured by a member’s interest in both the capital and proits interests in the LLC.

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.

Schedule IW, LLC Income Worksheet Instructions

For purposes of this worksheet, “Total California Income” means total income from all sources derived from or attributable to this state. The deinition of total income for purposes of calculating the LLC fee excludes all allocations, distributions, or gains from another LLC that was already subject to the LLC fee. “Total income” means gross income, plus the cost of goods sold that are paid or incurred in connection with the trade or business of the taxpayer attributed to California. Total income from all sources derived or attributable to this state is determined using the rules for assigning sales under R&TC Sections 25135 and 25136 and the regulations thereunder, as modiied

by regulations under R&TC Section 25137, if applicable, other than those provisions that exclude receipts from the sales factor.

If the SMLLC does not meet the 3 million criteria for iling Schedule B (568) and Schedule K (568), the SMLLC is still required to complete Schedule IW. Disregarded entities that do not meet the iling requirements to complete Schedule B or Schedule K should prepare Schedule IW by entering the

Form 568 Booklet 2018 Page 13

California amounts attributable to the disregarded entity from the member’s federal Schedule B, C, D, E, F (Form 1040), or additional schedules associated with other activities. For example, if an SMLLC has IRC Section 1231 gains, the SMLLC will need to get the amount from the schedule containing that information, such as Schedule D-1, and enter the amount on line 14 of the Schedule IW.

Determining Total Income From All Sources Derived From or Attributable to California.

Use only amounts that are from sources derived from or attributable to California when completing lines 1-17 of this worksheet. If the LLC business is wholly within California, the total income amount is assigned to California and is entered on Schedule IW. If the LLC conducts business within and outside of California, the LLC must assign its total income, item by item, to California based on the following rules:

Sales of Tangible Property

Total income from sales of tangible personal property with a destination in California (except sales to the U. S. Government) are attributable to California if the property is delivered or shipped to a purchaser within California regardless of the freight on board point or other conditions of sale. Total income from sales of tangible personal property (except sales to the U. S. Government) which are shipped from an ofice, store, warehouse, factory, or other place of storage within California are assigned to California unless the seller is taxable in the state of destination. Any transportation of goods by vehicle is a form of shipment, whether the vehicle is owned by the seller, the purchaser, or a common carrier. If a seller transfers possession of goods to a purchaser at the purchaser’s place of business in California, the sale is a California sale. However, if goods are transferred to the purchaser’s employee or agent at some other location in California and the purchaser immediately transports the goods to another state, the sale is not a California sale. (See FTB Legal Ruling 95-3).

Total income from sales of tangible personal property to the U.S. Government are attributable to California if the property is shipped from California even

if the taxpayer is taxable in the state of destination. Only sales for which the U.S. Government makes direct payment to the seller according to the terms of a contract constitute sales to the U.S. Government. Thus, as a general rule, sales by a subcontractor to the prime contractor, the party to the contract with the U.S. Government, do not constitute sales to the U.S. Government.

Sales of Other Than Sales of Tangible Personal Property

Market Assignment – R&TC Section 25136 requires all taxpayers to assign sales, other than sales of tangible personal property, using market assignment.

The market assignment method and single-sales factor apportionment may result in California sourced income or apportionable business income if a taxpayer is receiving income from intangibles or services from California sources. Such income includes:

1.Sales from services to the extent that the purchaser of the service receives the beneit of the service in California.

2.Sales of intangible property to California to the extent that the intangible property is used in California. For marketable securities, the sales are in California if the customer is in California.

3.Sales from the sale, lease, rental, or licensing of real property if the real property is located in California.

4.Sales from the rental, lease, or licensing of tangible personal property if the property is located in California.

For more information, see R&TC Section 25136 and Cal. Code Regs., tit.

18 section 25136-2, get Schedule R or go to ftb.ca.gov and search for market assignment.

Alternative Methods. There are alternative methods to assign total income to California that apply to speciic industries. These rules are contained in the regulations adopted pursuant to R&TC Section 25137. If the LLC is in one of these lines of business, the sale assignment methodology employed in the regulation applicable to the LLC’s line of business should be used to determine total income derived from or attributable to California.

The rules contained in R&TC Section 25137(c) that serve to remove items from assignment in their totality are not applicable to the determination of income derived from or attributable to California.

The deinition of “Total Income” excludes allocations, distributions, or gains to an LLC from another LLC, if that allocation, distribution, or gain was

already subject to the LLC fee. Do not include any income on the worksheet that has already been subject to the LLC fee.

Pass-through Entities. LLCs with ownership interest in a pass-through entity, other than an LLC, must report their distributive share of the pass-through entity’s “Total Income from all sources derived from or attributable to this state.” Their distributive share must include the matching cost of goods sold and any deductions that are subtracted from gross ordinary income to obtain net ordinary income. The matching cost of goods sold must be entered on line 3b and any deductions on line 3c. If you received Schedule K-1s (565) with Table 3 information, include the sum of the Table 3 amounts on Schedule IW, lines 3b, 3c, 8b, and 9b as follows:

Sum of all Table 3, lines 1a, add to line 3b Sum of all Table 3, lines 1b, add to line 3c Sum of all Table 3, lines 2, add to line 8b Sum of all Table 3, lines 3, add to line 9b

All Table 3 amounts come from partnerships and LLCs that have iled Form 565.

Lines 1b, 2b, 3b, 3c, and 17 may not be negative numbers. LLCs that are disregarded entities compute the “Total Income” on Schedule IW. Use the applicable lines.

Form 568

Line 1 – Total Income from Schedule IW, LLC Income Worksheet Enter the LLC’s “Total California Income” as computed on line 17 of Schedule IW. The amount entered on Form 568, line 1, may not be a negative number.

Line 2 – Limited Liability Company Fee

Enter the amount of the LLC fee. The LLC must pay a fee if the total California income is equal to or greater than $250,000.

The LLC must estimate the fee it will owe for the year and make an estimated fee payment by the 15th day of the 6th month of the current taxable year.

When the due date falls on a weekend or holiday, the deadline to ile and pay without penalty is extended to the next business day. LLCs will use form FTB 3536, to remit the estimated fee. LLCs will also use form FTB 3536 to pay by the due date of the LLC’s return, any amount of LLC fee owed that was not paid as a timely estimated fee payment. A penalty will apply if the LLC’s estimated fee payment is less than the fee owed for the year. A penalty will not be imposed if the estimated fee paid by the due date is equal to or greater than the total amount of the fee of the LLC for the preceding taxable year. See General Information G, Penalties and Interest, for more details.

Line 3 – 2018 Annual Limited Liability Company Tax

Enter the $800 annual tax. This tax was due the 15th day of the 4th month (iscal year) or April 15, 2018 (calendar year), after the beginning of the LLC’s 2018 taxable year and paid with the 2018 form FTB 3522. When the due date falls on a weekend or holiday, the deadline to ile and pay without penalty is extended to the next business day. If the annual LLC tax was not paid within the prescribed time period, penalties and interest are now due. See General Information G, Penalties and Interest, for more details.

Line 4 – Nonconsenting Nonresident Members’ Tax Liability

Enter the total tax computed on Schedule T from Side 4 of Form 568. The LLC is responsible for paying the tax of nonconsenting nonresident members and nonconsenting owners of disregarded entities. Treat a nonconsenting owner of a disregarded entity in the same manner as a nonconsenting nonresident member. See the Speciic Line Instructions for Schedule T.

The nonconsenting nonresident members’ tax paid by an LLC on behalf of a nonresident is allocated to the nonresident member on Schedule K-1 (568).

Line 5 – Partnership Level Tax

Enter the California tax change resulting from federal partnership level audit adjustments. See R&TC Section 18622.5 for more information

Line 7 – Enter the amount paid with form FTB 3537 and 2018 form FTB 3522 and form FTB 3536. If the LLC is a nonconsenting nonresident member of another LLC, an amount will be entered on line 15e of the Schedule K-1 from that LLC. In addition to amounts paid with form FTB 3537 and 2018 form FTB 3522 and form FTB 3536, the amount from line 15e of the Schedule K-1 may be claimed on line 7, but may not exceed the amount on line 4.

Line 9 – Withholding (Form 592-B and/or 593)

If the LLC was withheld upon by another entity, the LLC can either allocate the entire withholding credit to all its members or claim a portion on line 9 (not to exceed the total tax and fee due) and allocate the remaining portion

Page 14 Form 568 Booklet 2018

to all its members. If the LLC claims any of the amount withheld, attach Form 592-B, or Form 593, Real Estate Withholding Tax Statement, to the front lower portion of the LLC return. The LLC must ile Form 592 or 592-F, and Form 592-B to allocate any remaining withholding credit to its members. For additional information, get FTB Pub. 1017.

Line 11 – Use Tax

As explained under General Information W, 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 or (TTY) 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:

yBusinesses that have, or are required to hold, a California seller’s permit.

yBusinesses that receive $100,000 or more per year in gross receipts.

yBusinesses that are registered or required to be registered with the California Department of Tax and Fee Administration to report use tax.

An LLC 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 Limited Liability Company Return of Income. To report use tax on the tax return, complete the Use Tax Worksheet on this page.

Note: An LLC 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 LLC owes use tax but does not report it on the income tax return, the LLC 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

$

.00

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

$

.00

4.

Enter any sales or use tax paid to another state for purchases

 

 

 

included on line 1. See worksheet instructions

$

.00

5.Total Use Tax Due. Subtract line 4 from line 3. Enter the amount here and on line 11. If the amount is less than zero,

enter -0-

$

.00

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.

yInclude handling charges.

yDo not include any other state’s sales or use tax paid on the purchases.

yEnter only purchases made during the year that correspond with the tax return the LLC is iling.

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

yVehicles, vessels, and trailers that must be registered with the Department of Motor Vehicles.

yMobile homes or commercial coaches that must be registered annually as required by the Health and Safety Code.

yVessels documented with the U.S. Coast Guard.

yAircraft.

yRental receipts from leasing machinery, equipment, vehicles, and other tangible personal property to its customers.

yCigarettes 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 LLC 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 or (TTY) 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 LLC 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 LLC paid $8.00 sales tax to another state for a purchase, and would have paid $6.00 in California, the LLC can only claim a credit of $6.00 for that purchase.

Line 18 – Penalties and Interest

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

Line 19 – Total Amount Due

Enter the total amount due. See General Information E, When and Where to File.

Question K

Enter the maximum number of members in the LLC at any time during the taxable year. For multiple member LLCs, the number of Schedules K-1 (568) attached to the Form 568 must equal the number of members entered on Question K. Do not use abbreviations or terms such as “various.”

Question L through Question GG

Check the “Yes” or “No” box. SMLLCs are excluded from providing a Schedule K-1 (568).

Question L

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

1.No less than 90% of the cost of the partnership’s total assets consist of the following:

y Qualifying investment securities.

y Deposits at banks or other inancial institutions.

y Ofice equipment and ofice 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.”

“Qualifying investment securities” include all of the following:

yCommon and preferred stock, as well as debt securities convertible into common stock.

yBonds, debentures, and other debt securities.

yForeign and domestic currency deposits or equivalents and securities convertible into foreign securities.

yMortgage-backed or asset-backed securities secured by governmental agencies.

yRepurchase agreements and loan participations.

yForeign currency exchange contracts and forward and futures contracts on foreign currencies.

yStock and bond index securities and futures contracts, and other similar securities.

yRegulated futures contracts.

yOptions to purchase or sell any of the preceding qualiied investment securities, except regulated futures contracts.

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

Question N

If Question N is answered “Yes,” see the federal partnership instructions concerning an election to adjust the basis of the LLC’s assets under IRC Section 754.

Form 568 Booklet 2018 Page 15

Question P

California requires taxes to be withheld from certain payments or allocations of income and sent to the FTB (R&TC Sections 18662 and 18666). If the LLC does not withhold and, upon examination, the FTB determines that withholding was required, the LLC may be liable for the tax and penalties. The reference to Forms 592, 592-A, 592-B, and 592-F relates to LLC withholding. If you need additional information concerning LLC withholding, see General Information K, Required Information Returns, and General Information R, Withholding Requirements, in this booklet.

Question U

See General Information S, Check-the-Box Regulations, for the iling requirements for disregarded entities.

Question V

Federal Form 8886, Reportable Transaction Disclosure Statement, must be attached to any return on which the LLC has claimed or reported income from, or a deduction, loss, credit, or other tax beneit attributable to, participation in a reportable transaction. If the LLC is required to ile this form with the federal return, attach a copy to the LLC’s Form 568. Do not attach copies of federal Schedule 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 deined in R&TC

Section 18407 and Treas. Reg. 1.6011-4 and includes, but is not limited to:

yA Conidential Transaction, which is offered to a taxpayer under conditions of conidentiality and for which the taxpayer has paid a minimum fee.

yA transaction with contractual protections which 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.

yA loss transaction is any transaction resulting in the taxpayer claiming a loss under IRC Section 165 of at least $10 million in any single taxable year or $20 million in any combination of taxable years for partnerships that have only corporation as partners (looking through any partners that are themselves partnerships), whether or not any losses pass through to one or more partners. $2 million in any single taxable year or $4 million in any combination of taxable years for all other partnerships.

yA transaction with a signiicant 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.

yA 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).

yA transaction of interest is a transaction that is the same as or substantially similar to one of the types of transactions that has been identiied by the IRS as a transaction of interest (entered into on or after November 2, 2006).

yA Listed Transaction is a speciic reportable transaction, or one that is substantially similar, which has been identiied by the IRS or the FTB to be a tax avoidance transaction.

Question CC

Check the “Yes” or “No” box to indicate if the LLC is deferring any income from the disposition of assets. If “Yes,” enter the four-digit year in which the assets were disposed (ex. 2018) 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 LLC 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 LLC 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 LLC 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 LLC is reporting previously deferred income in the current taxable year or prior taxable years.

Question EE

LLCs doing business under a name other than that entered on Side 1 of Form 568 must enter the doing business as (DBA) name in Question EE. If the LLC is doing business under multiple DBA’s attach a schedule listing all DBA’s. Leave Question EE blank if the LLC is not using DBA’s to conduct business.

Question FF

Check the “Yes” or “No” box to indicate if the LLC operated as another entity type such as a Corporation, S Corporation, General Partnership, Limited Partnership, LLC, or Sole Proprietorship in the previous ive (5) years. If “Yes,” enter prior FEIN(s) if different, business name(s), and entity type(s) for prior returns iled 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 LLC previously operated outside California. Check “Yes” or “No” if this is the LLC’s irst year of doing business in California.

Single Member LLC Information and Consent

Complete all requested information and provide the identiication number of the entity (Federal TIN/SSN or FEIN/CA Corp no./CA SOS File no.) that will report the items of income, deductions, credits, etc., of the disregarded entity. The owner will be responsible for limiting any credits attributable to the disregarded entity. Check the box for the entity type of the ultimate owner of the SMLLC. Note: Check exempt organization if the owner is a pension plan, charitable organization, insurance company, or a government entity.

The LLC must treat the failure of the sole owner to sign this consent in the same manner as the failure of a nonresident member to sign form FTB 3832. See the Speciic Line Instructions for Schedule T.

If the single member of the LLC signs the consent, only complete Form 568, Side 1, Side 2, Side 3, Side 7 (Schedule IW), and pay the amount due.

Schedules B & K are required to be iled if any of the following are met:

yThe income or loss amount reported on Schedule B, line 1 or line 3 through line 11, is $3,000,000 or more.

yThe “Total distributive income/payment items,” Schedule K, line 21a, is greater than or equal to $3,000,000 OR less than or equal to $-3,000,000.

See Instructions for Schedule IW for more information.

Multiple member LLCs will complete the remaining schedules, as appropriate.

Single member LLCs (SMLLCs) do not complete form FTB 3832. An SMLLC consents to be taxed under California jurisdiction by signing the Single Member LLC Information and Consent on Form 568. Multiple member LLCs must complete and sign form FTB 3832.

Schedule A — Cost of Goods Sold

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

Schedule B — Income and Deductions

Line 1 through Line 12

California’s reporting requirements for LLCs classiied as partnerships are generally the same as the federal reporting requirements for partnerships.

Follow the instructions for federal Form 1065 and include only trade or business activity income on line 1 through line 12. However, for California tax purposes, business income of the LLC is deined using the rules set forth in R&TC Section 25120. Therefore, certain income that may be portfolio income for federal purposes may be included as 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 (568) and Schedule K-1 (568). 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 568. 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 568, Schedule B, line 4 through line 11 have been separated to report total gains and total losses. Net amounts are no longer reported. List total gains and total losses separately, even if listed together on federal forms. For example, the LLC 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.

Page 16 Form 568 Booklet 2018

Line 6 – Total Farm Proit

Line 7 – Total Farm Loss

Enter on line 6 the LLC’s total farm proit from federal

Schedule F (Form 1040), Proit or Loss From Farming, line 34, Net farm proit or (loss). Enter on line 7 the LLC’s total farm loss from federal Schedule F (Form 1040), line 34. Attach federal Schedule F to Form 568. If the amount includable for California purposes is different from the amount on federal Schedule F, enter the California amount and attach an explanation of the difference.

Line 8 – Total Gain from Schedule D-1

Line 9 – Total Loss from Schedule D-1

Include only ordinary gains or losses from the sale, exchange, or involuntary conversion of assets used in a trade or business activity. Ordinary

gains or losses from the sale, exchange, or involuntary conversion of rental activity assets must be reported separately on Schedule K (568) and Schedule K-1 (568), generally as part of the net income (loss) from the rental activity.

An LLC that is a member in another LLC or partner in a 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 LLC’s or partnership’s trade or business assets.

Line 13 through Line 22

California’s reporting requirements for LLCs are generally the same as the federal reporting requirements for partnerships.

Follow the instructions for federal Form 1065 and include only trade or business activity deductions on line 13 through line 21. Line 21 (Other Deductions) includes repairs, rents and taxes. 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 (568) and Schedule K-1 (568).

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

Federal reporting requirements for organization and 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 ine 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 LLC deducted the ine or penalty for federal purposes, do not include the deduction for California purposes.

Claim of Right. To claim the 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 9, Total payments (Form 568, Side 1). To the left of this total, write “IRC 1341” and the amount of the credit.

Line 17a – Depreciation and Amortization

Enter on line 17a, only the total depreciation and amortization claimed on assets used in a trade or business activity. Complete and attach form

FTB 3885L, Depreciation and Amortization (included in this booklet), to igure depreciation and amortization. Transfer the total from form FTB 3885L, line 6, to Form 568, Side 4, line 17a, or federal Form 8825, as appropriate (use California amounts).

Do not include any expense deduction for depreciable property

(IRC Section 179) on this line. This expense is not deducted by the LLC. Instead, the expense is passed through separately to the members and is reported on line 12 of Schedule K (568) and Schedule K-1 (568).

Schedule T — Nonconsenting Nonresident Members’ Tax Liability

Use Schedule T to compute the nonconsenting nonresident members’ tax liability to be paid by the LLC. List the names and identiication numbers of all nonresident members who have not signed a form FTB 3832 or a nonresident single member who has not signed the SMLLC Information and Consent on Side 3 of Form 568, and have not consented to be subject to California tax. Also, list the nonresident members’ distributive share of income.

To compute the amount of tax that must be paid by the LLC on behalf of a nonconsenting nonresident member, multiply such member’s distributive share of income by the following rates:

y8.84% if the member is a C corporation.

y12.3% if the member is an individual, partnership, LLC, estate, or trust.

y1.5% if the member is an S corporation.

Each member’s Nonconsenting Nonresident Members’ Tax may be reduced by the amount of tax previously withheld under R&TC Section 18662 and paid by the LLC on behalf of such member.

Multiply column (c) by column (d) and put the result in column (e) for each nonconsenting nonresident member. Reduce column (e) by the amount in column (f) and put the net amount in column (g) for each nonconsenting nonresident member. Column (g) cannot be less than zero.

The tax being paid by the LLC on behalf of nonconsenting nonresident members is due by the original due date of the return.

Reminder: All members must ile a California tax return. The completion of Schedule T or form FTB 3832 does not satisfy the member’s California iling requirement. Corporate members are also considered doing business in California and may have additional iling requirements. For additional information get FTB Pub. 1060, Guide for Corporations Starting Business in California. Nonresident individuals may qualify to ile a group Form 540NR and should get FTB Pub. 1067, Guidelines for Filing a Group Form 540NR.

Schedule L — Balance Sheets

If Question 4a through Question 4c on federal Form 1065, Schedule B, are all answered “Yes” and the LLC has 10 or fewer members, the LLC is not required to complete Schedules L, M-1, M-2, or Item G on Side 1 of Form 568 or Item I on Schedule K-1 (568).

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

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

If the LLC is required to complete Schedule M-1 and Schedule M-2, the amounts shown should agree with the LLC’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 I, column (c), of all the members’ Schedules K-1 (568).

Net Income (Loss) Reconciliation for Certain LLCs. For taxable years beginning on or after January 1, 2014, the IRS allows LLCs with at least $10 million but less than $50 million in total assets at tax year end to ile 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 LLCs. For California purposes, the LLC must complete the California Schedule M-1, and attach either of the following:

yA copy of the federal Schedule M-3 (Form 1065) and related attachments to the California Limited Liability Company Return of Income.

yA 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 O — Amounts from Liquidation Used to Capitalize a Limited Liability Company

Complete Schedule O if “initial return” is checked in Question H of Form 568.

Schedule O is a summary of the entities liquidated to capitalize the LLC and the amount of gains recognized in such liquidations.

Include the complete names and identiication numbers of all entities liquidated. Check the appropriate box for the type of entity liquidated. Include the amount of liquidation gains recognized in order to capitalize the LLC.

Form 568 Booklet 2018 Page 17

Schedule K (568) and Schedule K-1 (568) — Member’s Share of Income, Deductions, Credits, etc.

Purpose of Schedules

Schedule K (568) is a summary schedule for the LLC’s income, deductions, credits, etc. and Schedule K-1 (568) shows each member’s distributive share. The line items for both of these schedules are the same unless otherwise noted.

One copy of each Schedule K-1 (568) must be attached to the Form 568 when it is iled.

Be sure to give each member a copy of their respective Schedule K-1 (568). The LLC should also include a copy of the Member’s Instructions for Schedule K-1 (568) or speciic instructions for each item reported. These items should be provided to the member on or before the due date of the Form 568.

Refer to the Schedule K Federal/State Line References chart, in this booklet, and Speciic Line Instructions when completing California Schedule K (568) and Schedule K-1 (568).

Schedule K (568) Only

Disregarded entities – Schedule K is only required to be iled if any of the following is met:

yThe income or loss amount reported on Schedule B, line 1 or line 3 through line 11, is $3,000,000 or more.

yThe “Total distributive income/payment items,” Schedule K, line 21a, is greater than or equal to $3,000,000 OR less than or equal to $-3,000,000.

If Schedule K (568) is required to be iled, prepare Schedule K by entering the amount of the corresponding Member’s share of Income, Deductions, Credits, etc. attributable to the activities of the disregarded entity from the Member’s federal Form 1040 including Schedule B, Interest and Ordinary Dividends, Schedule C, Proit or Loss from Business (Sole Proprietorship), Schedule D, Capital Gains and Losses, Schedule E, Supplemental Income and Loss, and Schedule F, federal Schedule K, or federal Form 1120 or 1120S, of the owner.

In column (b) on Schedule K (568), Members’ Shares of Income, Deductions, Credits, etc., enter the amounts from federal Schedule K (1065), Partners’ Distributive Share Items.

In column (c), enter the adjustments resulting from differences between California and federal law (not adjustments related to California source income). In column (d), enter the worldwide income computed under California law.

For members 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 member. Rental activity income (loss) and portfolio income (loss) are not reported on Form 568, Side 4 so that these amounts are not combined with trade or business activity income (loss). Use Schedule K, lines 2, 3, 5, 6, 7, 8, 9, and 11a to report these amounts.

Compliance with LLC Filing Requirements

To help ensure the accurate and timely processing of the LLC’s Form 568, verify the following:

yA Schedule K-1 (568) has been attached to Form 568 for each member included on Form 568, Side 2, Question K. LLCs eligible for the reduced iling program, see General Information D, Who Must File.

yThe attached Schedule K-1 (568) contains the member’s correct name, address, and identifying number.

yItems A through I are completed on Schedule K-1 (568).

yThe appropriate entity type box on Schedule K-1 (568), Side 1, Question A, is checked for each member.

yAll attached Schedules K-1 (568) reconcile to Schedule K.

yThe member’s percentage, on Schedule K-1 (568), Question C, is expressed in decimal format and carried to four decimal places

(i.e., 33.5432). Do not print fractions, percentage symbols (%), or use terms such as “Various” or “Formula”.

ySubstitute computer-generated Schedule K-1 (568) forms must be approved by the FTB.

Schedule K-1 (568) Only

The Schedule K-1 (568) details each member’s distributive share of the LLC’s income, deductions, credits, etc. The LLC completes the entire

Schedule K-1 (568) by illing out the member’s and LLC’s information (name, address, identifying numbers), Questions A through I and the member’s distributive share of items.

For members with PMB addresses, include the designation number in the member’s address area. Precede the number (or letter) with “PMB.”

For each individual member, enter the member’s social security number (SSN) or Individual Taxpayer Identiication Number (ITIN). For all other members enter their FEIN. However, if a member is an individual retirement arrangement (IRA), enter the identifying number of the custodian of the IRA. Do not enter the SSN or ITIN of the person for whom the IRA is maintained.

The LLC iles one California Schedule K-1 (568) for each member with the LLC return and gives one copy to the appropriate member. Do not attach federal Schedules K-1 (1065). The LLC should also provide each member with a copy of either the Member’s Instructions for Schedule K-1 (568) or speciic instructions for each item reported.

Determining the Source of the LLC’s Income for a Resident Member

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

Determining the Source of the LLC’s Income for a Nonresident Member

Business Income: Regardless of the classiication of income for federal purposes, the LLC’s 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 Member is determined as follows:

yA trade or business wholly within California, then income from that trade or business is California source income;

yA business within and outside California, but the part within the state is so separate and distinct that it can be separately accounted for, then only that separate income from within the state is California source income; or

yA single trade or business within and outside California, then California source business income of that trade or business is determined

by apportionment.

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

Nonbusiness Income: Nonbusiness income attributable to real or tangible personal property (such as rents, royalties, or gains or losses) located in California is California source income (Cal. Code Regs., tit. 18 section 17951-3 and R&TC Sections 25124 and 25125). Enter this information on the appropriate line of Schedule K-1 (568). If the LLC believes it may have a unitary member, the information for that member should also be entered in Schedule K-1 (568), Table 2, Part B, for that member.

The source of nonbusiness income attributable to intangible property depends upon the member’s state of residence or commercial domicile. Individuals generally source this income to their state of residence and corporations to their commercial domicile, R&TC Sections 17951 through 17955.

Because the determination of the source of intangible nonbusiness income must be made at the member level, this income is not entered on Schedule K-1 (568), column (e). It is only entered in Table 1.

Completing Schedule K-1 (568)

Questions A through I

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

Question A, Schedule K-1 (568)

Check the appropriate box to indicate the member’s entity type. Exempt organizations should check the exempt organization box regardless of legal form.

Question B, Schedule K-1 (568)

Check the appropriate box to indicate whether this member is foreign or not.

Question C, Schedule K-1 (568)

Percentages must be 4 to 7 characters in length and have a decimal point before the inal 4 characters. For example, 50% is represented as 50.0000,

Page 18 Form 568 Booklet 2018

5% as 5.0000, 100% as 100.0000. Do not enter a fraction, the percentage symbol (%), or the term ‘’Various” or “Formula”.

Question D, Schedule K-1 (568)

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

Question E, Schedule K-1 (568)

Enter the reportable transaction number, and/or the tax shelter registration number if applicable. See instructions for Form 568, Question V, for more information.

Question F(1), Schedule K-1 (568)

If the “YES” box is checked on Form 568, Question T, then check the box for Question F(1) on Schedule K-1 (568).

Question F(2), Schedule K-1 (568)

If the “YES” box is checked on Form 568, Question L, then check the box for Question F(2) on Schedule K-1 (568).

Question G(1), Schedule K-1 (568)

If the LLC is iling a inal year tax return, check the “Final Return” box on Form 568, Side 1, Item H(2), and check the “A inal Schedule K-1 (568)” box for Item G(1) on Schedule K-1 (568). Attach a statement that explains the reason for the termination, or liquidation of the limited liability company, or the reason for iling a short-period return in the case of a technical termination pursuant to IRC Section 708(b)(1)(B) as of January 1, 2015.

California law does not conform to the federal repeal of the technical termination of a partnership.

Completing Column (b) through Column (e)

yIn column (b), enter the amounts from federal Schedule K-1 (1065).

yIn column (c), enter the adjustments resulting from differences between California and federal law for each speciic line item.

yIn 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 member’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 LLC are from agricultural, extractive, savings and loans, banks, and inancial activities. Apportioning LLCs should complete Schedule R and attach it to Form 568.

5.California credits.

For Corporations and Other Business Entities:

1.Income from a trade or business conducted within and outside California. See #4 above For Individuals.

2.Nonbusiness income from real and tangible property located in California. Enter the member’s share of nonbusiness income from real and tangible property located in California in column (e). If the LLC believes it may have a unitary member, enter this income in Table 2, Part B.

3.California credits.

For all members, nonbusiness income from intangible property should not be entered in column (e). Enter this income in Table 1. For more information, see Member’s Instructions for Schedule K-1 (568).

Column (d) and Column (e): Schedule K-1 (568), column (d), includes the member’s distributive share of total LLC 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 member is not a factor in the computation of amounts to be included in column (d) and column (e).

For an LLC 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, gain, or loss from sales of securities).

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

If the LLC knows the member is a resident individual, then the LLC answers “Yes” to Question H on Schedule K-1 (568), and completes column (d), only. Otherwise, the LLC should complete column (e) for all other members.

Completing Table 1

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

Completing Table 2

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.

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

The members will use Table 2, Part C to determine if they meet threshold amount of California property, payroll and sales for doing business threshold in California. See General Information A, Important Information, regarding Doing Business for more information.

Special Rules for Members and LLCs in a Single Unitary Business Special rules apply if the LLC and a member are engaged in a single unitary business. In that case, a unitary member will not use the income information shown in column (e). Instead, the member’s distributive share of business income is combined with the member’s own business income. The combined business income is apportioned using an apportionment formula that consists of an aggregate of the member’s share of the apportionment factors from the LLC and the member’s own apportionment factors, Cal. Code Regs., tit. 18 section 25137-1. The determination of whether a single sales factor or 3-factor apportionment formula applies to the combined income will be made at the member level. The member’s distributive share of business income and property, payroll, and sales factors are entered in Table 2.

If the LLC knows that all of the members are unitary with the LLC, the LLC need not complete column (e) or attach Schedule R. For further information, see Member’s Instructions for Schedule K-1 (568).

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 (568), the LLC must attach a statement to Schedule K-1 (568) for each activity that is a passive activity to the member. Rental activities are passive activities to all members; trade or business activities may be passive activities to some members. The attachment must include all the information explained in the instructions for federal Schedule K-1 (1065).

Specific Line Instructions

The California Schedule K (568) generally follows the federal

Schedule K (1065). Where California and federal laws are the same, the instructions for California Schedule K (568) refer to the instructions for federal Schedule K (1065).

When completing the California Schedule K (568) and Schedule K-1 (568), refer to the Schedule K Federal/State Line References chart (included in this booklet).

Line 1 through Line 11

See the instructions for federal Form 1065, Speciic Instructions Schedules K and K-1, and Schedule K-1 (568) Income (Loss), line 1 through line 11.

Form 568 Booklet 2018 Page 19

Form 568, Schedule K and Schedule K-1 lines 10a and 10b have been separated to report total gains and total losses, and lines 11b and 11c have been separated to report total other income and losses. Net amounts are no longer reported. For example, the partnership is required to report a $100 IRC Section 1231 gain item and a <$60> IRC Section 1231 loss item. The $100 IRC Section 1231 gain item must be reported on line 10a and the

<$60> IRC Section 1231 loss item must be reported as a negative number on line 10b.

Energy conservation rebates, vouchers, or other inancial incentives are excluded from income.

Schedule K (568) must include all income and losses from the LLC 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 (568).

Financial Incentive for Seismic Improvement

For taxable years beginning on or after July 1, 2015, California law allows an income exclusion for loan forgiveness, grants, credits, rebates, vouchers, or other inancial 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).

Financial Incentive for Turf Removal

For taxable years beginning on or after January 1, 2014, and before January 1, 2019, California law allows an income exclusion for rebates, vouchers or other inancial incentive issued by a local water agency or supplier in a turf removal water conservation program. 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).

IRC Section 965 inclusions. California does not conform to IRC Section

965.If for federal purposes, deferred foreign income was included, make an adjustment on line 11b, column (c). In addition, taxpayers that reported IRC Section 965 amounts on their federal tax return should write “IRC 965” on the top of their California tax return or follow their tax software guidelines.

Line 1, column (c)

An adjustment to increase the business income of a service LLC to relect the guaranteed payment deduction adjustment required by Cal. Code Regs., tit. 18 section 17951-4(g) should be made here.

Line 10a and Line 10b

Enter on lines 10a and 10b the amounts shown on Schedule D-1, line 7. Do not include specially allocated ordinary gains and losses, or net gains (losses) from involuntary conversions due to casualties or thefts on this line. Instead, report them on line 11b or 11c, along with a schedule and explanation.

If the LLC has more than one activity and the amount on line 10a or

line 10b is a passive activity amount to the member, attach a statement to Schedule K-1 (568), that identiies the activity to which IRC Section 1231 gain (loss) relates.

Deductions

Line 12 through Line 13

See the instructions for federal Form 1065, Speciic Instructions Schedules K and K-1, and Schedule K-1 (568), Deductions, line 12 and line 13a through line 13e.

IRC Section 179 expense deductions are subject to different rules for California. See instructions for form FTB 3885L.

Cancellation of Debt Income (CODI). California did not conform to the federal election under IRC Section 108(i) to defer the recognition of CODI in connection with the reacquisition of an applicable debt instrument after December 31, 2008, and before January 1, 2011. The deferral period is ive taxable years for CODI generated in 2009, or four taxable years for CODI generated in 2010.

For federal tax purposes, at the end of the deferral period the income is reported ratably over the next ive years (taxable years beginning on or after January 1, 2014 and before January 1, 2019). If for California purposes, the CODI had been included in income during previous taxable years, and the LLC

recognized the CODI for federal tax purposes in the current year, deduct the federal CODI amount on line 13e, column (c).

IRC Section 965 deductions. California does not conform to IRC Section 965. If, for federal purposes, a deduction was made for deferred foreign income, make an adjustment on line 13e, column (c).

Line 13a – Charitable Contributions

Enter the total amount of charitable contributions made by the LLC during its taxable year on Schedule K (568) and each member’s distributive share on Schedule K-1 (568). Attach an itemized list to both schedules that show the amount subject to the 50%, 30%, and 20% limitations.

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

Members are allowed a deduction for contributions to qualiied 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, 2014, and before January 1, 2023, do not include any amounts taken into account for the College Access Tax credit as a contribution deduction on line 13a.

Line 13b – Investment Interest Expense

This line must be completed whether or not a member 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 (568) and Schedule K-1 (568) rather than line 13d of Schedule K (568) and Schedule K-1 (568).

Property held for investment includes a member’s interest in a trade or business activity that is not a passive activity to the LLC and in which the member does not materially participate. An example would be the rule concerning a member’s working interest in an oil and gas property (i.e., the member’s interest is not limited if the member 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 box 14 of the 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

Add the total amounts on all member’s Schedule K-1 (568). If taxes were withheld by the LLC or if there is a pass-through withholding credit from another entity or backup withholding, the LLC must provide each affected member (including California residents) a completed Form 592-B. Members must attach Form 592-B to the front of their California tax return to claim the withheld amounts. Schedule K-1 (568) 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 members need to igure credits related to a rental real estate activity, other than the low-income housing credit. Attach to each member’s Schedule K-1 (568) a statement showing the amount to be reported and the applicable form on which the amount should be reported.

Page 20 Form 568 Booklet 2018

Line 15d – Credits Related to Other Rental Activities

Use this line to report information that the members need to igure credits related to a rental activity. Attach to each member’s Schedule K-1 (568) 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 Paid by LLC, Schedule K-1 (568) only

If income tax was paid by the LLC on behalf of a nonresident member who did not sign form FTB 3832, the amount paid is entered on the member’s Schedule K-1 (568), line 15e. This is not a distributive share item; it is only reported on the speciic nonresident member’s Schedule K-1. Members must attach a copy of Schedule K-1 (568) to their California income tax return to claim the tax paid by the LLC on their behalf.

If income tax was paid by an LLC on behalf of a member that is an LLC and form FTB 3832 is not signed on behalf of the member LLC, the amount paid by an LLC is entered on the member LLC’s Schedule K-1 (568), line 15e.

Part of this amount or this entire amount may be reported on Form 568, line 7 (see instructions). Any remaining withholding credit is allocated to all members according to their LLC interest. Individual members must attach a copy of the following to their California tax return to claim their share of the tax paid by the LLC on behalf of the member LLC:

yThe Schedule K-1 (568) previously issued to the member LLC by its LLC

yThe Schedule K-1 (568) issued by the member LLC, that paid the LLC tax, to its members.

Line 15f – Other Credits

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

Credits that may be reported on line 15f (depending on the type of activity they relate to) include:

yCalifornia Competes Tax Credit. Get form FTB 3531.

yCollege Access Tax Credit. Get form FTB 3592.

yDisabled Access Credit for Eligible Small Businesses. Get form FTB 3548.

yDonated Agricultural Products Transportation Credit. Get form FTB 3547.

yEnhanced Oil Recovery Credit. Get form FTB 3546.

yEnterprise Zone (EZ) Hiring Credit. Get form FTB 3805Z.

yLocal Agency Military Base Recovery Area (LAMBRA) Hiring Credit. Get form FTB 3807.

yNatural Heritage Preservation Credit. Get form FTB 3503.

yNew Advanced Strategic Aircraft Credit. Use credit code 236.

yNew California Motion Picture and Television Production Credit. Get form FTB 3541.

yNew Donated Fresh Fruits or Vegetables Credit. Get form FTB 3814.

yNew Employment Credit. Get form FTB 3554.

yPrison Inmate Labor Credit. Get form FTB 3507.

yResearch Credit. Get form FTB 3523.

All credit forms are available at ftb.ca.gov/forms.

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

Line 16

The information reported on line 16 of the federal Schedule K (1065) and

box 16 of the federal Schedule K-1 (1065), Foreign Transactions, do not apply to California and therefore there is no line 16.

Alternative Minimum Tax (AMT) Items

Line 17a through Line 17f

Enter each member’s distributive share of income and deductions that are adjustments and tax preference items. 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 alternative minimum tax (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 (568), 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 (568), the amounts of tax-exempt income, other tax-exempt income, and nondeductible expenses, from federal Schedule K-1 (1065), box 18. The LLC should give each member a description and the amount of the member’s share for each item applicable to California in this category.

Distributions

Line 19a and Line 19b – Distributions

Enter on Schedule K (568), 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 (568), 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 (568) and Schedule K-1 (568). Enter on line 20b only investment expenses included on line 13d of Schedule K (568) and Schedule K-1 (568).

If items of investment income or expenses are included in the amounts that are required to be passed through separately to the member on Schedule K-1 (568), items other than the amounts included on line 5 through line 9, line 11a, and line 13d of Schedule K-1 (568), give each member 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

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.

Form 568 Booklet 2018 Page 21

The LLC 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:

a.Description of the property.

b.Date the property was acquired.

c.Date the property was sold.

d.Gross sales price.

e.Cost or other basis plus expense of sale (not including the LLC’s basis reduction in the property due to IRC Section 179 expense deduction).

f.Depreciation allowed or allowable (not including the IRC Section 179 expense deduction).

g.Amount of IRC Section 179 expense deduction (if any) passed through to each member for the property and the LLC’s taxable year(s) in which the amount was passed through.

h.An indication if the disposition is from a casualty or theft.

i.If this is an installment sale, any information needed to complete form FTB 3805E.

Supplemental Information

The LLC may need to report supplemental information that is not speciically requested on the Schedule K-1 (568) separately to each member. If the LLC 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.

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

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

The LLC 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:

a.Description of the property.

b.Date the property was acquired.

c.Date the property was sold.

d.The members pro-rata share of the gross sales price.

e.The members 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).

f.The members pro-rata share of the depreciation allowed or allowable (not including the IRC Section 179 expense deduction).

g.The members pro-rata share of the amount of IRC 179 expense deduction (if any) passed through to the member for the property and the LLC’s taxable year(s) in which the amount was passed through.

h.An indication if the disposition is from a casualty or theft.

i.If this is an installment sale, any information needed to complete form FTB 3805E. The LLC also must separately report the member’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 qualiied taxpayer who has 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 LLC should provide the member’s proportionate interest of aggregate gross receipts on Schedule K-1 (568), 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:

yThe gross receipts of the trades or businesses which the taxpayer owns.

yThe proportionate interest of the gross receipts of the trades or businesses which the taxpayer owns.

yThe proportionate interest of the pass-through entity’s gross receipts in which the taxpayer holds an interest.

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

R&TC Section 25120 was amended to add the deinition of gross receipts. For a complete deinition 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 deined 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 noting each of the following:

1.Each member’s distributive share of business income apportioned to an EZ, LAMBRA, MEA, or TTA.

2.Each member’s distributive share of business capital gain or loss included in 1 above.

Analysis (Schedule K (568) only)

Line 21a and Line 21b

See the federal instructions for Schedule K (1065), Analysis of Net Income (Loss).

Other Member Information (Schedule K-1 (568) only)

Table 1

Enter the member’s share of nonbusiness income from intangibles. Because the source of this income must be determined at the member 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 statement providing a breakdown of income (loss) in each subclass.

Enter nonbusiness income from intangibles in Table 1 net of related expenses. Do not include expenses offset against nonbusiness income from intangibles in column (e).

Table 2

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.

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

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

“Business income” is deined by Cal. Code Regs., tit. 18 section 25120(a) as income arising in the regular course of the taxpayer’s trade or business. Business income includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitutes integral parts of the taxpayer’s regular trade or business.

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

Nonbusiness income is all income other than business income.

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

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

The members will use Table 2, Part C to determine if they meet threshold amount of California property, payroll and sales for doing business threshold in California. See General Information regarding Doing Business for more information.

Page 22 Form 568 Booklet 2018

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 (568). For more information, see the Speciic Line Instructions for Schedule K (568) and Schedule K-1 (568), Member’s Share of Income, Deductions, Credits, etc, included in this booklet.

 

Federal Schedule K (1065)

 

CA Schedule K (568)

 

 

 

 

Line

Items

Line

Items

 

 

 

 

1

Ordinary business income (loss)

1

Ordinary income (loss) from trade or business activities

2

Net rental real estate income (loss)

2

Net income (loss) from rental real estate activities

3a

Other gross rental income (loss)

3a

Gross income (loss) from other rental activities

3b

Expenses from other rental activities

3b

Less expenses

3c

Other net rental income (loss)

3c

Net income (loss) from other rental activities

4

Guaranteed payments

4

Guaranteed payments to members

5

Interest income

5

Interest income

6a

Ordinary dividends

6

Dividends

6b

Qualiied dividends

Included in line 6 above

6c

Dividend equivalents

Not applicable

7

Royalties

7

Royalties

8

Net short-term capital gain (loss)

8

Net short-term capital gain (loss)

9a

Net long-term capital gain (loss)

9

Net long-term capital gain (loss)

9b

Collectibles 28% gain (loss)

Included in line 8 and line 9 above, as applicable

9c

Unrecaptured section 1250 gain

Included in line 8 and line 9 above, as applicable

 

 

 

 

10

Net section 1231 gain (loss)

10a

Total gain under IRC Section 1231 (other than due to casualty or theft)

Included in line 10 above

10b

Total loss under IRC Section 1231 (other than due to casualty or theft)

 

 

 

 

Included in line 11 below

11a

Other portfolio income (loss)

11

Other income (loss)

11b

Total other income

Included in line 11 above

11c

Total other loss

12

Section 179 deduction

12

Expense deduction for recovery property (IRC Section 179)

 

 

 

 

13a

Contributions

13a

Charitable contributions

13b

Investment interest expense

13b

Investment interest expense

13c

Section 59(e)(2) expenditures: (2) Amount

13c

1. Total expenditures to which IRC Section 59(e) election may apply

 

(1) Type

 

2. Type of expenditures

 

Included in line 13d below

13d

Deductions related to portfolio income

13d

Other deductions (see instructions)

13e

Other deductions

 

 

 

 

14a-c

Self-employment

14a-c

Not applicable

 

 

 

 

15a

Low-income housing credit (section 42(j)(5))

15a

Withholding on LLC allocated to all members

15b

Low-income housing credit (other)

15b

Low-income housing credit

15c

Qualiied rehabilitation expenditures (rental real estate)

15c

Credits other than the credit shown on line 15b related to rental

 

 

 

real estate activities

15d

Other rental real estate credits

15d

Credit(s) related to other rental activities

15e

Other rental credits

15e

Nonconsenting nonresident members’ tax paid by LLC

15f

Other credits

15f

Other credits

 

 

 

 

16a-r

Foreign Transactions

16a-r

Not applicable

 

 

 

 

17a

Post-1986 depreciation adjustment

17a

Depreciation adjustment on property placed in service after 1986

17b

Adjusted gain or loss

17b

Adjusted gain or loss

17c

Depletion (other than oil and gas)

17c

Depletion (other than oil and gas)

17d

Oil, gas, and geothermal properties – gross income

17d

Gross income from oil, gas, and geothermal properties

17e

Oil, gas, and geothermal properties – deductions

17e

Deductions allocable to oil, gas, and geothermal properties

17f

Other AMT items

17f

Other alternative minimum tax items

 

 

 

 

18a

Tax-exempt interest income

18a

Tax-exempt interest income

18b

Other tax-exempt income

18b

Other tax-exempt income

18c

Nondeductible expenses

18c

Nondeductible expenses

 

 

 

 

19a

Distributions of cash and marketable securities

19a

Distributions of cash and marketable securities

19b

Distributions of other property

19b

Distributions of property other than money

 

 

 

 

20a

Investment income

20a

Investment income

20b

Investment expenses

20b

Investment expenses

20c

Other items and amounts

20c

Other information

 

 

 

 

Form 568 Booklet 2018 Page 23

THIS PAGE INTENTIONALLY LEFT BLANK

Visit our website:

ftb.ca.gov

Page 24 Form 568 Booklet 2018

TAXABLE YEAR

Limited Liability Company

 

CALIFORNIA FORM

 

 

 

 

568

2018 Return of Income

For calendar year 2018 or iscal year beginning

(m m / d d / y y y y)

and ending

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(m m / d d / y y y y)

 

RP

Limited liability company name (type or print)A California Secretary of State (SOS) ile number

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B FEIN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Street address (suite, room, PO box)

 

PMB no.

 

 

 

 

 

 

 

C Principal business activity name (same as federal)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

City (If the LLC has a foreign address, see instructions.)

 

State

ZIP code

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

D Principal product or service (same as federal)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign country name

 

 

 

Foreign province/state/county

 

 

 

 

 

 

 

 

 

Foreign postal code

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E

Check accounting method

 

 

 

 

 

 

F Date business started in CA

 

G

 

Enter total assets at end of year.

 

 

 

 

 

 

 

 

 

(m m / d d / y y y y)

 

 

 

 

See instructions.

 

 

 

(1) Cash (2) Accrual (3) Other (attach explanation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

H Check the applicable box

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I Principal business activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

code (same as federal)

(1) Initial return (2) FINAL RETURN

(3) Amended return

 

 

 

(4) Protective claim

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

J

(1) During this taxable year, did another person or legal entity acquire control or majority ownership (more than a 50% interest)

 

 

 

 

of this LLC or any legal entity in which the LLC holds a controlling or majority interest that owned California real property

 

 

 

 

(i.e., land, buildings), leased such property for a term of 35 years or more, or leased such property from a government

No

 

agency for any term?

. . . . . .

. .

.

. .

. . .

. .

. . . .

. . .

. .

.

.

.

.

.

.

 

. . .

 

. . .

. . .

. .

.

.

. . .

.

.

.

.

.

. .

.

 Yes

 

(2) During this taxable year, did this LLC acquire control or majority ownership (more than a 50% interest) in another legal

 

 

 

 

entity that owned California real property (i.e., land, buildings), leased such property for a term of 35 years or more,

No

 

or leased such property from a government agency for any term?

. . .

. .

.

.

.

.

.

.

 

. . .

 

. . .

. . .

. .

.

.

. . .

.

.

.

.

.

. .

.

 Yes

 

(3) During this taxable year, has more than 50% of the LLC’s ownership interests cumulatively transferred in one or more

 

 

 

 

transactions after an interest in California real property (i.e., land, buildings) was transferred to it that was excluded

 

 

 

 

from property tax reassessment under Revenue and Taxation Code Section 62(a)(2) and it was not reported on a

 

 

 

 

 

 Yes

No

 

previous year’s tax return?

. . . . . .

. .

.

. .

. . .

. .

. . . .

. . .

. .

.

.

.

.

.

.

 

. . .

 

. . .

. . .

. .

.

.

. . .

.

.

.

.

.

. .

.

(Yes requires iling of statement, penalties may apply– see instructions.)

Enclose, but do not staple, any payment.

Complete Schedule IW, LLC Income Worksheet (on Side 7) irst to determine line 1.

1

Total income from Schedule IW, Limited Liability Company Income Worksheet. See instructions

2

Limited Liability Company fee. See instructions

3

2018 annual Limited Liability Company tax. See instructions

4

Nonconsenting nonresident members’ tax liability from Schedule T (Side 4)

5

Partnership level tax. See instructions

6

Total tax and fee. Add line 2, line 3, line 4, and line 5

7

Amount paid with form FTB 3537 and 2018 form FTB 3522 and form FTB 3536

8

Overpayment from prior year allowed as a credit

9

Withholding (Form 592-B and/or 593)

10

Total payments. Add line 7, line 8, and line 9

11

Use tax. This is not a total line. See instructions

12

Payments balance. If line 10 is more than line 11, subtract line 11 from line 10

13

Use tax balance. If line 11 is more than line 10, subtract line 10 from line 11

 

Whole dollars only

 

 

 

1

 

00

2

 

00

3

 

00

4

 

00

5

 

00

6

 

00

7

 

00

8

 

00

9

 

00

10

 

00

11

 

00

12

 

00

13

 

00

3671183

Form 568 2018 Side 1

 

 

 

 

 

 

 

 

 

 

 

 

 

Whole dollars only

 

 

 

 

 

 

 

. . .

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

Tax and fee due. If line 6 is more than line 12, subtract line 12 from line 6

. . . . . .

 

. . .

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

00

 

 

15

Overpayment. If line 12 is more than line 6, subtract line 6 from line 12

. . . . . .

 

. . .

 

. . .

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

00

 

 

16

Amount of line 15 to be credited to 2019 tax or fee

. . . . . .

 

. . .

 

. . .

16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

00

 

 

17

Refund. If the total of line 16 is less than line 15, subtract the total from line 15

17

 

 

 

 

 

 

,

 

 

 

 

,

 

 

 

 

 

 

.

 

00

 

 

 

 

 

 

. . .

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18

Penalties and interest. See instructions

. . . . . .

 

. . .

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

00

 

 

19

Total amount due. Add line 13, line 14, line 16, and line 18, then subtract line 15 from the result. .

19

 

 

 

 

 

 

,

 

 

 

 

,

 

 

 

 

 

.

 

00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KEnter the maximum number of members in the LLC at any time during the year. For multiple member LLCs, attach a

 

California Schedule K-1 (568) for each of these members

 

 

 

 

 

L

Is this LLC an investment partnership? See General Information O

 Yes No

M

(1)

Is this LLC apportioning or allocating income to California using Schedule R?

 Yes No

 

(2)

If “No,” was this LLC registered in California without earning any income sourced in this state during the taxable year? . . .

Yes No

N

Was there a distribution of property or a transfer (for example, by sale or death) of an LLC interest during the taxable year? . . .

 Yes No

P

(1)

Does the LLC have any foreign (non-U.S.) nonresident members?

 Yes No

 

(2)

Does the LLC have any domestic (non-foreign) nonresident members?

 Yes No

 

(3)

Were Form 592, Form 592-A, Form 592-B , and Form 592-F iled for these members?

 Yes No

Q

Are any members in this LLC also LLCs or partnerships?

 Yes No

R

Is this LLC under audit by the IRS or has it been audited in a prior year?

 Yes No

S

Is this LLC a member or partner in another multiple member LLC or partnership?

 Yes

No

 

If “Yes,” complete Schedule EO, Part I.

 

 

 

T

Is this LLC a publicly traded partnership as deined in IRC Section 469(k)(2)?

. . . . Yes No

U

(1)

Is this LLC a business entity disregarded for tax purposes?

 Yes

No

 

(2)

If “Yes,” see instructions and complete Side 1, Side 2, Side 3, Schedule B, Side 5, and Side 7, if applicable. Are there

 Yes

No

 

 

credits or credit carryovers attributable to the disregarded entity?

 

(3)

If “Yes” to U(1), does the disregarded entity have total income derived from or attributable to California that is less than

. . . . Yes

No

 

 

the LLC’s total income from all sources?

V

Has the LLC included a Reportable Transaction, or Listed Transaction within this return?

 Yes No

 

(See instructions for deinitions). If “Yes,” complete and attach federal Form 8886 for each transaction

W Did this LLC ile the Federal Schedule M-3 (federal Form 1065)?

 Yes No

X

Is this LLC a direct owner of an entity that iled a federal Schedule M-3?

 Yes No

Y

Does the LLC have a beneicial interest in a trust or is it a grantor of a Trust?

 Yes

No

 

If “Yes,” attach schedule of trusts and federal identiication numbers.

 

 

 

Z

Does this LLC own an interest in a business entity disregarded for tax purposes?

Yes

No

 

If “Yes,” complete Schedule EO, Part II.

 

 

 

(CONTINUED ON SIDE 3)

Side 2 Form 568 2018

3672183

(CONTINUED FROM SIDE 2)

 

 

 

 

AA Is any member of the LLC related (as deined in IRC Section 267(c)(4)) to any other member of the LLC?

. . . . . . . . . . .  Yes

No

BB Is any member of the LLC a trust for the beneit of any person related (as deined in IRC Section 267(c)(4))

. . . . . . . . . . .  Yes No

 

to any other member?

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CC

(1)

Is the LLC deferring any income from the disposition of assets? (see instructions)

. . . . . . . . . . .  Yes No

 

(2)

. . .If “Yes,” enter the year of asset disposition

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . .

 

 

DD Is the LLC reporting previously deferred Income from:

 Installment Sale  IRC §1031

IRC §1033  Other

 

(see instructions)

EE “Doing business as” name. See instructions:

. . . . _____________________________________________________________________

FF

(1)

Has this LLC operated as another entity type such as a Corporation, S Corporation, General Partnership,

. . . . . . . . . . .  Yes

No

 

 

Limited Partnership, or Sole Proprietorship in the previous ive (5) years?

(2)If “Yes”, provide prior FEIN(s) if different, business name(s), and entity type(s) for prior returns

iled with the FTB and/or IRS (see instructions): _________________________________________________________________________________

GG (1)

Has this LLC previously operated outside California?

. . . . . . . . . . . . . . . .

. . .

 

 Yes No

(2)

Is this the irst year of doing business in California?

. . . . . . . . . . . . . . . .

. . .

 

 Yes No

Single Member LLC Information and Consent — Complete only if the LLC is disregarded.

Federal TIN/SSN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sole Owner’s name (as shown on owner’s return)

FEIN/CA Corp no./CA SOS File no.

Street Address, City, State, and ZIP Code

What type of entity is the ultimate owner of this SMLLC? See instructions. Check only one box:

(1) Individual

(2) C Corporation

(3) Pass-Through (S corporation, partnership, LLC classiied as a partnership)

(4) Estate/Trust (5) Exempt Organization

Member’s Consent Statement: I consent to the jurisdiction of the State of California to tax my LLC income and agree to ile returns and pay tax as may be required by the Franchise Tax Board.

Signature

 

 

 

 

 

Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

To learn about your privacy rights, how we may use your information, and the consequences for not providing the requested information, go to ftb.ca.gov/forms

 

and search for 1131. To request this notice by mail, call 800.852.5711.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and

 

belief, it is true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.

 

Signature

 

 

 

Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sign

of authorized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Here

member or

 

 

 

 

Telephone

manager

 

 

 

 

 

 

Authorized member or manager’s email address (optional)

 

 

 (

)

 

 

 

 

 

 

 

 

 

 

 

Paid

 

 

Date

Check if

PTIN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

preparer’s

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

self-employed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid

signature

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preparer’s

 

 

 

 

 

 

Firm’s FEIN

Use Only

Firm’s name (or yours,

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

if self-employed)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Telephone

 

and address

 

 

 

 

 

 

 

 

 

 

 

 (

)

 

 

 

 

 

 

 

 

 

 

May the FTB discuss this return with the preparer shown above (see instructions)?. . . . . . . . . .  Yes No

3673183

Form 568 2018 Side 3

Schedule A Cost of Goods Sold

1 Inventory at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 Purchases less cost of items withdrawn for personal use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 Cost of labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 Additional IRC Section 263A costs. Attach schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 Other costs. Attach schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 Total. Add line 1 through line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 Inventory at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8 Cost of goods sold. Subtract line 7 from line 6. Enter here and on Schedule B, line 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

 

00

2

 

00

3

 

00

4

 

00

5

 

00

6

 

00

7

 

00

8

 

00

9a Check all methods used for valuing closing inventory:

 

(1) Cost

(2) Lower of cost or market as described in Treas. Reg. Section 1.471-4

(3) Write down of “subnormal” goods as

 

described in Treas. Reg. Section 1.471-2(c)

(4) Other. Specify method used and attach explanation ___________________________

b

Check this box if the LIFO inventory method was adopted this taxable year for any goods. If checked, attach federal Form 970

c

Do the rules of IRC Section 263A (with respect to property produced or acquired for resale) apply to the LLC?

Yes No

dWas there any change (other than for IRC Section 263A purposes) in determining quantities, cost, or valuations between opening

and closing inventory? If “Yes,” attach explanation

Yes No

Schedule B Income and Deductions

Caution: Include only trade or business income and expenses on line 1a through line 22 below. See the instructions for more information.

Income

Deductions

1

. . . . .a Gross receipts or sales $ ____________ b Less returns and allowances $ ____________ .

c Balance

1c

 

00

2

Cost of goods sold (Schedule A, line 8)

. . . . . . . .

2

 

00

3

GROSS PROFIT. Subtract line 2 from line 1c

. . . . . . . .

3

 

00

4

Total ordinary income from other LLCs, partnerships, and iduciaries. Attach schedule

. . . . . . . .

4

 

00

5

Total ordinary loss from other LLCs, partnerships, and iduciaries. Attach schedule

. . . . . . . .

5

 

00

6

Total farm proit. Attach federal Schedule F (Form 1040)

. . . . . . . .

6

 

00

7

Total farm loss. Attach federal Schedule F (Form 1040)

. . . . . . . .

7

 

00

8

Total gains included on Schedule D-1, Part II, line 17 (gain only)

. . . . . . . .

8

 

00

9

Total losses included on Schedule D-1, Part II, line 17 (loss only)

. . . . . . . .

9

 

00

10

Other income. Attach schedule

. . . . . . . .

10

 

00

11

Other loss. Attach schedule

. . . . . . . .

11

 

00

12

Total income (loss). Combine line 3 through line 11

. . . . . . . .

12

 

00

13

Salaries and wages (other than to members)

. . . . . . . .

13

 

00

14

Guaranteed payments to members

. . . . . . . .

14

 

00

15

Bad debts

. . . . . . . .

15

 

00

16

Deductible interest expense not claimed elsewhere on return

. . . . . . . .

16

 

00

17

a Depreciation and amortization. Attach form FTB 3885L $ _________________

c Balance

 

 

 

 

b Less depreciation reported on Schedule A and elsewhere on return $ _________________

17c

 

00

18

Depletion. Do not deduct oil and gas depletion

. . . . . . . .

18

 

00

19

Retirement plans, etc

. . . . . . . .

19

 

00

20

Employee beneit programs

.. .. .. .. .. .. .. ..

20

 

00

21

Other deductions. Attach schedule

21

 

00

22

Total deductions. Add line 13 through line 21

. . . . . . . .

22

 

00

23

Ordinary income (loss) from trade or business activities. Subtract line 22 from line 12

. . . . . . . .

23

 

00

Schedule T Nonconsenting Nonresident Members’ Tax Liability. Attach additional sheets if necessary.

(a)

Member’s name

(b)

SSN, ITIN,

or FEIN

(c)

Distributive

share of income

(d)

Tax

rate

(e)

Member’s

total tax due

(see instructions)

(f)

Amount withheld by this LLC on this member – reported on Form 592-B

(g)

Member’s

net tax due

Total the amount of tax due. Enter the total here and on Side 1, line 4. If less than zero enter -0-

________________

Side 4 Form 568 2018

3674183

Schedule K Members’ Shares of Income, Deductions, Credits, etc.

 

(a)

 

(b)

(c)

(d)

 

Distributive share items

 

Amounts from

California

Total amounts using

 

 

 

federal K (1065)

adjustments

California law

1

Ordinary income (loss) from trade or business activities

1

 

 

 

 

2

Net income (loss) from rental real estate activities. Attach federal Form 8825

2

 

 

 

 

 

3

a Gross income (loss) from other rental activities

3a

 

 

 

 

 

 

b Less expenses. Attach schedule

3b

 

 

 

cNet income (loss) from other rental activities. Subtract line 3b

 

 

 

from line 3a

 

 

 

 

 

 

3c

 

 

 

 

 

 

 

. . . . . . . . . . . . . .

. . . .

. . . . . . . . . . .

. . . . . . . . . . . . . .

. . . .

.

 

 

 

 

 

(Loss)

4

Guaranteed payments to members

 

 

 

 

4

 

 

 

 

 

. . . . . . . . . .

. . . . . . . . . . . . . .

. . . .

.

 

 

 

 

 

 

5

Interest income

 

 

 

 

 

 

5

 

 

 

 

 

. . . . . . . . . . . . . .

. . . .

. . . . . . . . . .

. . . . . . . . . . . . . .

. . . .

.

 

 

 

 

 

 

6

Dividends

 

 

 

 

 

 

6

 

 

 

 

 

Income

 

 

 

 

 

 

 

 

 

 

 

. . . . . . . . . . . . . .

. . . .

. . . . . . . . . .

. . . . . . . . . . . . . .

. . . .

.

 

 

 

 

 

 

7

Royalties

 

 

 

 

 

 

7

 

 

 

 

 

. . . . . . . . . . . . . .

. . . .

. . . . . . . . . .

. . . . . . . . . . . . . .

. . . .

.

 

 

 

 

 

 

8

Net short-term capital gain (loss). Attach Schedule D (568)

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

.

 

 

 

 

 

 

 

9

Net long-term capital gain (loss). Attach Schedule D (568)

 

9

 

 

 

 

 

 

.

 

 

 

 

 

 

 

10

a

Total gain under IRC Section 1231 (other than due to casualty or theft) .

10a

 

 

 

 

 

 

 

 

 

 

 

 

b Total loss under IRC Section 1231 (other than due to casualty or theft) .

10b

 

 

 

 

 

 

 

 

 

 

 

 

11

a

Other portfolio income (loss). Attach schedule

 

 

 

11a

 

 

 

 

 

. . . . . . . . . . . . . .

. . . .

.

 

 

 

 

 

 

 

b Total other income. Attach schedule

 

 

 

11b

 

 

 

 

 

 

. . . . . . . . . . . . . .

. . . .

.

 

 

 

 

 

 

 

. .c Total other loss. Attach schedule

. . . . . . . . . .

. . . . . . . . . . . . . .

. . . .

.

11c

 

 

 

 

 

 

12

Expense deduction for recovery property (IRC Section 179). Attach schedule

12

 

 

 

 

 

 

Deductions

13

a

. . . . . . . . .Charitable contributions. See instructions. Attach schedule

.

13a

 

 

 

 

 

 

b

Investment interest expense

. . . . . . . . . . . . . .

. . . .

.

13b

 

 

 

 

 

c

.1 Total expenditures to which IRC Section 59(e) election may apply

.

13c1

 

 

 

 

 

 

 

2 Type of expenditures ________________________________ ____

13c2

 

 

 

 

 

 

 

. . . . . . .d Deductions related to portfolio income

. . . . . . . . . . . . . .

. . . .

.

13d

 

 

 

 

 

 

 

e Other deductions. Attach schedule

 

 

 

 

13e

 

 

 

 

 

 

. . . . . . . . . .

. . . . . . . . . . . . . .

. . . .

.

 

 

 

 

 

 

15

a

Withholding on LLC allocated to all members

. . . . . . . . . . . . . . .

. . . .

.

15a

 

 

 

 

 

 

 

 

b

. . . . . . . . . . . . . . . .Low-income housing credit

. . . . . . . . . . . . . .

. . . .

.

15b

 

 

 

 

 

Credits

 

c Credits other than the credit shown on line 15b related to rental real

 

 

 

 

 

 

 

 

 

 

estate activities. Attach schedule . .

. . . . . . . . . .

. . . . . . . . . . . . . .

. . . .

.

15c

 

 

 

 

 

 

 

d

Credits related to other rental activities. Attach schedule

 

15d

 

 

 

 

 

 

 

 

.

 

 

 

 

 

 

 

. . . . . . . . . . . . .e Nonconsenting nonresident members’ tax paid by LLC

.

15e

 

 

 

 

 

 

 

 

f Other credits. Attach schedule . . . .

. . . . . . . . . .

. . . . . . . . . . . . . .

. . . .

.

15f

 

 

 

 

Alternative Minimum Tax (AMT) Items

17

a

Depreciation adjustment on property placed in service after 1986

.

17a

 

 

 

 

 

 

. . . . . . . . . . . . . . . . . . . . .b Adjusted gain or loss

. . . . . . . . . . . . . .

. . . .

.

17b

 

 

 

 

 

 

.c Depletion (other than oil and gas)

. . . . . . . . . .

. . . . . . . . . . . . . .

. . . .

.

17c

 

 

 

 

 

 

. . . . . . . . . . . .d Gross income from oil, gas, and geothermal properties

.

17d

 

 

 

 

 

 

. . . . . . . . .e Deductions allocable to oil, gas, and geothermal properties

.

17e

 

 

 

 

 

 

f

. . . . . . . . . . . . .Other alternative minimum tax items. Attach schedule

.

17f

 

 

 

 

 

 

18

a

Tax-exempt interest income

. . . . . . . . . . . . . .

. . . .

.

18a

 

 

 

 

 

Information

 

b

Other tax-exempt income

. . . . . . . . . . . . . .

. . . .

.

18b

 

 

 

 

 

c

. . . . . . . . . . . . . . . . . .Nondeductible expenses

. . . . . . . . . . . . . .

. . . .

.

18c

 

 

 

 

 

19

a

Distributions of money (cash and marketable securities)

 

19a

 

 

 

 

.

 

 

 

 

 

 

b

Distribution of property other than money

 

 

 

19b

 

 

 

 

Other

 

. . . . . . . . . . . . . .

. . . .

.

 

 

 

 

 

20

a

Investment income

. . . . . . . . . . . . . .

. . . .

.

20a

 

 

 

 

 

 

b

Investment expenses

 

 

 

 

20b

 

 

 

 

 

 

 

. . . . . . . . . . . . . .

. . . .

.

 

 

 

 

 

 

 

. . . . . . . . . .c Other information. See instructions

. . . . . . . . . . . . . .

. . . .

.

20c

 

 

 

 

 

 

21

a

Total distributive income/payment items. Combine lines 1, 2, and 3c

 

 

 

 

 

 

 

Analysis

 

 

through 11c. From the result, subtract the sum of lines 12 through 13e.

21a

 

 

 

 

 

 

members:

Corporate

 

i. Active

ii. Passive

 

Partnership

Exempt Organization

Nominee/Other

LLC

 

 

b

Analysis of

(a)

 

(b) Individual

 

 

(c)

(d)

(e)

(f)

 

 

 

Members

 

 

 

 

 

 

 

 

 

 

 

 

 

3675183

Form 568 2018 Side 5

Schedule L Balance Sheets. See the instructions for Schedule L, before completing

Schedules L, M-1, and M-2.

 

 

 

 

Beginning of taxable year

 

End of taxable year

 

 

 

 

 

 

 

 

 

 

 

Assets

 

(a)

(b)

(c)

 

(d)

1

Cash

 

 

 

 

 

 

2

. . . . . . . . . . .a Trade notes and accounts receivable

 

 

 

 

 

 

 

b

Less allowance for bad debts

(

)

 

(

)

 

3

Inventories

 

 

 

 

 

4

. . . . . . . . . . . . . . . . . . . .U.S. government obligations

 

 

 

 

 

 

5

. . . . . . . . . . . . . . . . . . . . . . . . .Tax-exempt securities

 

 

 

 

 

 

6

Other current assets. Attach schedule

 

 

 

 

 

7

. . . . . . . . . . . . . . . . . .Mortgage and real estate loans

 

 

 

 

 

 

8

Other investments. Attach schedule

 

 

 

 

 

9

. . . . . . . . .a Buildings and other depreciable assets

 

 

 

 

 

 

 

b

Less accumulated depreciation

(

)

(

)

10

a

Depletable assets

 

 

 

 

 

 

 

b

Less accumulated depletion

(

)

 

(

)

 

11

Land (net of any amortization)

 

 

 

 

 

 

 

 

 

12

. . . . . . . . . . .a Intangible assets (amortizable only)

 

 

 

 

 

 

 

b

Less accumulated amortization

(

)

 

(

)

 

13

Other assets. Attach schedule

 

 

 

 

 

14

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Total assets

 

 

 

 

 

 

 

Liabilities and Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

Accounts payable

 

 

 

 

 

16

Mortgages, notes, bonds payable in less than 1 year. .

 

 

 

 

 

17

. . . . . . . . . . .Other current liabilities. Attach schedule

 

 

 

 

 

 

18

All nonrecourse loans

 

 

 

 

 

 

 

 

 

19

Mortgages, notes, bonds payable in 1 year or more

 

 

 

 

 

 

 

 

 

20

Other liabilities. Attach schedule

 

 

 

 

 

21

Members’ capital accounts

 

 

 

 

 

 

 

 

 

22

. . . . . . . . . . . . . . . . . . . . . .Total liabilities and capital

 

 

 

 

 

 

Schedule M-1 Reconciliation of Income (Loss) per Books With Income (Loss) per Return. Use total amount under California law. See instructions.

1 Net income (loss) per books . . . . . . . . . . . . . . . . . . . . . . . .

2Income included on Schedule K, line 1 through line 11c

not recorded on books this year. Itemize . . . . . . . . . . . . . .

3 Guaranteed payments (other than health insurance) . . . . . . .

4Expenses recorded on books this year not included on Schedule K, line 1 through line 13e. Itemize:

a Depreciation

$ ______________

b Travel and entertainment

$ ______________

c Annual LLC tax

$ ______________

d Other

$ ______________

e Total. Add line 4a through line 4d. . .

. . . . . . . . . . . . . . .

5 Total of line 1 through line 4e

. . . . . . . . . . . . . . . .

6Income recorded on books this year not included on Schedule K, line 1 through line 11c. Itemize:

a Tax-exempt interest

$ ______________

b Other

$ ______________

c Total. Add line 6a and line 6b

. . . . . . . . . . . . . . . .

7Deductions included on Schedule K, line 1 through line 13e

not charged against book income this year. Itemize:

a Depreciation

$ ______________

b Other

$ ______________

c Total. Add line 7a and line 7b

. . . . . . . . . . . . . . . .

8 Total. Add line 6c and line 7c

. . . . . . . . . . . . . . . . .

9Income (loss) (Schedule K, line 21a.) Subtract line 8 from line 5.

Schedule M-2 Analysis of Members’ Capital Accounts. Use California amounts.

1 Balance at beginning of year . . . . . . . . . . . . . . . . . . .

2Capital contributed during year

a Cash

b Property

3 Net income (loss) per books . . . . . . . . . . . . . . . . . . .

4 Other increases. Itemize. . . . . . . . . . . . . . . . . . . . . . .

5

Total of line 1 through line 4

 

6

Distributions: a Cash

 

b Property

7

Other decreases. Itemize

8

Total of line 6 and line 7

 

9

Balance at end of year. Subtract line 8 from line 5 . . .

 

Schedule O Amounts from Liquidation used to Capitalize a Limited Liability Company. (Complete only if initial return box is checked on Side 1, Question H.)

Name of entity liquidated (if more than one, attach a schedule) _____________________________________________________________________________

Type of entity: (1) C Corporation (2) S Corporation

(3) Partnership (4) Limited Partnership (5) Sole Proprietor (6) Farmer

 

 

Entity identiication number(s): FEIN __________________ SSN or ITIN __________________ CA Corp. No. _________________ CA SOS File No.

 

Amount of liquidation gains recognized to capitalize the LLC . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ___________________

Side 6 Form 568 2018

3676183

Schedule IW Limited Liability Company (LLC) Income Worksheet

Enter your California income amounts on the worksheet. All amounts entered must be assigned for California law differences. Use only amounts that are from sources derived from or attributable to California when completing lines 1-17 of this worksheet. If your business is both within and outside of California, see Schedule IW instructions to assign the correct amounts to California. If the LLC is wholly within California, the total income amount is assigned to California and is entered beginning with line 1a. If the single member LLC (SMLLC) does not meet the 3 million criteria for iling Schedule B (568) and Schedule K (568), the SMLLC is still required to complete Schedule IW. Disregarded entities that do not meet the iling requirements to complete Schedule B or Schedule K should prepare Schedule IW by entering the California amounts attributable to the disregarded entity from the member’s federal Schedule B, C, D, E, F (Form 1040), or additional schedules associated with other activities. Do not enter amounts on this worksheet that have already been reported by another LLC to determine its fee.

See instructions on page 13 and page 14 of the Form 568 Booklet for more information on how to complete Schedule IW.

1 a

Total California income from Form 568, Schedule B, line 3. See instructions

b

Enter the California cost of goods sold from Form 568, Schedule B, line 2 and from federal

 

Schedule F (Form 1040) (plus California adjustments) associated with the receipts assigned to

 

California on lines 1a and 4

1a

1b

2a If the answer to Question U(1) on Form 568 Side 2, is “Yes”, include the gross income of this

disregarded entity that is not included in lines 1 and 8 through 16

2a

bEnter the cost of goods sold of disregarded entities associated with the receipts assigned to

California on line 2a

2b

3 a LLC’s distributive share of ordinary income from pass-through entities

3a

bEnter the LLC’s distributive share of cost of goods sold from other pass-through entities associated with the receipt assigned to California on line 3a (see Schedule K-1s (565),

Table 3, line 1a)

3b

cEnter the LLC’s distributive share of deductions from other pass-through entities associated with

 

 

the receipt assigned to California on line 3a (see Schedule K-1s (565), Table 3, line 1b)

3c

4

Add gross farm income from federal Schedule F (Form 1040). Use California amounts

4

5

Enter the total of other income (not loss) from Form 568, Schedule B, line 10

5

6

Enter the total gains (not losses) from Form 568, Schedule B, line 8

6

7

Add line 1a through line 6

. . .

. . . . . . . . . . . . . . . 7

8

California rental real estate

 

 

 

a

Enter the total gross rents from federal Form 8825, line 18a

8a

 

b

Enter the total gross rents from all Schedule K-1s (565), Table 3, line 2

8b

 

c

Add line 8a and line 8b

. . .

. . . . . . . . . . . . . . . 8c

9

Other California rentals.

 

 

 

a

Enter the amount from Schedule K (568), line 3a

9a

 

b

Enter the amount from all Schedule K-1s (565), Table 3, line 3

9b

 

c

Add lines 9a and 9b

. . .

. . . . . . . . . . . . . . . 9c

10

California interest. Enter the amount from Form 568, Schedule K, line 5

. . .

. . . . . . . . . . . . . . . 10

11

California dividends. Enter the amount from Form 568, Schedule K, line 6

. . .

. . . . . . . . . . . . . . . 11

12

California royalties. Enter the amount from Form 568, Schedule K, line 7

. . .

. . . . . . . . . . . . . . . 12

13California capital gains. Enter the capital gains (not losses) included in the amounts from Form 568,

 

Schedule K, lines 8 and 9

13

14

California 1231 gains. Enter the amount of total gains (not losses) from Form 568, Schedule K, line 10a

14

15

Other California portfolio income (not loss). Enter the amount from Form 568, Schedule K, line 11a

15

16

Other California income (not loss) not included in line 5. Enter the amount from Form 568, Schedule K, line 11b

16

17Total California income. Add lines 7, 8c, 9c, 10, 11, 12, 13, 14, 15, and 16. Line 17 may not be a negative number.

Enter here and on Form 568, Side 1, line 1. If less than zero enter -0-

17

3677183

Form 568 2018 Side 7

THIS PAGE INTENTIONALLY LEFT BLANK

Visit our website:

ftb.ca.gov

Page 32 Form 568 Booklet 2018

 

TAXABLE YEAR

Member’s Share of Income,

 

 

CALIFORNIA SCHEDULE

 

 

 

 

 

2018 Deductions, Credits, etc.

 

 

 

 

 

 

K-1 (568)

For calendar year 2018 or iscal year beginning

(m m / d d / y y y y)

and ending

.

(m m / d d / y y y y)

Member’s name

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Member’s identifying number

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

City

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State

ZIP code

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LLC’s FEIN

 

 

 

California Secretary of State ile number

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LLC’s name

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

City

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State

ZIP code

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A What type of entity is this member?

See instructions.

 

 

 

 

(1)

 Individual

(4)

 C Corporation

(7)

 LLP

(10)

 Exempt Organization

(2)

 S Corporation

(5)

 General Partnership

(8)

 LLC

(11)

 Disregarded Entity

(3)

 Estate/Trust

(6)

 Limited Partnership

(9)

 IRA/Keogh/SEP

 

 

B Is this member a foreign member? .

. . . . . . . . . . . . . . . . . . . . . . . . . . .

. . .

. . . . . . . . . . . . . . . . . . . . . . .

. . . .

. . . . . . . . . . . Yes No

C Enter member’s percentage (without regard to special allocations) of:

 

(i) Beginning

 

(ii) Ending

Proit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

DMember’s share of liabilities:

Nonrecourse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $

Qualiied nonrecourse inancing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $

Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $

EReportable transaction or tax shelter registration number(s)

.

.

.

(i) Beginning

.

.

.

%

%

%

00

00

00

 $  $  $

.

.

.

(ii) Ending

%

%

%

.00

.00

.00

F

(1)

Check here if this is a publicly traded partnership as deined in IRC Section 469(k)(2)

. . . . . . . . . . . .

 

(2)

Check here if this is an investment partnership (R&TC Sections 17955 and 23040.1)

. . . . . . . . . . . .

G

Check here if this is: (1) A inal Schedule K-1 (568) (2) An amended Schedule K-1 (568)

 

 

H

Is this member a resident of California?

Yes  No

For Privacy Notice, get FTB 1131 ENG/SP.

7901183

Schedule K-1 (568) 2018 Side 1

Member’s name

 

Member’s identifying number

 

 

 

 

 

 

 

 

 

IAnalysis of member’s capital account: Check the box (1) Tax Basis (2) GAAP (3) IRC Section 704(b) Book (4) Other (explain)

(a)

(b)

(c)

(d)

(e)

Capital account at beginning of year

Capital contributed during year

Member’s share of line 3, line 4, and

Withdrawals and distributions

Capital account at end of year,

 

 

line 7 Form 568, Schedule M-2

 

combine column (a) through column (d)

 

 

(

)

 

Caution: Refer to Member’s Instructions for Schedule K-1 (568) before entering information from this schedule on your California return.

 

 

 

 

(a)

(b)

(c)

(d)

(e)

 

 

 

 

Distributive share items

Amounts from

California adjustments

Total amounts using

California

 

 

 

 

 

 

federal Schedule K-1

 

California law. Combine

source amounts

 

 

 

 

 

 

(1065)

 

col. (b) and col. (c)

and credits

 

 

 

 

 

 

 

 

 

 

 

1

Ordinary income (loss) from trade or

 

 

 

 

 

 

business activities

 

 

 

 

 

2

Net income (loss) from rental real

 

 

 

 

 

 

estate activities

 

 

 

 

 

3

Net income (loss) from other rental activities

 

 

 

 

 

 

 

 

 

 

 

4

Guaranteed payments to members

 

 

 

 

 

5

Interest income

 

 

 

 

(Loss)

6

Dividends

 

 

 

7

Royalties

 

 

 

 

Income

8

Net short-term capital gain (loss)

 

 

 

 

 

 

 

 

 

9

Net long-term capital gain (loss)

 

 

 

 

 

10 a Total gain under IRC Section 1231

 

 

 

 

 

 

(other than due to casualty or theft)

 

 

 

 

 

 

b Total loss under IRC Section 1231

 

 

 

 

 

 

(other than due to casualty or theft)

 

 

 

 

 

11 a Other portfolio income (loss). Attach schedule

 

 

 

 

 

 

b Total other income. Attach schedule

 

 

 

 

 

 

c Total other loss. Attach schedule

 

 

 

 

 

 

 

 

 

 

 

 

 

12

Expense deduction for recovery property

 

 

 

 

 

 

 

(IRC Section 179)

 

 

 

 

 

 

 

13 a Charitable contributions

 

 

 

 

 

 

 

 

b Investment interest expense

 

 

 

 

 

 

Deductions

 

c 1

Total expenditures to which an IRC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Section 59(e) election may apply

 

 

 

 

 

 

 

 

2

Type of expenditures ________________.

 

 

 

 

 

 

 

 

d Deductions related to portfolio income

 

 

 

 

 

 

 

Attach schedule

 

 

 

 

 

 

 

 

e Other deductions. Attach schedule

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Side 2 Schedule K-1 (568) 2018

7902183

Member’s name

 

Member’s identifying number

 

 

 

 

 

 

Credits

Information Distributions ExpensesAlternative Minimum Tax (AMT) Items

OtherTaxand-exemptNondeductibleIncome

 

(a)

(b)

(c)

(d)

(e)

 

Distributive share items

Amounts from federal

California adjustments

Total amounts using

California

 

 

Schedule K-1 (1065)

 

California law. Combine

source amounts

 

 

 

 

col. (b) and col. (c)

and credits

15 a

Total withholding (equals amount on

 

 

 

Form 592-B if calendar year LLC)

 

 

 

 

 

 

 

b

Low-income housing credit

 

 

 

 

c

Credits other than line 15b related to rental

 

 

 

 

d

real estate activities. Attach schedule

 

 

 

 

Credits related to other rental activities.

 

 

 

 

 

Attach schedule

 

 

 

 

e

Nonconsenting nonresident member’s tax

 

 

 

 

 

paid by LLC

 

 

 

 

f

Other credits – Attach required schedules

 

 

 

 

 

or statements

 

 

 

 

17 a

Depreciation adjustment on property placed

 

 

 

in service after 1986

 

 

 

 

 

 

 

b

Adjusted gain or loss

 

 

 

 

c

Depletion (other than oil & gas)

 

 

 

 

d

Gross income from oil, gas, and

 

 

 

 

e

geothermal properties

 

 

 

 

Deductions allocable to oil, gas, and

 

 

 

 

f

geothermal properties

 

 

 

 

Other alternative minimum tax items.

 

 

 

 

 

Attach schedule

 

 

 

 

18 a

Tax-exempt interest income

 

 

 

 

b

Other tax-exempt income

 

 

 

 

c

Nondeductible expenses

 

 

 

 

19 a

Distributions of money (cash and

 

 

 

 

marketable securities)

 

 

 

 

 

 

 

 

b

Distributions of property other than money . .

 

 

 

 

 

 

 

20 a

Investment income

 

 

 

 

b

Investment expenses

 

 

 

 

c

Other information. See instructions

 

 

 

 

7903183

Schedule K-1 (568) 2018 Side 3

Member’s nameMember’s identifying number

Other Member Information

Table 1 — Member’s share of nonbusiness income from intangibles (source of income is dependent on residence or commercial domicile of

the member):

 

 

 

 

 

 

 

 

 

 

 

Interest . . . .

$

 

Sec. 1231 Gains/Losses

$

 

 

Capital Gains/Losses

$

 

 

 

 

 

 

 

Dividends . .

$

 

Royalties

$

 

 

Other. . . .

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FOR USE BY MEMBERS ONLY – See instructions.

 

 

 

 

 

 

 

 

Table 2 — Member’s share of distributive items.

 

 

 

 

 

 

 

 

A. Member’s share of the LLC’s business income. See instructions. $

 

 

 

 

 

 

 

 

 

B. Member’s share of nonbusiness income from real and tangible personal property sourced or allocable to California.

 

 

 

Capital Gains/Losses.

. . . . $

 

 

 

Rents/Royalties .

. . . . . .$

 

 

 

 

 

 

 

 

 

 

 

Sec. 1231 Gains/Losses.

. . . . $

 

 

 

Other

. . . . . .$

 

 

 

 

 

 

 

 

 

 

 

C. Member’s distributive share of the LLC’s property, payroll, and sales:

 

 

 

 

 

 

 

 

Factors

 

 

 

Total within and outside California

Total within California

 

 

 

Property: Beginning . . . . . . . . . . . . . . . . . . . . $

$

Property: Ending . . . . . . . . . . . . . . . . . . . . . . . $

$

Property: Annual rent expense . . . . . . . . . . . . $

$

Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

$

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

$

Side 4 Schedule K-1 (568) 2018

7904183

2018 Member’s Instructions for Schedule K-1 (568)

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).

What’s New

Federal Tax Reform – The Tax Cuts and Jobs Act (TCJA) signed into law on December 22, 2017, made changes to the Internal Revenue Code (IRC). In general, California Revenue and Taxation Code (R&TC) does not conform to the changes. California taxpayers continue to follow the IRC as of the speciied date of January 1, 2015, with modiications.

New Deduction for Pass-Through Income – For taxable years beginning after December 31, 2017, and before January 1, 2026, the TCJA

adds IRC Sec. 199A, “Qualiied Business Income,” under which a non-corporate taxpayer, including a trust or estate, who has qualiied business income (QBI) from a partnership, S corporation, or sole proprietorship is allowed a deduction. California does not conform to the deduction for qualiied business income of pass-through entities under IRC Section 199A.

General Information

In general, for taxable years beginning on or after January 1, 2015, California law conforms to the 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 or 540NR), and the Business Entity tax booklets.

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 R&TC in the instructions. Taxpayers should not consider the instructions as authoritative law.

California follows the revised federal instructions (with some exceptions) for reporting the sale, exchange or disposition of an asset for which an IRC Section 179 expense was claimed in a prior year by a partnership, limited liability company (LLC), or S corporation.

Members should follow federal reporting requirements as detailed in federal Form 1065, U.S. Return of Partnership Income, and federal Form 4797, Sales of Business Property.

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, Apportionment and Allocation of Income, 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.

APurpose

An LLC that has elected to be treated as a partnership for tax purposes uses Schedule K-1 (568), Member’s Share of Income, Deductions, Credits, etc., to report your distributive share of the LLC’s income, deductions, credits, etc. Keep Schedule K-1 (568) for your records. Information from the Schedule K-1 (568) should be used to complete your California tax return. However, do not ile the schedule with your California tax return. The LLC has iled a copy with the Franchise Tax Board (FTB).

As a member of the LLC, you are subject to tax on your distributive share of the LLC income, whether or not distributed.

The amount of loss and deduction you are allowed to claim on your California tax return may be less than the amount reported on Schedule K-1 (568). Generally, the amount of loss and deduction you are allowed to claim is limited to your basis in the LLC and the amount for which you are considered at-risk. If you have losses, deductions, or credits from a passive activity, you also must apply the passive activity loss and credit rules. It is the member’s responsibility to consider and apply any applicable limitations. See Instructions, Loss Limitations.

You should also read the federal Schedule K-1 (1065), Partner’s Instructions for Schedule K-1 (Form 1065), before completing your California tax return with this Schedule K-1 (568) information.

For additional information on the treatment of LLC income, deductions, credits, etc., get the following federal publications:

Publication 541, Partnerships

Publication 535, Business Expenses

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 your California return when iled. If the information returns are not provided, penalties may be imposed under R&TC Sections 19141.2 and 19141.5.

BDefinitions

Member

An individual or entity owning an interest in the LLC whose potential personal liability for LLC debts is limited to the amount of money or other property that the member contributed or is required to contribute to the LLC.

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 classiication of that entity for tax purposes. If the spouses elect to be a single owner, the LLC could be disregarded as a separate entity but may not be classiied as a partnership. Similarly, if the spouses elect to be two owners, the entity may be classiied as a partnership but cannot be disregarded as a separate entity. This election is not available to Registered Domestic Partners (RDPs). For more information on RDPs, get FTB Pub. 737, Tax Information for Registered Domestic Partners.

Nonrecourse Loans

Liabilities of the LLC for which none of the members have assumed any personal liability.

Qualiied Nonrecourse Financing

Any inancing for which no one is personally liable for repayment that is borrowed for use in an activity of holding real property and that is loaned or guaranteed by a federal, state, or local government, or borrowed from a “qualiied person.”

California Business Situs

The place at which intangible personal property is employed as capital in California or the possession and control of the property is localized in connection with a business in California so that its substantial use and value attach to and become an asset of the business in California.

Apportionment

The process by which business income from a trade or business is conducted in two or more states (an apportioning trade or business) is divided between taxing jurisdictions. Get Schedule R for more information.

Unitary

A method of taxation by which all of the activities comprising a single trade or business are viewed as a single unit, regardless of whether those activities are conducted by divisions of a single entity or by commonly owned or controlled entities. For more information about unitary business principles, get FTB Pub. 1061, Guidelines for Corporations Filing a Combined Report.

Schedule K-1 (568) Instructions 2018 Page 37

Election

The ability to choose a particular accounting method for tax reporting purposes. Generally, the LLC decides how to compute taxable income from its operations. For example, it chooses the accounting method and depreciation methods it will use.

However, certain elections are made separately on your California tax return and not by the LLC. These elections are made under the following IRC Sections, to which the R&TC conforms:

IRC Section 108(b)(5) (income from discharge of indebtedness).

IRC Section 617 (deduction and recapture of certain mining exploration expenditures, paid or incurred).

CReporting Information from Columns (d) and (e)

If the LLC derives income from activities conducted both within and outside California, the LLC is an apportioning LLC. All LLCs (apportioning and nonapportioning) should complete columns (c) and (d). Apportioning LLCs must also complete column (e). The apportioning LLC will determine which items of income constitute business or nonbusiness income and will use Schedule R to determine the LLC income from California sources. The LLC business income apportioned to California are entered in column (e). LLC nonbusiness income from real and tangible property will also be entered in column (e). Nonbusiness intangibles are sourced or allocated at

the member level and must be entered on Table 1 instead. For more information, see General Information D, Nonbusiness Income, and General Information E, Unitary Members. Resident members will use only the information in column (c) and column (d) to report their share of the LLC’s income or loss.

Nonresident, corporate, and other entity members must report their distributive share of income, loss or credits apportioned or allocated to California as indicated on Schedule K-1 (568), column (e). Special rules apply if a member and the LLC are engaged in a unitary business. See Cal. Code Regs., tit. 18 sections 17951-4 and 25137-1 for more information. Also see General Information E, Unitary Members.

Residents, part-year residents, and some nonresidents may qualify for a credit for taxes paid to other states on income that is apportioned or allocated to a state other than California. For more information, get California Schedule S, Other State Tax Credit.

Nonapportioning LLCs do not need to ill out column (e) on Schedule K-1 (568) if the member is a resident and the “Yes” box is checked on Question H. However, the inal determination of residency is made at the member level. If the LLC is uncertain as to the residency status of the member, it should ill out column (e) for that member.

Inconsistent Treatment of Items

Generally, members must report tax items shown on their Schedule K-1s and any attached schedules the same way the LLC treated the items on its tax return. If the treatment on a member’s original or amended tax return is inconsistent with the LLC’s treatment, or if the LLC has not iled a tax return, the member must attach a statement with its original or amended tax return to identify and explain any inconsistency or to note that a LLC tax return has not been iled. If a member is required to attach this statement but fails to do so, the member may be subject to an accuracy related penalty.

DNonbusiness Income

The determination of whether LLC income is business income or nonbusiness income is made at the LLC level. Nonbusiness income from real or tangible personal property located in California, such as rents, royalties, gains, or losses is California source income (Cal. Code Regs., tit. 18 section 17951-3 and R&TC Sections 23040, 25124, and 25125). This information should be included on the appropriate line of column (e), as well as in Table 2, Part B, if the LLC believes it is unitary with the member or if the LLC is uncertain whether it is unitary with the member. Non-unitary members should ignore the information in Table 2 and use column (e).

If the LLC has income from nonbusiness intangibles, the source of that nonbusiness intangible income will be determined at the member level. In most cases, income from nonbusiness intangible property is sourced at the residence or commercial domicile of the member. If the member is an individual, estate, or trust, income from nonbusiness intangibles will have a California source if the intangible has acquired a California business situs. For example, a nonresident pledges stocks, bonds, or other intangible personal property in California. This pledge is security for the payment of debt, taxes, or other liabilities incurred for a business in this state. The pledged property will acquire a business situs in California. Another example is a nonresident who maintains an ofice and bank account in California for the business activities in this state. The bank account will acquire a business situs in California. See Cal. Code Regs., tit. 18 section 17951-2 and R&TC Section 17952. If the intangible income is determined to have a business situs by the LLC, the intangible income will be included in column (e).

If the member is a corporation or another business entity, Cal. Code Regs., tit. 18 sections 17951-4 and 25137-1 require that nonbusiness income from intangibles be allocated in accordance with the rules of R&TC Sections 25125 to 25127.

Because the source of intangible nonbusiness income is dependent upon the status of the individual member, that income is not included in column (e) and is entered only in Table 1. The member must determine the source of such income by applying the rules described above.

EUnitary Members

The rules discussed below apply to corporations, individuals, and other entities that conduct a trade or business that is unitary with the LLC’s trade or business (see Cal. Code Regs., tit. 18 section 17951-4, incorporating the provisions of R&TC Section 25137 and regulations thereunder).

Unitary members cannot use the California source information relected in column (e). Such members must use the information in Tables 1 and 2 as described in the instructions that follow, and in the Line Instructions.

The member’s distributive share of LLC items is determined by applying the rules in R&TC Sections 17851 through 17858. The determination of the portion of the distributive share of business and nonbusiness income that has its source in California or that is includible in the member’s business income subject to apportionment is made in accordance with Cal. Code Regs., tit. 18 section 25137-1 if the member, or the LLC,

or both, have income from sources within and outside this state. The member, in computing net income for its tax accounting period, must include its distributive share of LLC items referred to above for any LLC taxable year ending within or with the member’s tax accounting period.

Distributive Items of Business Income

Apportionment of Business Income – Unitary Business

If the LLC’s activities and the member’s activities constitute a unitary business under established standards (other than ownership requirements), the combined business income of this single trade or business apportioned to California is determined by combining the member’s distributive share of the LLC’s apportionment factors with the factors of the member for any LLC year ending within the member’s tax accounting period. Combined business income is then apportioned by the sales factor. Use of a 3-factor formula depends upon whether combined gross business receipts (member’s share of the LLC’s gross business receipts plus the member’s own gross business receipts) are more than 50% from agricultural, extractive, savings and loans, banking, or inancial business activities. For more information, get Schedule R.

If you are a member that is unitary with the LLC, use Table 2 to compute your factors, applying the rules shown below (see Cal. Code Regs.,

tit. 18 sections 25129 to 25137 for examples). Members that are unitary with the LLC should perform the following steps:

1.Combine your distributive share of the LLC’s business income with your own business income to determine total business income.

Page 38 Schedule K-1 (568) Instructions 2018

2.If using the single-sales factor formula, compute the sales factor by combining your share of the LLC’s sales factor from Table 2, Part C, with your own sales factor as explained in these instructions. If using the 3-factor formula, compute property, payroll, and sales factors by combining your share of the LLC’s factors from Table 2, Part C, with your own factors as explained in these instructions.

3.Apply the apportionment factor determined in Step 2 to the total business income determined in Step 1 to arrive at business income apportioned to this state.

Unitary Member’s Computation of the Sales Factor

Compute the numerator and denominator of the sales factor in accordance with Cal. Code Regs., tit. 18 sections 25134 to 25136. Apply the following special rules:

A.Include in the denominator of the sales factor your distributive share of the LLC’s sales that give rise to business income. See Table 2, Part C.

B.Include in the numerator of your sales factor the amount of such sales described in part A attributable to California.

C.Eliminate intercompany sales as one of the following:

Sales by the member to the LLC to the extent of the member’s interest in the LLC.

Sales by the LLC to the member not to exceed the member’s interest in all LLC sales. See Cal. Code Regs., tit. 18 section 25137-1(f)(3).

Unitary Member’s Computation of Property Factor

Use Schedule R to compute the numerator and the denominator of the property factor. Adjust factors in accordance with Cal. Code Regs., tit. 18 sections 25129, 25130, and 25131. Also apply the following special rules:

A.Include in the denominator of your property factor your distributive share of the LLC’s beginning and ending balances of real and tangible personal property owned (if rented, multiply net annual rents paid, by 8) and used during the tax accounting period in the regular course of business. See Table 2, Part C.

B.Include in the numerator of your property factor the value of such property that is described in part A (above) that is located in California. See Table 2, Part C.

C.See Cal. Code Regs., tit. 18 section 25137-1(f)(1)(B) for examples of how to avoid duplication of the value of property that is rented by the member to the LLC or vice versa.

Unitary Member’s Computation of Payroll Factor

Use Schedule R to compute the numerator and the denominator of the payroll factor in accordance with Cal. Code Regs., tit. 18 sections 25132 and 25133. Apply the following special rules:

A.Include in the denominator of your payroll factor your distributive share of the LLC’s payroll used to produce business income. See Table 2, Part C.

B.Include in the numerator any such payroll described in part A (above) that is applicable to California. See Table 2, Part C.

Apportionment of Business Income – Nonunitary 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, R-1, R-2, R-3, and R-4 only. The different items of business income as apportioned to CA are entered in column (e).

Distributive Items of Nonbusiness Income for a Unitary Member

Income in Table 2, Part B, is from a California source under R&TC Sections 25124 and 25125. Unitary members must make certain to separately include such items from Tables 1 and 2 as California source income. Unitary members shall use Tables 1 and 2 to report nonbusiness income instead of Schedule K-1 (568), column (e).

Instructions

Questions and Items

The LLC completes the questions and items on each Schedule K-1 (568) for all its members. For more information, see the instructions for federal Schedule K-1 (1065).

Schedule K-1 (568)

Important Note to Members: If your Schedule K-1 (568) reports losses and/or deductions, you must irst apply the basis, at-risk, and passive activity limitations before such losses/deductions can be deducted on your California tax return. See Instructions, Loss Limitations. Also, see IRC Section 705(a) for information on how to compute basis.

If your return is ever examined, you may be required to provide your computations and the supporting documents for your membership interest.

If you are an individual member, the amounts in column (c), California adjustments, and column (d), Total amounts using California law, that are from nonpassive activities must be reported on the appropriate California form or schedule; such as, Schedule D (540), California Capital Gain or Loss Adjustment, Schedule D-1, Sales of Business Property, Schedule CA (540), California Adjustments – Residents,

or Schedule CA (540NR), California Adjustments – Nonresidents or Part-Year Residents.

Amounts in column (e), California source amounts and credits, that are from passive activities must be reported on form FTB 3801, Passive Activity Loss Limitations, form FTB 3801-CR, Passive Activity Credit Limitations, or form FTB 3802, Corporate Passive Activity Loss and Credit Limitations. Use the related worksheets to igure any passive loss limitations. If the LLC knows that you are a California resident, it may leave column (e) blank. California residents are subject to tax on their entire taxable income shown in column (d) (R&TC Section 17041).

If you are not an individual member, report the amounts as instructed on your California tax return.

If you have losses, deductions, credits, etc., from a prior year that were not deductible or usable because of certain limitations they may be taken into account in determining your net income, loss, etc., for this year. However, do not combine the prior-year amounts with any amounts shown on this Schedule K-1 (568) to get a net igure. Instead, report the amounts on an attached schedule, statement, or form on a year- by-year basis. See the instructions for federal Schedule K-1 (1065) for more information.

Loss Limitations

The amounts shown on line 1 through line 3 of your Schedule K-1 (568) relect your distributive share of income or loss from the LLC’s business or rental operations. If you have losses from the LLC, there are three potential limitations imposed on losses before you may deduct them on your return. These limitations and the order in which they must be applied are:

Basis limitations (IRC Section 704)

At-risk limitations (IRC Section 465)

Passive activity loss and credit limitations (IRC Section 469)

Each of these limitations is discussed separately in the following instructions.

Other limitations may apply to speciic deductions such as the investment interest expense deduction. These limitations on speciic deductions generally apply before the basis, at-risk, and passive loss limitations.

Basis Rules

Generally, California tax law conforms to federal tax law concerning basis limitation. You may not claim your share of an LLC loss (including a capital loss) that is greater than the adjusted basis of your LLC interest at the end of the LLC’s taxable year.

Schedule K-1 (568) Instructions 2018 Page 39

The LLC is not responsible for keeping the information needed to compute the basis of your LLC interest. Although the LLC does provide you with an analysis of the changes to your capital account on your Schedule K-1 (568), Item I, that information is based on the LLC’s books and records and should not be used to compute your basis.

You can compute the basis of your LLC interest by adding items that increase your basis and then subtracting items that decrease your basis.

Items that increase your basis may include the following:

Money and the adjusted basis of property you contributed to the LLC.

Your distributive share of the LLC’s income.

Your distributive share of the increase in the liabilities of the LLC (and/or your individual liabilities caused by your assumption of LLC liabilities).

Items that decrease your basis, but not below zero, may include the following:

Money and the adjusted basis of property distributed to you.

Your share of the LLC’s losses.

Your share of the decrease in the liabilities of the LLC (and/or your individual liabilities assumed by the LLC).

This is not a complete list of items and factors that determine basis. Get federal Publication 541, for a complete discussion of how to determine the basis of your LLC interest.

At-Risk Rules

The at-risk rules limit the amount of loss (including loss on disposition of assets) and other deductions (such as IRC Section 179) that you can claim to the amount you could actually lose in the activity.

If you have: (1) a loss or other deduction from an activity carried on as a trade or business or for the production of income by the LLC; and

(2)amounts in the activity for which you are not at-risk, you will have to complete federal Form 6198, At-Risk Limitations, to igure the allowable loss to report on your return. Complete federal Form 6198 using California amounts.

See the instructions for federal Schedule K-1 (1065), At-Risk Limitations, and federal Publication 925, Passive Activity and At-Risk Rules, for more information.

Passive Activity Loss and Credit Rules

IRC Section 469 limits the deduction of certain losses and credits. California law generally conforms to this federal provision. These rules apply to members who have a passive activity loss or credit for the taxable year.

For California purposes, passive loss limitations apply to individuals, estates, trusts (other than grantor trusts), closely held corporations, and S corporations.

Even though the passive loss rules do not apply to grantor trusts, partnerships, and LLCs, they do apply to the owners of these entities.

A passive activity is generally a trade or business activity in which the member does not materially participate or a rental real estate activity in which the member does not actively participate. An LLC may have more than one activity. Each member must apply the passive activity loss and credit limitations on an activity-by-activity basis.

Individuals, estates, trusts, and S corporations must complete form FTB 3801 to calculate the allowable passive losses and form FTB 3801-CR to calculate the allowable passive credits. Corporations must complete form FTB 3802.

The amounts reported on Schedule K-1 (568), line 1 and line 15f, are normally passive activity income (loss) or credits from the trade or business of the LLC if you are a member who did not materially participate in the trade or business activities of the LLC. The amounts reported on Schedule K-1 (568), line 2, line 3, line 15b, line 15c, and line 15d are from rental activities of the LLC and are passive activity income (loss) or credits to all members. There is an exception to this rule for losses incurred by qualiied investors in qualiied low-income housing projects. The LLC will identify any of these qualiied amounts on an attachment for line 2.

The passive loss rules apply to the items attributable to each publicly traded partnership (PTP) that is not treated as a corporation under IRC Section 7704. Thus, members who do not materially participate in the operations of a PTP are allowed to deduct their share of the PTP’s losses only to the extent of passive income from the same PTP or when the entire interest is sold (IRC Section 469(k)). See the instructions for form FTB 3801 and form FTB 3802 for rules to calculate and report income, gains, and losses from passive activities that you held through each PTP you owned during the taxable year.

See the instructions for federal Schedule K-1 (1065), Passive Activity Limitations, and federal Publication 925, for more information.

Investment Partnership Income

If you are a nonresident individual, the amounts in column (e) will generally not be taxable by California (R&TC Section 17955). However, nonresident individuals will be taxed on their distributive share of California source income from an LLC that is an investment partnership if the income from the qualifying investment securities is interrelated with:

Any other business activity of the nonresident member.

Any other entity in which the nonresident member owns an interest that is separate and distinct from the investment activity of the LLC and that is conducted in California.

If you are a corporate member, the amounts in column (e) will generally not be taxable in California provided the income from the LLC is the corporation’s only California source income. However, if the corporation does either of the following:

Participates in the management of the investment activities of the LLC or is engaged in a unitary business with another corporation or partnership that participates in the management of the investment activities of the LLC.

Has income attributable to sources within California other than income from the investment partnership.

Then the corporation will be taxable on its distributive share of California source income of the LLC. See R&TC Section 23040.1 for more information.

Line Instructions

Enter the difference between federal and California amounts from column (c) on Schedule CA (540) if you are a resident or on Schedule CA (540NR) if you are a nonresident or part-year resident. Also, if you are a nonresident or part-year resident, enter California source amounts from the Schedule K-1 (568), column (e), on your Schedule CA (540NR), column E.

F(1) – If this box is checked, the LLC is a PTP as deined in IRC Section 469(k)(2). Follow the instructions for form FTB 3801 or form FTB 3802 for reporting income, gains, and losses from PTPs.

F(2) – If this box is checked, the LLC qualiies as an investment partnership as deined in R&TC Sections 17955 and 23040.1. If you are a nonresident individual, the amounts in column (e) will generally not be taxable in California.

Nonresident and Part-Year Resident Members, get FTB Pub. 1100, Taxation of Nonresidents and Individuals Who Change Residency.

Part-year resident members must consider their period of residency and nonresidency in the computation of total California income.

The line instructions below that instruct you to enter information from Schedule K-1 (568), column (d), on other forms, apply to resident members. When the instructions make reference to column (d), nonresident members should take information from columns (c), (d), and (e) and apply the information to the appropriate line relating to computation of total income and income from California sources.

Page 40 Schedule K-1 (568) Instructions 2018

Income (Loss)

Line 1 – Ordinary Income (Loss) from Trade or Business Activities

The amount reported on line 1, column (d), is your share of the ordinary income (loss) from the trade or business activities of the LLC. For individual members, where this amount is reported depends on whether or not this amount is a passive activity.

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. If a loss is reported on line 1, column (d), report the loss on the applicable line of form FTB 3801 or form FTB 3802 to determine how much of the loss is allowable.

If the LLC income is from activities both within and outside California, the amount nonresidents or corporate members must report on their California return is a function of the LLC’s apportionment percentage and allocation of income. Reporting instructions are included in

the information provided by the LLC. See Cal. Code Regs., tit. 18 sections 17951-4 and 25137-1 for more information. In addition, see General Information E, Unitary Members.

Line 2 – Net Income (Loss) from Rental Real Estate Activities

Generally, the income (loss) reported on line 2, column (d), is a passive activity amount to all members. However, the loss limitations of IRC Section 469 do not apply to qualiied investors in qualiied low-income housing projects. If applicable, the LLC will attach a schedule for line 2 to identify such amounts. If you have an amount on Schedule K-1 (568), line 2, column (c), report this amount on Schedule CA (540), Part I, line 17, or on Schedule CA (540NR), Part II, line 17, column B or column C, whichever is applicable.

Use the following instructions to determine where to enter the line 2 amount.

If you have a loss on line 2, column (d) (other than a qualiied low-income housing project loss), enter the loss on the applicable line of form FTB 3801 or form FTB 3802 to determine how much of the loss is allowable. Your share of the loss may be eligible for the special $25,000 allowance for rental real estate losses. Get the instructions for form FTB 3801 or form FTB 3802 for more information.

See the federal Schedule K-1 (1065) Speciic Instructions for box 2, item 1 and item 2, for more information.

Report any California adjustment amount from column (c) on Schedule CA (540 or 540NR) if you are a qualiied investor reporting a qualiied low-income housing project loss.

If you have only income on line 2, column (d), and no other passive losses, enter any California adjustment amount from column (c) on Schedule CA (540 or 540NR). However, if in addition to this passive activity income, you have a passive activity loss from this LLC or from any other source, report the line 2, column (d), income on the applicable line of form FTB 3801 or form FTB 3802.

Line 3 – Net Income (Loss) from Other Rental Activities

The amount on line 3, column (d) is a passive activity amount for all members.

If line 3, column (d) is a loss, report the loss on the applicable line of form FTB 3801 or form FTB 3802.

If only income is reported on line 3, column (d), and you have no other passive losses, report the California adjustment from column (c) on Schedule CA (540 or 540NR). However, if in addition to this passive activity income, you have a passive activity loss from this LLC or from any other source, report the line 3 income on the applicable line of form FTB 3801 or form FTB 3802.

Line 4 – Guaranteed Payments to Members

Amounts on this line are not normally part of a passive activity. If there is an amount on Schedule K-1 (568), line 4, column (c), enter this amount on Schedule CA (540), Part I, line 21f, or on Schedule CA (540NR), Part II, line 21f, 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.

Line 5 through Line 11a – Portfolio 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, classiied 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 5 – Interest Income

If you have an amount on Schedule K-1 (568), line 5, column (c), report this amount on Schedule CA (540), Part I, line 2, or on Schedule CA (540NR), Part II, line 2, column B or column C, whichever is applicable.

Line 6 – Dividends

If you have an amount on Schedule K-1 (568), line 6, column (c), report this amount on Schedule CA (540), Part I, line 3, or on Schedule CA (540NR), Part II, line 3, column B or column C, whichever is applicable.

Line 7 – Royalties

If you have an amount reported on Schedule K-1 (568), line 7, column (c), report this amount on Schedule CA (540), Part I, line 17, or on Schedule CA (540NR), Part II, line 17, column B or column C, whichever is applicable.

Line 8 and Line 9 – Net Short-term and Net Long-term Capital Gain (Loss)

If you have an amount on Schedule K-1 (568), line 8 or line 9, column (d), report this amount on Schedule D (540 or 540NR), line 2.

Line 10a and Line 10b – Total Gain and Total Loss under IRC Section 1231 (Other Than Due to Casualty or Theft)

If the amounts on line 10a and line 10b relate to rental activity, the IRC Section 1231 gain (loss) is a passive activity amount. If the amounts on line 10a and line 10b relate to a trade or business activity and you are a limited partner, the IRC Section 1231 gain (loss) is a passive activity amount.

If the amount is not a passive activity amount report it on Schedule D-1, line 2, column (g).

If a gain is reported on line 10a, column (d), and it is a passive activity amount report the gain on Schedule D-1, line 2, column (g).

If a loss is reported on line 10b, column (d), and it is a passive activity amount, get form FTB 3801 to determine if your loss is limited.

Line 11a – Other Portfolio Income (Loss)

The LLC uses line 11a, column (d), to report portfolio income other than interest, dividend, royalty, and capital gain (loss) income. The LLC should attach a schedule to Schedule K-1 (568) to tell you what kind of portfolio income is reported on line 11a, column (d). An example of portfolio income that could be reported on line 11a, column (d), is from a real estate mortgage investment conduit (REMIC) in which the LLC is a residual interest holder.

If the LLC has a residual interest in a REMIC, it will report your share of REMIC taxable income (net loss) on the schedule. Report the adjustment amount from column (c) on Schedule CA (540 or 540NR). The LLC

will also report your share of “excess inclusion” and your share of IRC Section 212 expenses.

For taxable years beginning after December 31, 2017, and before January 1, 2026, the federal deduction for miscellaneous itemized deductions subject to the 2% loor is suspended. California does not conform. You may deduct these IRC Section 212 expenses as a miscellaneous deduction for California purposes.

Schedule K-1 (568) Instructions 2018 Page 41

Line 11b and Line 11c – Total Other Income and Total Other Loss

Amounts reported on these lines are other items of income (loss) not included on line 1 through line 11a. The LLC should give you a description for each of these items.

Use the following instructions to:

Report income or gain (not losses) from passive activities.

Report income, gain, or losses from all other passive activities.

If you have losses from passive activities, or a combination of income, gains, and losses from passive activities, you must irst complete form FTB 3801 or form FTB 3802 to determine if any of your losses are limited by the passive loss rules. Use the instructions below to report passive income and losses after the passive loss limitations have been computed.

Line 11b and line 11c items may include:

LLC gains from disposition of farm recapture property (get Schedule D-1) and other items to which IRC Section 1252 applies.

Recoveries of bad debts, prior taxes, and delinquency amounts (IRC Section 111). Report the amounts from line 11b and line 11c, column (c), on Schedule CA (540), Part I, line 21f, or on Schedule CA (540NR), Part II, line 21f, column B or column C, whichever is applicable.

Gains and losses from wagering (IRC Section 165(d)). Report the amounts from line 11b and line 11c, column (c), on Schedule CA (540), Part I, line 21f, or on Schedule CA (540NR), Part II, line 21f, column B or column C, whichever is applicable.

Any income, gain, or loss to the LLC under IRC Section 751. Report this amount on Schedule D-1, line 10.

Specially allocated ordinary gain or loss. Report this amount on Schedule D-1, line 10.

Net gain or loss from involuntary conversions due to casualty or theft. The LLC will provide a schedule that shows the California amounts to be entered on federal Form 4684, Casualties and Thefts, Section B, Part II, line 34, column (b)(i), column (b)(ii), and column (c).

Other income (loss) including involuntary conversions,

IRC Section 1256 contracts & straddles, and mining exploration costs.

Deductions

Line 12 – Expense Deduction for Recovery Property

For California, the maximum amount of expense deduction for recovery property (IRC Section 179 deduction) that you can claim for all sources is $25,000. The $25,000 limit is reduced if the total cost of IRC Section 179 property placed in service during the year exceeds $200,000.

California does not conform to the federal limitation 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. Get form FTB 3885A, Depreciation and Amortization Adjustments, and get federal Publication 534, Depreciating Property Placed In Service Before 1987, and federal Publication 946, How to Depreciate Property, for more information.

If the IRC Section 179 deduction is a passive activity amount, report it on the applicable line of form FTB 3801. If it is not a passive activity amount and there is an amount on Schedule K-1 (568), line 12, column (c), enter this amount on Schedule CA (540), Part I, line 21f, or on Schedule CA (540NR), Part II, line 21f, column B or column C, whichever is applicable.

Line 13a – Charitable Contributions

The LLC will provide a schedule that shows which contributions were subject to the 50%, 30%, and 20% limitations. See the instructions for federal Form 1040, U.S. Individual Income Tax Return, and federal Publication 526, Charitable Contributions, for more information.

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

California has not conformed to any of the provisions of the Katrina Emergency Relief Act of 2005.

If there is an amount on Schedule K-1 (568), line 13a, column (c), enter this amount on Schedule CA (540), Part II, line 11 and/or line 12, or on Schedule CA (540NR), Part III, line 11 and/or line 12.

Line 13b – Investment Interest Expense

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 Publication 550, Investment Income and Expenses.

Enter the amount from column (d) on form FTB 3526 along with your investment interest expense from any other sources. Form FTB 3526 will help you determine how much of your total investment interest is deductible.

Line 13c – IRC Section 59(e) Expenditures

If you have an amount on Schedule K-1 (568), line 13c, see the instructions for the federal Schedule K-1 (1065), box 13. The LLC should give you a description and the amount of your share for each item applicable to California in this category.

Line 13d – Deductions Related to Portfolio Income

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 13d, column (c), enter this amount on Schedule CA (540), Part II, line 27 or on Schedule CA (540NR), Part III, line 27.

If any of the line 13d amounts should not be reported on Schedule CA (540 or 540NR), the LLC should identify these amounts.

Line 13e – Other Deductions

Amounts on this line are deductions not included on lines 12, 13a through 13d. If there is an amount on Schedule K-1 (568), line 13e, column (c), enter this amount on the applicable line of Schedule CA (540 or 540NR).

See the instructions for federal Schedule K-1 (1065), box 13, for examples of other deductions. Also get FTB Pub. 1001, for differences between federal and state tax law for certain deductions.

Line 14

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

Credits

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. Get the instructions for form FTB 3801-CR (or form FTB 3802) for more information.

Line 15a – Total Withholding

Total withholding is the sum of your distributive share of withholding on payments to the LLC by another entity, (allocated to all members according to their respective LLC interests), taxes withheld on you

Page 42 Schedule K-1 (568) Instructions 2018

by the LLC, or backup withholding on you as a domestic or foreign nonresident member. If taxes were allocated to you or withheld on you by the LLC, the LLC must provide a completed Form 592-B, Resident and Nonresident Withholding Tax Statement. Attach Form 592-B to the front of your California return to claim the amount withheld.

Schedule K-1 (568) may not be used to claim the withholding credit. If the LLC is not on a calendar year, the amount on line 15a may not match the amount on Form 592-B because of the difference in accounting periods. Claim the amount shown on Form 592-B on one of the following:

Form 540, California Resident Income Tax Return, line 73.

Form 540NR, California Nonresident or Part-year Resident Income Tax Return (Long), line 83.

Form 541, California Fiduciary Income Tax Return, line 31.

Form 109, California Exempt Organization Business Income Tax Return, line 17.

Form 100, California Corporation Franchise or Income Tax Return, line 33.

Form 100S, California S Corporation Franchise or Income Tax Return, line 32.

Get FTB Pub. 1017, Resident and Nonresident Withholding Guidelines, for more information.

Line 15b – Low-Income Housing Credit

The farmworker housing credit has been consolidated into the low-income housing tax credit. For more information, get form FTB 3521, Low-Income Housing Credit.

Any allowable credit is entered on form FTB 3521. 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.

You cannot claim the low-income housing credit on any qualiied low-income housing project for which any person was allowed any beneit under Section 502 of the Tax Reform Act of 1986.

Line 15c – Other Credits Related to Rental Real

Estate Activities

The information you need to compute credits related to rental real estate activities other than the low-income housing credit is provided with an attached schedule. These credits may be limited due to passive activity limitation rules.

Line 15d – Credits Related to Other Rental Activities

Any information you need to compute credits related to rental activities other than rental real estate activities is provided on this line with an attached schedule. These credits may be limited due to passive activity limitation rules.

Line 15e – Nonconsenting Nonresident Member’s Tax Paid by LLC

This line shows any income tax paid on your behalf by the LLC if, as a nonresident member, you did not sign form FTB 3832, Limited Liability Company Nonresident Members’ Consent, consenting to California’s jurisdiction to tax your distributive share of the LLC income attributable to California sources.

This line also shows any income tax paid on behalf of your LLC by another LLC of which your LLC is a member. This applies if form

FTB 3832 is not signed on behalf of your LLC. This means that your LLC is not consenting to California’s jurisdiction to tax your LLC’s distributive share of another LLC’s income attributable to California sources.

You must attach a copy of Schedule K-1 (568) to your California tax return to claim the tax paid by the LLC on your behalf. The LLC’s return must be iled before an individual member’s account can be credited.

For taxable years beginning on or after January 1, 2005, the tax may be reduced by the amount of tax previously withheld and paid by the LLC with respect to each nonconsenting, nonresident member.

If there was income tax paid on behalf of your LLC, you must attach a copy of the following to your California tax return to claim your share of the tax paid by another LLC on behalf of your LLC:

The Schedule K-1 (568) issued to your LLC by another LLC.

The Schedule K-1 (568) issued by your LLC.

Line 15f – Other Credits

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.

Credits that may be reported on line 15f (depending on the type of activity they relate to) include:

California Competes Tax Credit. Get form FTB 3531.

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.

Enterprise Zone (EZ) Hiring Credit. Get form FTB 3805Z.

Local Agency Military Base Recovery Area (LAMBRA) Hiring Credit. Get form FTB 3807.

Natural Heritage Preservation Credit. Get form FTB 3503.

New Advanced Strategic Aircraft Credit. Use credit code 236.

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.

Prison Inmate Labor Credit. Get form FTB 3507.

Research Credit. Get form FTB 3523.

The passive activity limitations of IRC Section 469 may limit the amount of credits on line 15b, line 15c, line 15d, and line 15f. Line 15b, line 15c, and line 15d credits are related to the rental activities of the LLC.

Line 15f credits are related to the trade or business activities of the LLC. In general, passive activity credits from passive activities are limited

to tax attributable to passive activities for California purposes (R&TC Section 17561). Credits that may be limited under the passive activity credit rules include the following:

Research credit

Low-income housing credit

You may be able to use the low-income housing credit, and other credits generated from rental activities, against tax on other income. Get form FTB 3801-CR for more information.

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 iled with the other state and evidence of the payment of the tax. Get California Schedule S for more information.

Line 16

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

Alternative Minimum Tax (AMT) Items

Line 17a through Line 17f, column (d)

Use the information reported on line 17a through line 17f, column (d) as well as your adjustments and tax preference items from other sources to complete Schedule P (100, 100W, 540, 540NR, or 541), Alternative Minimum Tax and Credit Limitations. For more information, see the instructions for federal Schedule K-1 (1065), box 17, Alternative minimum tax (AMT) items.

Schedule K-1 (568) Instructions 2018 Page 43

Tax-Exempt Income and Nondeductible Expenses

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

See the instructions for federal Schedule K-1 (1065), box 18. The LLC should give you a description and the amount of your share for each item applicable to California in this category.

Distributions

Line 19a and Line 19b – Distributions

See the instructions for federal Schedule K-1 (1065), box 19.

Other Information

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

If the LLC paid or accrued interest on 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, and federal Publication 550.

Use the column (d) amounts to determine the amount to enter on form FTB 3526, line 1.

The amounts shown include only investment income and expenses included on lines 5, 6, 7, 11a, and 13d of this Schedule K-1 (568). The LLC should attach a schedule that shows the amount of any investment income and expenses included in any other lines of this Schedule K-1 (568). 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.

Combine these totals with investment income and expenses from all other sources to determine the amount to enter on form FTB 3526, line 1.

Line 20c – Other Information

For credit recaptures attach a schedule including credit recapture names and amounts.

The LLC will provide supplemental information required to be reported to you on this line. If the LLC is claiming tax beneits from an EZ, LAMBRA, MEA, or TTA, it will give you the business income, and business capital gains and losses, apportioned to the EZ, LAMBRA, MEA, or TTA, on this line. Get form FTB 3805Z, FTB 3807, FTB 3808, or FTB 3809 to claim any applicable credit.

The LLC may have provided a schedule with amounts showing your proportionate interest in the LLC’s aggregate gross receipts, less returns and allowances. A qualiied taxpayer may exclude income, positive and negative adjustments, and preference items attributable to any trade

or business from alternative minimum taxable income. A “qualiied taxpayer” is deined as an individual, estate, or trust that meets both of the following:

Is the owner of, or has an ownership interest in a trade or business.

Has aggregate gross receipts, less returns and allowances, of less than $1,000,000 during the taxable year from all trades or businesses in which the taxpayer is an owner or has an ownership interest. In the case of an ownership interest, you should include only your proportional share of aggregate gross receipts of any trade or business from a partnership, LLC, S corporation, regulated investment company (RIC), real estate investment trust (REIT), or

REMIC.

You need to add your share of the aggregate gross receipts from this LLC to your aggregate gross receipts from all other trades or businesses in which you hold an interest to determine if you are a qualiied taxpayer.

For purposes of R&TC Section 17062(b)(4), “aggregate gross receipts, less returns and allowances” means the sum 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 pass-through entities gross receipts in which the taxpayer holds an interest.

Gross Receipts – R&TC Section 25120 was amended to add the deinition of gross receipts. “Gross receipts” means the gross amounts realized (the sum of money and the fair market value of other property or services received) on:

The sale or exchange of property,

The performance of services, or

The use of property or capital (including rents, royalties, interest, and dividends) in a transaction that produces business income, in which the income, gain, or loss is recognized (or would be recognized if the transaction were in the United States) under the IRC.

Amounts realized on the sale or exchange of property shall not be reduced by the cost of goods sold or the basis of property sold.

For a complete deinition 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 deined by R&TC Section 17008), an S corporation, a RIC, a REIT, and a REMIC. See R&TC Section 17062 for more information.

Get FTB Pub. 1001, for a listing of items of nonconformity for individuals.

The pro-rata share of gain or loss on property subject to the IRC Section 179 expense deduction recapture should be reported on Schedule K-1 (568) as other information. Follow the instructions on the federal Form 4797 and federal Schedule K-1 (1065) for the reporting requirements.

Other Member Information

Table 1 – Member’s Share of Nonbusiness Income from Intangibles (source of income is dependent on residence or commercial domicile of the member)

The income data contained in Table 1 is not relected 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. For more information, see General Information D, Nonbusiness Income, and General Information E, Unitary Members.

Table 2 – Member’s Share of Distributive Items

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. The inal determination of unity is made at the member level.

If the member and the LLC are engaged in a single unitary business, or if the LLC is uncertain as to whether it is unitary with the member, the LLC will furnish the information on Table 2.

Page 44 Schedule K-1 (568) Instructions 2018

The member’s share of the LLC’s business income is entered on Table 2, Part A. The member then adds that income to its own business income and apportions the combined business income using the revised factor described below.

Table 2, Part B, relects 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. For more information, see R&TC Sections 25124 and 25125, and Cal. Code Regs., tit. 18 sections 17951-1, 17951-2, and 17951-3.

The member’s share of the LLC’s property, payroll, and sales factors is in Table 2, Part C. The member combines its apportionment factors with the apportionment factors of the LLC and uses the revised factor to compute its business income apportioned to California. For more information, see General Information D, Nonbusiness Income, and General Information E, Unitary Members.

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

Members will use Table 2, Part C to determine if they meet threshold amounts of California property, payroll and sales.

R&TC Section 23101 provides that a taxpayer is doing business if it actively engages in any transaction for the purpose of inancial or pecuniary gain or proit in California or if any of the following conditions are satisied:

The taxpayer is organized or commercially domiciled in California.

The sales, as deined 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 $583,867 or 25% of the taxpayer’s total sales.

The real property and tangible personal property of the taxpayer in California exceed the lesser of $58,387 or 25% of the taxpayer’s total real property and tangible personal property.

The amount paid in California by the taxpayer for compensation, as deined in R&TC Section 25120(c), exceeds the lesser of $58,387 or 25% of the total compensation paid by the taxpayer.

If the member’s distributive share of property, payroll, or sales in California, when combined with the member’s property, payroll, or sales in California from other pass-through entities or its own activities, exceeds the threshold amounts set forth in R&TC Section 23101, the member is “doing business” in California and must ile a return and pay all applicable taxes, including the minimum franchise tax if the member is a corporation or the applicable annual tax if the member is a business entity that is required to pay an annual tax.

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

Schedule K-1 (568) Instructions 2018 Page 45

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Page 46 Form 568 Booklet 2018

TAXABLE YEAR

 

 

CALIFORNIA SCHEDULE

2018

Pass–Through Entity Ownership

 

EO (568)

 

Name as shown on tax return

California Secretary of State (SOS) ile no.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FEIN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Part I – Partial Ownership List the entities in which the taxpayer holds ownership of less than 100%.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CA

 

 

 

 

 

 

 

 

Proit and Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source

 

 

 

 

 

 

 

 

Percentage.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name of Entity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CA SOS ile no.

 

 

 

FEIN

 

 

Income.

 

 

 

 

 

 

 

 

See instructions.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See