California Targeted Tax Area Business Booklet

Targeted Tax Area Business Booklet
2018 Form FTB 3809 -  Target Tax Area Business Booklet
2018

Targeted Tax Area Business Booklet

3809

California Forms & Instructions
Members of the Franchise Tax Board
Betty T. Yee, Chair
George Runner, Member
Keely Bosler, Member

This booklet contains:
Form FTB 3809, Targeted Tax Area Deduction and Credit Summary

2018 Instructions for Form FTB 3809
Targeted Tax Area Businesses

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

Contents
General Information .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  2
How to Claim Deductions and
  Credit Carryovers .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  3
Part I – Credit Carryovers  .  .  .  .  .  .  .  .  .  .  .  .  .  .  4
Hiring Credit Carryover  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  4
Sales or Use Tax Credit Carryover .  .  .  .  .  .  .  .   4
Part II – Portion of Business Attributable
  to the Targeted Tax Area .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4
Part III – Net Operating Loss (NOL)
  Carryover and Deduction .  .  .  .  .  .  .  .  .  .  .  .  .  . 7
Worksheet I, Income or Loss
 Apportionment .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 7
Instructions for Schedule Z - Computation
  of Credit Carryover Limitations  .  .  .  .  .  .  .  . 10
Worksheet II, Computation of NOL
  Carryover and Carryover Limitations .  .  .  . 11
Form FTB 3809, Targeted Tax Area
  Deduction and Credit Summary .  .  .  .  .  .  .  . 13
Schedule Z, Computation of Credit Carryover
 Limitations .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 14
Standard Industrial Classification
	 Manual, 1987 Edition (Partial Listing)  .  . 15
Principal Business Activity Codes  .  .  .  .  .  .  .  . 18
How to Get ­California Tax Information .  .  .  .  . 22

General Information
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.
Targeted Tax Area (TTA) Credits Carryover Period
The portion of any TTA sales or use
tax credit or hiring credit remaining for
carryover to taxable years beginning on or
after January 1, 2014, shall be carried over
only to the succeeding 10 taxable years if
necessary, or until the credit is exhausted,
whichever occurs first. Any hiring credits
generated for employees hired on or before
December 31, 2012, may be carried over to the
succeeding 10 taxable years.

Page 2  FTB 3809 Booklet  2018

Repeal of Geographically Targeted Economic
Development Area Tax Incentives
The California legislature repealed and
made changes to all of the Geographically
Targeted Economic Development Area
(G-TEDA) Tax Incentives. Enterprise
Zones (EZ) and Local Agency Military Base
Recovery Areas (LAMBRA) were repealed on
January 1, 2014. The Targeted Tax Areas (TTA)
and Manufacturing Enhancement Areas (MEA)
both expired on December 31, 2012. For more
information, go to ftb.ca.gov and search for
repeal tax incentives.
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 singlesales 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. However, business income
apportioned to the TTA continues to be based
on the property and payroll factors.
Expired Targeted Tax Area
The TTA has expired as of December 31, 2012.
Generally, no further TTA incentives can be
generated after the expiration date. See below
for a discussion on how each incentive expired:
•	 TTA Hiring Credit - Taxpayers can
no longer generate/incur TTA hiring
credits for employees hired on or after
January 1, 2013. Taxpayers can claim the
hiring credit carryover from prior years.
•	 TTA Sales or Use Tax Credit - For taxpayers
engaged in a trade or business in an expired
TTA, the sales or use tax credit is not
available for assets purchased and/or placed
in service on or after January 1, 2013.
Taxpayers can claim the sales or use tax
credit carryover from prior years.
•	 TTA NOL Carryover Deduction – Taxpayers
can no longer generate/incur any TTA NOL
for taxable years beginning on or after
January 1, 2013. Taxpayers can claim an
NOL carryover deduction from prior years.
Assignment of Credit
Credit earned by members of a combined
reporting group may be assigned to an
affiliated corporation that is an eligible member
of the same combined reporting group. A
credit assigned may only be claimed by the
affiliated corporation against its tax liability.
For more information, see instructions for
Schedule Z, Computation of Credit Carryover
Limitations, on page 10, Assignment of Credit,
or get form FTB 3544, Election to Assign Credit
Within Combined Reporting Group, or form
FTB 3544A, List of Assigned Credit Received
and/or Claimed by Assignee or go to ftb.ca.gov
and search for credit assignment.

Important: Affiliated corporations that received
credits assigned under R&TC Section 23663,
do not include the assigned credits received on
this worksheet. Those credits are entered and
tracked on form FTB 3544A.
Pass-Through Entities
For purposes of this booklet, the term
“pass‑through entity” refers to an S corporation,
estate, trust, partnership and a limited liability
company (LLC). References to “partnerships”
include LLCs classified as partnerships.

Introduction
Economic Development Area
(EDA) Tax Incentives
California established four types of EDAs that
have related tax incentives. These incentives
were established to stimulate growth and
development in selected areas that were
economically depressed. EDA tax incentives
applied only to certain business transactions
that were undertaken after an EDA had
received final designation from the California
Department of Housing & Community
Development (HCD). Final designation was
when the HCD designated an area to be
an EDA. Tax incentives were available to
individuals and businesses operating or
investing within the geographic boundaries of
the following EDAs:
•	 Enterprise Zones (repealed on
January 1, 2014)
•	 Local Agency Military Base Recovery Areas
(repealed on January 1, 2014)
•	 Manufacturing Enhancement
Areas (designation expired on
December 31, 2012)
•	 Targeted Tax Areas (designation expired on
December 31, 2012)
Additional information on other EDAs can be
found in the following FTB tax booklets:
•	 EZ tax incentives, get FTB 3805Z, Enterprise
Zone Business Booklet.
•	 LAMBRA tax incentives, get FTB 3807,
Local Agency Military Base Recovery Area
Business Booklet.
•	 MEA hiring credit, get FTB 3808,
Manufacturing Enhancement Area
Business Booklet.
References in this booklet to the "TTA" are
interpreted as "the boundaries of the former
TTA as it existed on December 31, 2012."

Reporting Requirement
California statutes require the Franchise Tax
Board (FTB) to provide information to the
California Legislature regarding the number
of businesses using the EDA tax incentives,
types of EDA tax incentives being used, and the
EDAs in which the businesses are claiming the
tax incentives.
Complete items A through H on Side 1 of
form FTB 3809, Targeted Tax Area Deduction
and Credit Summary, as applicable. This
information will be used to meet the FTB’s
statutory reporting requirement.

Purpose
This booklet provides specific information on
the types of available former TTA tax incentives.
Taxpayers operating or investing in a business
located within a designated former TTA may be
eligible for the following credit carryover and
carryover deduction:
•	 Hiring credit carryover
•	 Sales or use tax credit carryover
•	 NOL carryover deduction
Use this booklet to determine the correct
amount of credit carryovers and deductions
that a business may claim for operating
or investing in a business located within
a designated former TTA. Complete the
worksheets in this booklet for each credit
carryover or deduction for which the business
is eligible. Then enter the total credits and
deductions on form FTB 3809.

Former Targeted Tax Area
Designation
California established the TTA program
to stimulate development in a selected
economically depressed area of Tulare County.
The program offered special tax incentives to
entities and individuals located in the Tulare
TTA and engaged in a trade or business within
the selected Standard Industrial Codes listed
on pages 15 through 17 of this booklet.
All of the incorporated cities in Tulare County
and portions of the unincorporated areas
of Tulare County received final designation
as the TTA effective November 1, 1998.
The designation was binding for 15 years,
commencing from January 1, 1998. Note: The
TTA designation expired on December 31, 2012.
The incorporated cities in Tulare County are:
	 •  Cutler-Orosi	 •  Pixley
•  Dinuba	
•  Porterville
•  Earliment	
•  Traver
•  Exeter	
•  Tulare
	 •  Farmersville	 •  Visalia
	• 
Goshen	
•  Woodlake
	• 
Lindsay

For business eligibility or zone related
information, including questions regarding the
former TTA geographic boundaries, contact the
HCD or the local zone program manager where
the business is located. Go to hcd.ca.gov and
search for directory of zone contacts to find
Directory of Economic Development Areas.
For information that is zone-specific, but not
tax-specific, you may contact the HCD. See
page 22 for the HCD contact information.

Who Can Claim the Former TTA
Tax Incentives?

Forms Table

How to Claim Deductions and
Credit Carryovers

The titles of forms referred to in this
booklet are:
Form 100	
 	
Form 100S	

California Corporation
Franchise or Income Tax Return
California S Corporation
Franchise or Income Tax Return
Form 100W	 California Corporation Franchise
or Income Tax Return –
Water’s‑Edge Filers
Form 109	
California Exempt Organization
Business Income Tax Return
Form 540	
California Resident Income Tax
Return
Long Form	
California Nonresident or Part‑Year
  540NR	
Resident Income Tax Return
Form 541	
California Fiduciary Income Tax
Return
Form 565	
Partnership Return of Income
Form 568	
Limited Liability Company Return
of Income
Schedule CA	 California Adjustments –
 (540)	
Residents
Schedule CA	 California Adjustments –
  (540NR)	
Nonresidents or Part-Year
Residents
Schedule P	
Alternative Minimum Tax and
(540)	
Credit Limitations – Residents
Schedule P	
Alternative Minimum Tax and
(540NR)	
Credit Limitations – Nonresidents
	
and Part-Year Residents
Schedule R	
Apportionment and Allocation of
Income
FTB Pub. 1061	 Guidelines for Corporations Filing
a Combined Report
Schedule C	
S Corporation Tax Credits
 (100S)
Schedule D-1	 Sales of Business Property
Schedule K-1	 Shareholder’s Share of Income,
  (100S)	
Deductions, Credits, etc.
Schedule K-1	 Beneficiary’s Share of Income,
  (541)	
Deductions, Credits, etc.
Schedule K-1	 Partner’s Share of Income,
  (565)	
Deductions, Credits, etc.
Schedule K-1	 Member’s Share of Income,
  (568)	
Deductions, Credits, etc.
FTB 3544	
Election to Assign Credit Within
Combined Reporting Group
FTB 3544A	
List of Assigned Credit Received
and/or Claimed by Assignee

The TTA hiring credit carryover, sales or
use tax credit carryover, and NOL carryover
deductions are available to individuals, sole
proprietors, corporations, estates, trusts,
and partnerships operating or investing in a
business located within the designated former
TTA.

To claim any TTA NOL carryover deduction
or credit carryover, attach a completed form
FTB 3809 to your ­California tax return.
Attach a separate form FTB 3809 for each
business you operate or invest in that is
located within the former TTA. Also, complete
the following schedule and/or worksheets
to report credit carryovers and deductions
incurred:
•	 Corporations complete Schedule Z and all
the worksheets, except for Worksheet I,
Section B.
•	 Sole proprietors complete Schedule Z and
all the worksheets.
•	 For trusts, estates, and partnerships,
complete Worksheet I, Section A.
•	 Individual investors receiving pass-through
former TTA credits complete Worksheet I,
Section B and Schedule Z. All other
investors complete Worksheet I, Section A
and Schedule Z.
•	 Individual investors receiving a
pass‑through loss, and having an overall
NOL carryover, complete Worksheet I,
Section B and Worksheet II. All other
investors complete Worksheet II.
Schedule Z is on Side 2 of form FTB 3809.
To assist with the processing of the tax return,
indicate that the business operates or invests
within the former TTA by doing the following:
Form 540 filers:	

Claim TTA tax incentives on
Form 540, line 43 through
45, as ­applicable.
Long Form 540NR	 Claim TTA tax incentives
filers:	
on Long Form 540NR,
line 58 through 60, as
­applicable.
Form 100 filers:	
Claim TTA tax incentives on
Form 100, line 20, lines 24
through 26, as applicable.
Form 100S filers:	 Claim TTA tax incentives on
Form 100S, line 18, lines 22
through 24, as applicable.
Form 100W filers:	 Claim TTA tax incentives on
Form 100W, line 20, lines 24
through 26, as applicable.
Form 109 filers:	
Check the “Yes” box for
the TTA question I at the
top of Form 109, Side 1.

Keep all completed worksheets and supporting
documents for your records.

FTB 3809 Booklet  2018  Page 3

Form FTB 3809 – Instructions
for items A through H
For corporations, estates, trusts, partnerships,
exempt organizations, and sole proprietors
who operate businesses in the former TTA,
complete items A through H.
Investors of pass-through entities, complete
items A through D.
Standard Industrial Classification (SIC) and
Principal Business Activity (PBA) Codes
To qualify for the former TTA hiring credit,
you must be engaged in a trade or business
within the selected SIC listed on page 15
through page 17 of this booklet. Enter the
SIC code of the establishment that qualifies
you to take this credit on form FTB 3809,
Side 1. If your business has more than one
establishment, and if more than one of them
qualifies you to take this credit, enter the
SIC code that best represents your primary
qualifying establishment.
The PBA codes are based on the North
American Industry Classification System
published by the United States Office of
Management and Budget. The PBA codes are
listed on page 18 through page 20. Enter the
PBA code of your principal activities on form
FTB 3809, Side 1.

Part I – Credit Carryover
Line 1a – Hiring Credit
Carryover
The TTA has expired as of December 31, 2012.
Generally, no further TTA incentives can be
generated after the expiration date. Taxpayers
can no longer generate/incur TTA hiring credits
for employees hired on or after January 1, 2013.
Although qualified taxpayers can no longer
generate/incur TTA hiring credits for qualified
employees hired prior to the TTA expiration date
for wages paid or incurred within the 60-month
period of the TTA hiring credit, they can claim
the hiring credit carryover from prior years.
Credit Limitations
The amount of hiring credit carryover claimed
may not exceed the amount of tax on TTA
business income in any year. Use Schedule Z
on Side 2 of form FTB 3809 to compute the
credit limitation.
The portion of any TTA hiring credit remaining
for carryover to taxable years beginning on
or after January 1, 2014, shall be carried
over only to the succeeding 10 taxable years
if necessary, or until the credit is exhausted,
whichever occurs first.

Page 4  FTB 3809 Booklet  2018

Record Keeping
Retain a copy of VoucherCert 10-07 and the
documentation given to the vouchering agency.
In addition, for each qualified employee, keep a
schedule of the first 60 months of employment
showing (at least) the following:
•	 Employee’s name.
•	 Date the employee was hired.
•	 Number of hours the employee worked for
each month of employment.
•	 Smaller of the hourly rate of pay for each
month of employment or 150% of the
minimum wage.
•	 Location of the employee’s job site and
duties performed.
•	 Records of any other federal or state
subsidies received for hiring the
qualified employee.
•	 Total qualified wages per month for each
month of employment.

Line 1b – Sales or Use Tax
Credit Carryover
The TTA has expired as of December 31, 2012.
Generally, no further TTA incentives can
be generated after the expiration date. For
taxpayers engaged in a trade or business in
an expired TTA, the sales or use tax credit
may only be generated for qualified property
purchased on or before December 31, 2012,
and placed in service on or before
December 31, 2012. The sales or use tax credit
is not available for assets purchased and/or
placed in service on or after January 1, 2013.
You may claim a credit carryover for the
sales or use tax paid or incurred on qualified
property under R&TC Sections 17053.33 and
23633, only if a carryover is available from
taxable years 1998 through 2012.
Credit Limitations
•	 The amount of sales or use tax credit
carryover claimed may not exceed the
amount of tax on the TTA business income
in any year.
•	 The portion of any TTA sales or use
tax credit remaining for carryover to
taxable years beginning on or after
January 1, 2014, shall be carried over
only to the succeeding 10 taxable years if
necessary, or until the credit is exhausted,
whichever occurs first.

Part II – Portion of Business
Attributable to the Targeted
Tax Area
TTA tax credits are limited to the tax on business
income attributable to operations within the
former TTA. TTA deductions are limited to
business income attributable to operations
within the former TTA. If the business is located
within and outside the former TTA, determine
the portion of total business operations that are
attributable to the former TTA. Each taxpayer
must complete one form FTB 3809 for each
zone, and therefore, must also compute the
income limitation for each zone.

Business Income vs.
Nonbusiness Income
Only business income is apportioned to the
TTA to determine the incentive limitation.
Business income is defined as income arising
from transactions and activities in the regular
course of the trade or business. Business
income includes income from tangible
and intangible property if the acquisition,
management, and disposition of the property
constitute integral parts of the regular trade
or business operations. Nonbusiness income
is all income other than business income.
See Cal. Code Regs., tit. 18 section 25120
for further references and examples of
nonbusiness income.
For corporations and entities doing business
in and outside of the former TTA, use
Worksheet I, Section A, to determine the TTA
apportionment factor to determine the amount
of business income attributable to the former
Targeted Tax Area.
Pass-through entities must report to their
shareholders, beneficiaries, partners, and
members the following items:
1.	 The distributive (or pro-rata for
S corporations) share of the business
income apportioned to the former TTA.
2.	 The distributive (or pro-rata for
S corporations) share of the business
capital gains and losses apportioned to the
former TTA included in item 1.
3.	 The distributive (or pro-rata for
S Corporation) share of the TTA property
and payroll to corporate partners,
members, shareholders, beneficiaries.
Report these items as other information on
Schedule K-1 (100S, 541, 565, or 568.)

For an individual, use Worksheet I, Section B
to determine business income attributable
to the former TTA. Business income
includes, but is not limited to, California
business income or loss from federal
Form 1040, Schedules C,D,E,F, and California
Schedule D-1, Sales of Business Property, (or
federal Form 4797, Sales of Business Property,
if California Schedule D-1 is not needed), as
well as wages. Be sure to include casualty
losses, disaster losses, and any business
deductions reported on federal Form 1040
Schedule A as itemized deductions.
Generally, all income which arises from the
conduct of trade or business operations of a
taxpayer is business income.
If you elected to claim part or all of your
current year disaster loss under IRC
Section 165(i)(1) on prior year's tax return,
do not include the amount of the loss that was
claimed in your current year business income
from the TTA.

Apportionment

Business income is apportioned to the former
TTA by multiplying the total California
business income of the taxpayer by a fraction.
The numerator which is the property factor
plus the payroll factor, and the denominator
which is two. Loss is apportioned to the TTA
by multiplying the taxpayer’s total overall
business loss by a fraction. If a taxpayer
conducts businesses in more than one TTA, the
TTA apportionment factor and credit limitations
are computed separately for each TTA.
Property Factor
Property factor is defined as the average value
of all real and tangible personal property owned
or rented by the taxpayer and used during the
taxable year to produce business income.
Property owned by the business is valued at
its original cost. Original cost is the basis of
the property for federal income tax purposes
(prior to any federal adjustment) at the time
of acquisition by the business, adjusted for
subsequent capital additions or improvements
and partial dispositions because of sale or
exchange. Allowance for depreciation is
not considered.
Rented property is valued at eight times the
net annual rental rate. The net annual rental
rate for any item of rented property is the total
rent paid for the property, less total annual
subrental rates paid by subtenants.
Payroll Factor
Payroll is defined as the total amount paid to
the business’ employees as compensation for
the production of business income during the
taxable year.
Compensation means wages, salaries,
commissions, and any other form of
remuneration paid directly to employees for
personal services.
Payments made to independent contractors or
any other person not properly classified as an
employee are excluded.

Compensation Within the Former TTA
Compensation is considered to be within the
former TTA if any one of the following tests is
met:
1.	 The employee’s services are performed
within the geographical boundaries of
the former TTA.
2.	 The employee’s services are performed
within and outside the former TTA, but the
services performed outside the former TTA
are incidental to the employee’s service
within the former TTA.
	 Incidental means any temporary or
transitory service performed in connection
with an isolated transaction.
3.	 If the employee’s services are performed
within and outside the former TTA, the
employee’s compensation is attributed to
the former TTA if any one of the following
items is met:
A.	 The employee’s base of operations is
within the former TTA.
B.	 There is no base of operations in any
other part of the state in which some
part of the service is performed, and the
place from which the service is directed
or controlled is within the former TTA.
C.	 The base of operations or the place
from which the service is directed or
controlled is not in any other part of
the state in which some part of the
service is performed and the employee’s
residence is within the former TTA.
	 Base of operations is the permanent
place from which employees start work
and customarily return in order to
receive instruction from the taxpayer or
communications from their customers
or persons; to replenish stock or other
material; to repair equipment; or to
perform any other functions necessary
in the exercise of their trade or
profession at some other point or points.
Corporations Filing a Combined Report
When determining the income attributable to
the former TTA, the business income of each
corporation doing business in the former
TTA is the business income apportioned to
California as determined under combined
report mechanics. Get FTB Pub. 1061 for
further information on combined reports and
entity income apportionment. Each corporation
computes the income attributable to the former
TTA by multiplying California business by TTA
apportionment factor computed in Worksheet I,
Section A. The former TTA property and payroll
factors used in the determination of TTA
income includes only the taxpayer’s California
amounts in the denominator.

Example: Computation of former TTA income
assigned to each entity operating within the
former TTA
Parent Corporation A has two subsidiaries, B
and C. Corporations A and B operate within
the former TTA. The combined reporting
group operates within and outside California
and apportions its income to California using
Schedule R. Assume the combined reporting
group’s business income apportioned to
California was $1,000,000 and Corporation A
and B’s share of business income assigned
to California is $228,000 and $250,000
respectively. Corporation A and B’s separate
former TTA and separate California property and
payroll factor amounts are shown.
Business income apportioned to the TTA is
determined as follows:
	
A	B

Property Factor
TTA Property	
$1,000,000	 $  800,000	
California Property	
$1,000,000	 $1,200,000		
  Apportionment %	100%	66.66%	
Payroll Factor
TTA Payroll	
$  800,000	 $   800,000	
California Payroll	
$  800,000	 $1,000,000		
  Apportionment %	100%	 80%	
Average Apport. %	
100%	73.33%
(Property + Payroll Factors)
     2
Apportioned
Business Income	
$  228,000	 $  250,000	
TTA Business
Income	

$  228,000	

$  183,325

FTB 3809 Booklet  2018  Page 5

Instructions for Worksheet I –
Income or Loss Apportionment
Section A – Income
Apportionment
If the business operates solely within the
former TTA and all its property and payroll
are solely within the former TTA, enter 100%
(1.00) on Section A, line 4, column (c). Do not
complete the rest of Worksheet I.
Use Worksheet I, Section A, Income
Apportionment, to determine the amount of
business income apportioned to the former
TTA. The apportioned TTA business income
determines the amount of the tax incentives
that can be used. A taxpayer’s TTA business
income is its California business income
multiplied by the specific TTA apportionment
percentage computed in Worksheet I,
Section A.
Property Factor
When determining the income apportioned to
the former TTA, the numerator of the property
factor is the average value of the real and
tangible personal property owned or rented
by the business and used within the former
TTA during the taxable year to produce TTA
business income, see Worksheet I, Section A,
column (b). The denominator of the property
factor is the total average value of all the
taxpayer’s real and tangible personal property
owned or rented and used during the taxable
year within California. See Worksheet I,
Section A, column (a).
Payroll Factor
When determining income apportioned to the
former TTA, the numerator of the payroll factor
is the taxpayer’s total compensation paid to
the employees for working within the former
TTA during the taxable year, see Worksheet I,
Section A, column (b). The denominator
of the payroll factor is the taxpayer’s total
compensation paid to employees working
in California. See Worksheet I, Section A,
column (a).

Section B – Income or Loss
Apportionment

Taxpayers filing Form 540 and Long Form
540NR filers, use Worksheet I, Section B
to determine the amount to enter on the
following:
•	 Worksheet II, line 1 and line 6
•	 Schedule Z, Part I, line 1 and line 3
Do not include disaster losses in any amounts
used in the table.
Only California source business income is
apportioned to the former TTA. A taxpayer’s
TTA business income is its California
apportioned business income computed using
Schedule R, multiplied by the specific TTA
apportionment percentage computed using
Worksheet I, Section A.

Page 6  FTB 3809 Booklet  2018

The first step is to determine which portion of
the taxpayer’s net income is “business income”
and which portion is “nonbusiness income,”
since only business income is apportioned
to the former TTA. See Part II, Portion of
Business Attributable to the Targeted Tax Area,
for a complete discussion of business and
nonbusiness income.
Business income or loss reported on federal
Form 1040 Schedules C, C-EZ, E, F, and other
schedules are reported on line 6 through line 9.
Line 11 and line 12 report business gains or
losses reported on California Schedule D,
California Capital Gain or Loss Adjustment,
and Schedule D-1 (or federal Form 4797,
if California Schedule D-1 is not needed).
All business income and losses should be
adjusted for any differences between California
and federal amounts as shown on the
Schedule CA.
Part I – Individual Income and
Expense Items
Wages
For taxpayers with wages from a company
located within and outside the former TTA,
determine the TTA wage income by entering
the percentage of the time that they worked
within the former TTA in column (b). The
percentage of time should be for the same
period for which the wages entered on line 1
were earned. Determine this percentage based
on their record of time and events such as a
travel log or entries in a daily planner.
Part II – Pass-Through Income or
Loss
Individuals with a K-1
The individual partner, member, or
shareholder completes Worksheet I, Section
B, Part II, Pass-Through Income or Loss,
and Schedule Z, Computation of Credit
Carryover Limitations.
Multiple Pass-Through Entities
If you are a shareholder, beneficiary, partner,
or member in multiple pass-through entities
with businesses located within and outside
the former TTA from which you received TTA
tax incentives, see the example below for
computing business income in the former TTA.
Example:
Trade or
business
income from
Schedule K-1
Pass-through (100S, 541,
entity
565, or 568)
ABC, Inc.
  $40,000
A, B, & C
   30,000
ABC, LLC
   10,000
Total

Entity’s TTA
TTA
apportionment apportioned
percentage
income
    80%
  $32,000
    10%
    3,000
    50%
    5,000
  $40,000

Part III – Taxpayer’s Trade or
Business
Business Income or Loss
Use business income or loss from federal
Form 1040 Schedules C, C-EZ, E, and F, plus
California adjustments from Schedule CA (540
or 540NR) for each trade or business. Also,
include business capital gains and losses from
Schedule D and business gains and losses
from Schedule D-1 as adjusted on Schedule CA
(540 or 540NR).
Income Computation Located Entirely Within
the Former TTA
Line 6 – Line 9
If your business operation reported on federal
Form 1040 Schedule C, C-EZ, E, F, or other
schedule is entirely within the former TTA,
enter the income or loss from this activity in
column (a), and enter 1.00 in column (b).
Line 11 and Line 12
If the gain or loss reported on Schedule D or
Schedule D-1 as adjusted on Schedule CA (540
or 540NR) was attributed to an asset used in
an activity conducted entirely within the former
TTA, enter the gain or loss reported in column
(a), and enter 1.00 in column (b).
Located Entirely Within California
Line 6 – Line 9
If your business operation reported on federal
Form 1040 Schedule C, C-EZ, E, F, or other
schedule is entirely within California, enter the
income or loss from this activity in column (a).
To determine the apportionment percentage in
column (b), complete Worksheet I, Section A.
Enter the percentage from Worksheet I,
Section A, line 4, column (c) on Worksheet I,
Section B, column (b).
Line 11 and Line 12
If the gain or loss reported on Schedule D or
Schedule D-1 as adjusted on Schedule CA
(540 or 540NR) was attributed to an asset
used in an activity conducted entirely within
California, enter the gain or loss reported in
column (a). To determine the apportionment
percentage figure in column (b), complete
Worksheet I, Section A. Enter the percentage
from Worksheet I, Section A, line 4, column (c)
on Worksheet I, Section B, column (b).

Located Within and Outside the Former TTA
and California
Line 6 – Line 9
If your business operation reported on federal
Form 1040 Schedule C, C-EZ, E, F, or other
schedule is within and outside the former
TTA and California, get California Schedule R
and complete line 1 through line 18b and
line 28 through line 31. Enter the amount
from Schedule R, line 18b and line 31 in
column (a) of this worksheet. To determine
the apportionment percentage in column
(b), complete Worksheet I, Section A. Enter
the percentage from Worksheet I, Section A,
line 4, column (c) on Worksheet I, Section B,
column (b).
When computing Schedule R, disregard any
reference to Forms 100, 100S, 100W, 565,
or 568. Also, disregard any reference to
Schedules R‑3, R-4, or R-5.
Nonresidents that have an apportioning
business that operates within the former TTA
should have already computed Schedule R, and
can use those amounts when that schedule is
referenced. Residents complete a Schedule R
in order to determine their California source
business income.

Line 11 and Line 12
If the gain or loss reported on Schedule D or
Schedule D-1 as adjusted on Schedule CA (540
or 540NR) was attributed to an asset used in
an activity conducted within and outside the
former TTA and California, get Schedule R
and complete Schedule R-1. Multiply the
gain or loss reported by the percentage
on Schedule R-1, Part A, line 2 or Part B,
line 5 and enter the result in column (a). To
determine the apportionment percentage in
column (b), complete Worksheet I, Section A.
Enter the percentage from Worksheet I,
Section A, line 4, column (c) on Worksheet I,
Section B, column (b).
Line 14
If you are computing the TTA business income
and the result on Worksheet I, Section B,
line 14, column (c) is a positive amount and:
•	 You have TTA NOL carryovers, enter the
amount on Worksheet II, line 1 and line 6
(skip line 2 through line 5).
•	 You have TTA credit ­carryovers, enter the
amount on Schedule Z, Part I, line 1 and
line 3 (skip line 2).
If the amount is negative, you do not have any
business income attributable to the TTA and
you cannot utilize any TTA NOL carryover or
credit carryover(s) in the current taxable year.

Part III – Net Operating Loss
(NOL) Carryover and Deduction
The TTA expired as of December 31, 2012.
Generally, no further TTA incentives can be
generated after the expiration date. For taxable
years beginning on or after January 1, 2013,
taxpayers can no longer generate any TTA
NOL. However, taxpayers can claim an NOL
carryover deduction from prior years.
For NOLs incurred in taxable years beginning
on or after January 1, 2008, California has
extended the NOL carryover period to 20
taxable years following the year of the loss.
For taxable years beginning in 2002 and 2003,
California had suspended the NOL carryover
deduction. Taxpayers continued to carryover
an NOL during the suspension period. The
carryover period for suspended losses was
extended by two years for losses incurred
before January 1, 2002, and by one year for
losses incurred on or after January 1, 2002,
and before January 1, 2003. The deduction
for disaster losses was not affected by the
NOL suspension rules. See instructions for
Worksheet II, on page 9 for more information
on the suspension of the NOL carryover
deduction for taxable years beginning in 2008
through 2011.

 Worksheet I  Income or Loss Apportionment – Targeted Tax Area
Section A  Income Apportionment
Use Worksheet I, Section A, if your business has net income	
from sources within and outside the former TTA.	
		
PROPERTY FACTOR
1	 Average yearly value of owned real and tangible personal

(a)	
Total within	
California	

(b)	
Total within	
the former TTA	

(c)
Percentage within the former TTA
column (b) ÷ column (a)

property used in the business (at original cost). See
instructions. Exclude property not connected with the
business and the value of construction in progress.

	Inventory .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
	Buildings  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
	 Machinery and equipment  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
	 Furniture and fixtures .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
	 Delivery equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
	Land .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
	 Other tangible assets (attach schedule) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
	 Rented property used in the business. See instructions .  .  .
	 Total property values  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
PAYROLL FACTOR
2	 Employees’ wages, salaries, commissions, and other
compensation related to business income included in
the tax return.
Total payroll  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
3	 Total percentage – sum of the percentages in column (c)  .
4	 Average apportionment percentage (1/2 of line 3).
Enter here and on form FTB 3809, Side 1, line 2  .  .  .  .  .  .  .  .

The average apportionment percentage shown on line 4 represents the portion of the taxpayer’s total business that is attributable to activities conducted
within the former TTA. Factors with zero balances in the totals of column (a) will not be included in the computation of the average apportionment
percentage. For example, if the taxpayer does not have any payroll within or outside the former TTA, the average apportionment percentage would be
computed by dividing line 3 by one instead of by two as normally instructed.

FTB 3809 Booklet  2018  Page 7

 Worksheet I   Income or Loss Apportionment-Targeted Tax Area (continued)
Section B  Income or Loss Apportionment
Part I  Individual Income and Expense Items. See instructions.
		
	(a)	
			
Amount	
				

(b)	
Percentage of time providing	
services in the former TTA	

(c)
Apportioned amount
(a) x (b)

 1	Wages  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
 2	 Employee business expenses .  .  .  .  .  .  .  .
  3	 Total. Combine line 1, column (c) and line 2, column (c) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
Part II  Pass-Through Income or Loss. See instructions.

		
(a)	(b)
		
Name of entity	
Distributive or pro-rata share of business income or loss apportioned
			
to the former TTA from Schedule K-1 (100S, 541, 565, or 568) including
			
capital gains and losses

 4

 5	 Total. Add line 4, column (b) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
Part III  Taxpayer’s Trade or Business. See instructions.

		
	(a)	
			
Business income or loss	
				

(b)	
Apportionment percentage	
for the former TTA	

(c)
Apportioned income or loss
(a) x (b)

 6	 Schedule C or C-EZ  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
 7	 Schedule E (Rentals) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
 8	 Schedule F .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
 9	 Other business income or loss .  .  .  .  .  .  .  .
10	 Total. Add line 6 through line 9, column (c) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
		
	(a)	
			
Business gain	
			
or loss	

(b)	
Apportionment percentage	
for the former TTA	

(c)
Apportioned gain or loss
(a) x (b)

11	 Schedule D .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
12	 Schedule D-1 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
13	 Total. Add line 11, column (c) and line 12, column (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 	
14	 Total. Add line 3, line 10, and line 13, column (c), and line 5, column (b)
See instructions .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .
The business cannot generate NOLs from
activities within the former TTA before the first
taxable year beginning on or after the date the
TTA was officially designated.
Limitation
A TTA NOL carryover deduction can only offset
business income attributable to operations
within the former TTA.
Election
If you elected and designated the carryover
category (general or specific, EZ, LAMBRA, or
TTA NOL) on the original tax return for the year
of a loss, file form FTB 3809 for each year in
which a TTA NOL deduction is being taken. The
election is irrevocable.
If you elected the TTA NOL deduction, you are
prohibited by law from carrying over any other
type of NOL (relating to TTA activities) from
this year.

Page 8  FTB 3809 Booklet  2018

Alternative Minimum Tax
Taxpayers claiming a TTA NOL carryover
deduction determine their NOL for alternative
minimum tax purposes. Use Schedule P (100,
100W, 540, 540NR, or 541) to compute the
NOL for alternative minimum tax purposes.
S Corporations
TTA NOLs incurred prior to becoming
an S corporation cannot be used
against S corporation income. See IRC
Section 1371(b).
However, an S corporation is allowed to deduct
a TTA NOL incurred after the “S” election is
made. An S corporation may use the NOL
carryover as a deduction against income
subject to the 1.5% entity-level tax (3.5% for
financial S corporations). The expenses (and
income) giving rise to the loss are also passed
through to the shareholders in the year the loss
is incurred.

Combined Report
Corporations that are members of a unitary
group filing a combined report separately
compute loss carryover for each corporation
in the group (R&TC Section 25108) using
individual apportionment factors.
Unlike the NOL treatment on a federal
consolidated tax return, a loss carryover
for one member included in a combined
report may not be applied to the intrastate
apportioned income of another member
included in a combined report.

Water’s-Edge Taxpayer
For any water’s-edge taxpayer, R&TC
Section 24416(c) imposes a limitation on
the NOL deduction, if the NOL is generated
during a non-water’s edge tax year. The NOL
carryover is limited to the lesser of the NOL
or the re-computed NOL. The re-computed
NOL carryover is determined by computing
the income and factors of the original
worldwide combined reporting group, as if
the water’s‑edge election had been in force for
the year of the loss. R&TC Section 24416(c)
serves as a limitation. If this section applies,
the NOL carryover for each corporation may
only be decreased, but not increased.

Instructions for Worksheet II –
Computation of NOL Carryover
and Carryover Limitations
Individuals, exempt trusts, and corporations
with current year income and a prior year TTA
NOL carryover complete Worksheet II.
For taxable years beginning in 2010 and 2011,
California suspended the NOL carryover
deduction. Taxpayers continued to compute
and carryover NOLs during the suspension
period. However, taxpayers with net income
after state adjustments (pre-apportioned
income) (corporations) or with modified
adjusted gross income (individuals) of less
than $300,000, or with disaster loss carryovers
are not affected by the NOL suspension rules.
Corporations use line 17 of Forms 100
and 100W, or line 14 less line 16 of
Form 100S to determine net income after state
adjustments (pre-apportioned income).
Individuals use the amount shown on
your federal tax return for the same taxable
year without regard to the federal NOL
deduction (Form 540/540NR, line 13,
plus the federal NOL deduction listed on
Schedule CA (540), Part I, line 21c, column
C or Schedule CA (540NR), Part II, line 21c,
column C.
The carryover periods for any NOL or NOL
carryover, for which a deduction is disallowed
because of the 2008 - 2011 suspension, are
extended by:
•	 One year for losses incurred in
taxable years beginning on or
after January 1, 2010, and before
January 1, 2011.
•	 Two years for losses incurred in taxable
years beginning before January 1, 2010.
•	 Three years for losses incurred in taxable
years beginning before January 1, 2009.
•	 Four years for losses incurred in taxable
years beginning before January 1, 2008.
The TTA NOL carryover deduction is used to
reduce current year income from the TTA.
Use this worksheet to compute the TTA
NOL carryover deduction for corporations,
individuals, and exempt trusts.
Line 1 – See Part II on page 4 for a discussion
of business and nonbusiness income.

Form 540 and Form 540NR filers:
Be sure to include casualty losses, disaster
losses, and any business deductions reported
on federal Form 1040, Schedule A, as
itemized deductions.
Exception: If you elected to carry back part or
all of your current year disaster loss, under
IRC Section 165(i)(1), do not include the
amount of the loss that was carried back in the
current year business income for the TTA.
Line 2 – In modifying your income, deduct the
capital losses only up to the amount of capital
gains. Enter any net capital losses included in
line 1 as a positive number.
Line 3 – Corporations reduce income by the
disaster loss deduction and the deduction for
excess net passive income.
Line 6 – This is your modified taxable
income (MTI). Reduce the MTI amount by
your TTA NOL carryover deduction. The
TTA NOL carryover deduction may not be larger
than your MTI. If your MTI is a loss in the
current year or if it limits the amount of NOL
you may use this year, carry over the NOL to
future years.
Line 7 – Enter the amount from line 6. If
this amount is zero or negative, transfer
the amount(s) from line 8 through line 22,
column (b) to column (e). Go to line 23.
Line 8 through Line 22 – Enter the amounts on
line 8 through line 22 as positive numbers.
In column (c), enter the smaller of the
amount in column (b) or the amount in
column (d) from the previous line.
In column (d), enter the result of subtracting
column (c) from the balance on the previous
line in column (d).
In column (e), enter the result of subtracting
the amount in column (c) from the amount in
column (b), as applicable.
Example:
(b)
Carryover
from prior
year
$ 500

(c)
(d)
(e)
Amount
Balance
TTA NOL
deducted available to carryover
this year offset losses
$5,000
$ 500
4,500
$ 0

Line 23 – Total the amounts in columns (b),
(c), and (e). Enter the totals from column (b)
and column (e) on form FTB 3809, Side 1,
line 3a and line 3c, accordingly.
Your TTA NOL carryover deduction for 2018 is
the total of column (c). Enter this amount on
your California tax return or schedule as follows:
•	 Form 100, line 20
•	 Form 100S, line 18
•	 Form 100W, line 20
•	 Form 109, line 6
•	 Schedule CA (540), Part I, line 21e,
column B
•	 Schedule CA (540NR), Part II, line 21e,
column B

Schedule Z – Computation of
Credit Carryover Limitations
Credit Carryover Limitations
The amount of credit carryover you can claim
on your California tax return is limited by the
amount of tax attributable to TTA business
income. The amount of tax attributable to
the TTA business income is computed in this
schedule. For corporations and other entities
doing business in the targeted tax area, the
TTA business income is computed in this
schedule using the TTA apportionment factor
formula computed on Worksheet I, Section A.
For individuals, the TTA business income is
computed on Worksheet I, Section B.
Assignment of Credit
For taxable years beginning on or after July 1,
2008, credit earned by members of a combined
reporting group may be assigned to an
affiliated corporation that is an eligible member
of the same combined reporting group. A
credit assigned may only be claimed by the
affiliated corporation against its tax in taxable
years beginning on or after January 1, 2010.
The eligible assignee shall be treated as if it
originally generated the assigned credit. Any
credit requirements, limitations or restrictions
that applied to the assignor will also apply to
the eligible assignee. The amount of TTA credit
carryovers you may claim on your California
tax return is limited to the tax attributable to a
specific former TTA. For zone credits assigned,
the assignee must have a tax liability as a result
of income generated in the same zone that the
original credit was generated. For example, if
the original credit was generated in the former
Tulare TTA of the assignor, the assignee must
have a tax liability on the income attributable
to the former Tulare TTA in order to use the
assigned credit. For more information, get
form FTB 3544, or form FTB 3544A or go to
ftb.ca.gov and search for credit assignment.
Other Limitations
If a taxpayer owns an interest in a disregarded
business entity, the amount of the credit
carryover that can be utilized is limited to the
difference between the taxpayer’s regular tax
computed with the income of the disregarded
entity, and the taxpayer’s regular tax computed
without the income of the disregarded entity.
Partnerships allocate the credit among the
partners according to the partner’s distributive
share as determined in a written partnership
agreement. See R&TC Section 17039(e)(2).

FTB 3809 Booklet  2018  Page 9

Credit carryovers you are otherwise eligible
to claim may be limited. Do not apply
credits against the minimum franchise tax
(corporations and S corporations), annual tax
(partnerships and QSub), alternative minimum
tax (corporations, exempt organizations,
individuals, and fiduciaries), built-in gains tax
(S corporations), or excess net passive income
tax (S corporations).
Refer to the credit instructions in your tax
booklet for more information.
S Corporations and the Application of TTA
Credits
An S corporation may use its TTA credit
carryovers to reduce TTA tax at both the
corporate and shareholder levels.
Carryover
If the amount of credit carryover available this
year exceeds your TTA tax, you may carry over
any excess credit to future years. For taxable
years beginning on or after January 1, 2014,
the carryover period is 10 years if necessary,
or until the credit is exhausted, whichever
occurs first. Apply the carryover to the earliest
taxable year(s) possible. In no event can the
credit be carried back and applied against a
prior year’s tax.
If a C corporation had unused credit carryovers
when it elected S corporation status, the
carryovers were reduced to 1/3 and transferred
to the S corporation. The remaining 2/3 were
disregarded. The allowable carryovers may
be used to offset the 1.5% tax on net income
in accordance with the respective carryover
rules. These C corporation carryovers may
not be passed through to shareholders. For
more information, get Schedule C (100S),
S Corporation Tax Credits.
Credit Code
Use credit code 210 to claim the TTA hiring
credit and sales or use tax credit carryover on
your tax return. Using an incorrect code may
cause a delay in allowing the credit(s).

Instructions for Schedule Z –
Computation of Credit
Carryover Limitations
Reporting Requirements of S Corporations,
Estates, Trusts, and Partnerships
•	 Partnerships and LLC’s treated as
partnerships do not complete Schedule Z.
The partners and members of these types
of entities should compute their TTA
income from all sources by completing
the Schedule Z to determine the amount of
TTA credit carryover that they may claim
on their California tax return. For individual
partners, report the distributive share of
all the business income apportioned to the
former TTA. For corporate partners, report
the distributive share of the former TTA
property and payroll. Report these items as
other information on Schedule K-1 (565).
•	 S corporations and their shareholders
complete Schedule Z.

Page 10  FTB 3809 Booklet  2018

•	 Report to shareholders, beneficiaries,
partners, and members, the distributive or
pro-rata share of business income, losses,
and deductions apportioned to the former
TTA; and
•	 Separately state any distributive or pro-rata
share of business capital gains and losses
apportioned to the former TTA included in
the amount above.
S Corporations
Complete only Part I and Part III of Schedule Z
if your entity-level tax before credits is more
than the minimum franchise tax.
Corporations and S Corporations subject to
the minimum franchise tax only
Complete only Part IV of Schedule Z.
All others: Complete Part I and Part II of
Schedule Z.
Part I  – Computation of Credit
Limitations
For filers with NOL carryovers.
•	 Complete Worksheet II first if you have an
NOL carryover.
•	 Then complete Schedule Z if you have any
TTA credits.
If you do not have any NOL carryovers:
•	 Individuals: Go to Worksheet I, Section B.
Follow the instructions there. Enter the
amount from Worksheet I, Section B,
line 14, column (c) on Schedule Z, Part I,
line 1 and line 3 (skip line 2).
•	 Corporations: Follow the instructions for
line 1 below.
Only business income is apportioned to the
TTA to determine the incentive limitation.
Business income is defined as income arising
from transactions and activities in the regular
course of the trade or business. Business
income includes income from tangible
and intangible property if the acquisition,
management, and disposition of the property
constitute integral parts of the regular trade or
business operations. Nonbusiness income is
all income other than business income.
For corporations filing a combined report, the
business income of each corporation doing
business in the former TTA is the business
income apportioned to California as determined
under combined report mechanics. Get FTB
Pub 1061 for more information on combined
reports and entity income apportionment.
Line 1 – Enter all trade or business income.
See form FTB 3809, Part II instructions for the
definition of business income.
Line 2 – If your business is located entirely
within the TTA, enter 1.
This percentage is the apportionment
percentage computed by the entity using
Worksheet I Section A, and represents the
percentage of the entity’s business income
attributable to the TTA.
Line 6a – Compute the tax as if the TTA taxable

income represented all of your taxable income.
Individuals
Use the tax table or tax rate schedule in your
tax booklet for your filing status.
Exempt Organizations
Use the applicable tax rate in your tax booklet.
Corporations and S Corporations
Use the applicable tax rate.
If the amount on line 6a is the minimum
franchise tax ($800), you cannot use your TTA
credits this year. Complete Part IV of Schedule
Z to compute the amount of credit carryover.
Example: Determination of TTA Income for
Shareholders, Partners, or Members of
Pass‑Through Entities
John Anderson is vice president of ABC, Inc.,
an S corporation that has two locations: one
within the TTA and one outside the TTA. Eighty
percent (80%) of the S corporation’s business
is attributable to the TTA.
This percentage was determined by ABC, Inc.
using Worksheet I, Section A, when ABC’s
S corporation tax return (Form 100S) was
prepared.
John divides his time equally (50/50) between
the two offices of ABC, Inc. Jackie Anderson
(John’s spouse/RDP) works for ABC, Inc. at its
office located within the TTA.
John and Jackie Anderson have the following
items of California income and expense for the
2017 taxable year:
John’s salary from ABC, Inc. .  .  .  .  .  .  . $100,000 
Jackie’s salary from ABC, Inc. .  .  .  .  .  .  .  . 75,000 
Interest on savings account .  .  .  .  .  .  .  .  .  .  . 1,000 
Dividends .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 3,000 
Schedule K-1 (100S) from ABC, Inc.:
  Ordinary income  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 40,000 
John’s unreimbursed employee
  expenses from federal Schedule A .  .  .  . (2,000)
The Anderson’s TTA income (total amount to
be reported on line 3) is computed as follows:
John’s TTA salary
  ($100,000 x 50%) .  .  .  .  .  .  .  .  .  .  .  .  .  .  . $50,000
Jackie’s TTA salary
($75,000 x 100%) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 75,000
Pass-through ordinary income from
ABC, Inc. ($40,000 x 80%)  .  .  .  .  .  .  .  .  . 32,000
John’s unreimbursed
employee business
expenses ($2,000 x 50%)  .  .  .  .  .  .  .  .  . (1,000)
Total TTA income
(Schedule Z, Part I, line 3) .  .  .  .  .  .  .  . $156,000
The standard deduction and personal or
dependency exemptions are not included in the
computation of TTA income since they are not
related to trade or business activities.
John and Jackie must compute the tax (to
be entered on Schedule Z, Part I, line 6a) on
the total TTA income of $156,000 (as if it
represents all of their income).
Line 6b – Corporations and S corporations:
If the amount on line 6b is the minimum
franchise tax ($800), you cannot use your
TTA credits this year. Complete Part IV of

Schedule Z to compute the amount of credit
carryover.
Part II  – Limitations of Credits for
Corporations, Individuals, Estates,
and Trusts
Use Part II of Schedule Z if you are a
corporation, individual, estate, or trust.
Corporations and S corporations that are
subject to paying only the minimum franchise
tax, go to Part IV of Schedule Z.
Individuals that received a Schedule K-1,
complete Schedule Z, Part II, using the
information from the Schedule K-1.

Line 8A, column (e) – Enter the amount from
line 7. This is the amount of limitation based
on the tax on TTA business income.
Line 8A, column (f) – Enter the amount of
credit carryover that is used on Schedule P
(100, 100W, 540, 540NR, or 541), column (b).
The amount cannot be greater than the
amount on line 8A, column (e) or the amount
computed on line 8B, column (d). Enter this
amount on form FTB 3809, Side 1, line 1a.
Line 8B, column (b) – Enter the amount of
the total prior year credit carryover. This is the
amount of credit that was previously computed

on Worksheet IA, Section A, in the prior year,
minus the amount that was allowed to be taken
on the prior year tax return.
Line 8B, column (c) – Enter the amount of
credit assigned to affiliated corporations that
are members of the same combined reporting
group from form FTB 3544, column (g). Only
C corporations who completed the form will
enter an amount in this column. Individuals,
Estates, and Trusts, leave blank and go to
column (e) instructions.
Line 8B, column (d) – Add the amount of
the total prior year carryover on line 8B,
column (b), then subtract the amount on
line 8B, column (c), if any.

 Worksheet II  Computation of NOL Carryover and Carryover Limitations – Targeted Tax Area. See instructions.
 1	 Enter the amount from Form 100 or Form 100W, line 17; Form 100S, combined amounts
of line 14 and line 16; or Form 109, line 1 or line 4. Form 540 and Long Form 540NR
filers, enter the total from Worksheet I, Section B, line 14, column (c) on line 1
and line 6 (skip line 2 through line 5). See instructions. Corporations which
file a combined report, enter the taxpayer’s business income assigned to California
(See instructions Part II) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 1
 2	 a	 Form 100, Form 100W, Form 100S, and Form 109 filers: Enter any nonbusiness
	 income included in line 1 as a negative number. Form 540 and Long Form 540NR
	 filers leave blank .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 2a
	
b	 Form 100, Form 100W, Form 100S, and Form 109 filers: Enter any nonbusiness
	 loss included in line 1 as a positive number. Form 540 and Long Form 540NR
	 filers leave blank .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 2b
	
c	 Combine line 2a and line 2b  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 2c
 3	 Form 100 or Form 100W filers: Enter the amount from Form 100 or Form 100W,
line 21. Form 100S filers: Enter the total of the amount from Form 100S, line 16 and
line 19. Form 540, Long Form 540NR, and Form 109 filers: Enter -0-. Enter this
amount as a negative number .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 3
 4	 Combine line 1, line 2c, and line 3. If zero or less, enter -0- on line 6  .  .  .  .  .  .  .  .  .  .  .  .  . 	 4
 5	 Enter the average apportionment percentage from Worksheet I, Section A, line 4 .  .  .  . 	 5
 6	 Modified taxable income. Multiply line 4 by line 5. See instructions .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 6
	
(a)	
	
Description	
		
  7	 Modified taxable income from line 6  .  .  .  .  .  .
 8	 TTA NOL carryover beginning in 1998 .  .  .  .  .
 9	 TTA NOL carryover beginning in 1999 .  .  .  .  .
10	 TTA NOL carryover beginning in 2000 .  .  .  .  .
11	 TTA NOL carryover beginning in 2001 .  .  .  .  .
12	 TTA NOL carryover beginning in 2002 .  .  .  .  .
13	 TTA NOL carryover beginning in 2003 .  .  .  .  .
14	 TTA NOL carryover beginning in 2004 .  .  .  .  .
15	 TTA NOL carryover beginning in 2005 .  .  .  .  .
16	 TTA NOL carryover beginning in 2006 .  .  .  .  .
17	 TTA NOL carryover beginning in 2007 .  .  .  .  .
18	 TTA NOL carryover beginning in 2008 .  .  .  .  .
19	 TTA NOL carryover beginning in 2009 .  .  .  .  .
20	 TTA NOL carryover beginning in 2010 .  .  .  .  .
21	 TTA NOL carryover beginning in 2011 .  .  .  .  .
22	 TTA NOL carryover beginning in 2012 .  .  .  .  .
23	 Total the amounts in columns (b), (c), and
(e). See instructions .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

(b)	
Carryover from	
prior year	

(c)	
Amount deducted	
this year	

(d)	
Balance available to	
offset losses	

(e)			
TTA NOL carryover
to future years.

FTB 3809 Booklet  2018  Page 11

Line 8B, column (e) – Compare the amounts
on line 8A, column (e) and line 8A, column (f).
Enter the smaller amount.
Line 8B, column (g) – Subtract the amount
on line 8B, column (e) from the amount on
line 8B, column (d). Enter the result on line 8B,
column (g). This is the amount of credit
that can be carried over to future years. This
carryover includes both the Schedule P (100,
100W, 540, 540NR, or 541) limitation and the
limitation based on TTA business income.
Line 9A, column (e) – Subtract the amount on
line 8B, column (e) from the amount on line 8A,
column (e). If the result is zero, your remaining
credits are limited and must be carried over to
future years. In this case, enter the amount from
line 9B, column (d) on line 9B, column (g).

Line 9A, column (f) – Enter the amount of
credit that is used on Schedule P (100, 100W,
540, 540NR, or 541), column (b). The amount
cannot be greater than the amount on line 9A,
column (e) or the amount computed on
line 9B, column (d). Enter this amount on form
FTB 3809, Side 1, line 1b.
Line 9B, column (b) – Enter the amount of
the total prior year credit carryover from prior
year’s Schedule Z, Part II, line 9B, column (g).
Line 9B, column (c) – Enter the amount of
credit assigned to affiliated corporations that
are members of the same combined reporting
group from form FTB 3544, column (g). Only
C corporations who completed the form will

enter an amount in this column. Individuals,
Estates, and Trusts, leave blank and go to
column (d) instructions.
Line 9B, column (d) – Subtract the amount on
line 9B, column (c), if any, from the amount
of the total prior year carryover on line 9B,
column (b).
Line 9B, column (e) – Compare the amounts
on line 9A, column (e) a