California Schedule R is the apportionment and allocation supplement that corporations attach to Form 100, the California Corporation Franchise or Income Tax Return. Any business with income both inside and outside California must complete Schedule R to determine what percentage of its total income is taxable by the state.
Who Must File Schedule R
Corporations earning income from California and other states are required to file Schedule R. This applies to C corporations, S corporations (using the related Form 100S), limited liability companies taxed as corporations, banks, and financial institutions subject to California franchise tax. Corporations making a Water's-Edge election must also complete Schedule R to document their apportionment calculation under California Franchise Tax Board (FTB) rules.
Apportionment Methods
California provides two ways to calculate the share of income attributed to California operations. Most corporations use the single-sales factor formula, which measures the percentage of total sales (or gross receipts) delivered to California customers. Certain industries may qualify for the standard three-factor formula, which considers property, payroll, and sales in equal parts to compute the apportionment percentage.
Key Sections of Schedule R
Schedule R covers three main parts supported by seven supplemental schedules (R-1 through R-7). Part I calculates net income after state adjustments. Part II allocates nonbusiness income to specific states. Part III applies the chosen apportionment formula to determine the California business income portion. The supplemental schedules handle deferred income on installment sales, asset disposition gains, interest offsets, and charitable contribution adjustments.
Water's-Edge Election
A Water's-Edge election limits the income subject to California apportionment to a corporation's domestic (U.S.-based) operations rather than worldwide income. This election changes how California taxes the corporation's global earnings and requires detailed reporting on Schedule R to confirm the calculation complies with FTB requirements. Corporations that have made this election use a modified apportionment formula that excludes foreign affiliate income from the computation.
| Question | Answer |
|---|---|
| Form Name | California Schedule R Form |
| Form Length | 7 pages |
| Filed With | California Form 100 (Corporation Franchise or Income Tax Return) |
| Required by | California Franchise Tax Board (FTB) |
| Who Files | Corporations with income from California and other states |
| Fillable? | No |
| Avg. time to fill out | 1 min 45 sec |
| Other names | ftb schedule r, california schedule r, california schedule r instructions 2020, schedule r 7 instructions, ca schedule r |