California California Adjustments - Nonresidents and Part-Year Residents

California Adjustments - Nonresidents and Part-Year Residents
2023 Instructions for Schedule CA (540NR) California Adjustments - Nonresidents or Part-Year Residents
2023 Instructions for Schedule CA (540NR)
California Adjustments — Nonresidents or Part-Year Residents

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

What’s New
Federal Veterans Auto and Education Improvement Act (VAEIA)
of 2022 – The VAEIA was enacted on January 5, 2023, and made
amendments to the federal Servicemembers Civil Relief Act (SCRA).
California conforms to the following VAEIA provisions:
•	 A spouse of a servicemember shall neither lose nor acquire a
residence or domicile for purposes of taxation with respect to the
person, personal property, or income of the spouse by reason
of being absent or present in any tax jurisdiction of the United
States solely to be with the servicemember in compliance with the
servicemember’s military orders.
•	 For any taxable year of the marriage, a servicemember and the
spouse of such servicemember may elect to use for purposes
of taxation, regardless of the date on which the marriage of the
servicemember and the spouse occurred, any of the following:
>	 The residence or domicile of the servicemember.
>	 The residence or domicile of the spouse.
>	 The permanent duty station of the servicemember.
For more information, get FTB Pub. 1032, Tax Information for Military
Personnel.
Federal Consolidated Appropriations Act (CAA), 2023 – The CAA,
2023, was enacted on December 29, 2022, and it includes the
federal Setting Every Community Up for Retirement Enhancement
(SECURE) 2.0 Act of 2022. In general, California Revenue and Taxation
Code (R&TC) conforms to the changes to the retirement provisions
under the SECURE 2.0 Act. California law does not conform to the
federal changes that disallow a deduction for charitable conservation
easement contributions when the amount of the contribution exceeds
2.5 times the sum of each partner’s relevant basis in the partnership.
For more information on the allowance of the deduction for charitable
conservation easement contributions for California income tax purposes,
get FTB Notice 2023-02.
For more general information, refer to the federal act and the
California R&TC. Also, see Schedule CA (540NR), California
Adjustments – Nonresidents or Part-Year Residents, specific line
instructions in Part III, line 12.
California Microbusiness COVID-19 Relief Grant – The gross income
exclusion for the California Microbusiness COVID-19 Relief Grant is
extended until taxable years beginning before January 1, 2025. For more
information, see Schedule CA (540NR) General Information, specific line
instructions in Part II, Section B, line 8z, and R&TC Section 17158.1.
California Hope, Opportunity, Perseverance, and Empowerment
(HOPE) for Children Trust Account Program – The California HOPE for
Children Trust Account Act created the California HOPE for Children
Trust Account Program for the purpose of providing an eligible child
with a HOPE trust account. For taxable years beginning on or after
January 1, 2023, California law allows an exclusion from gross income
for any funds deposited, any investment returns accrued, and any
accrued interest in a HOPE trust account and for any funds from a HOPE
trust account that is withdrawn or transferred by an eligible youth. For
more information, see Schedule CA (540NR) specific line instructions in
Part II, Section B, line 8z and R&TC Section 17141.5.
Interagency Council on Homelessness Payment Exclusion – For
taxable years beginning on or after January 1, 2023, California law
allows an exclusion from gross income for payments received pursuant
to the California Welfare and Institutions Code Section 8257 by
members of the Interagency Council on Homelessness, its advisory
committee, or its working groups who are or have been homeless. For
more information, see Schedule CA (540NR) specific line instructions in
Part II, Section B, line 8z and R&TC Section 17131.13.
Kincade Wildfire Exclusion – For taxable years beginning on or after
January 1, 2020, and before January 1, 2028, California law allows a
qualified taxpayer an exclusion from gross income for any qualified
amount received in a settlement from Pacific Gas and Electric (PG&E)
Company or its subsidiary relating to the 2019 Kincade Fire. If a qualified

taxpayer included income for a qualified amount received from this
settlement in a prior taxable year, the taxpayer can file an amended tax
return for that year within the normal statute of limitations. For more
information, see Schedule CA (540NR) specific line instructions in
Part II, Section B, line 8z and R&TC Section 17139.2.
Zogg Wildfire Exclusion – For taxable years beginning on or after
January 1, 2020, and before January 1, 2028, California law allows a
qualified taxpayer an exclusion from gross income for any qualified
amount received in a settlement from PG&E Company or its subsidiary
relating to the 2020 Zogg Fire. If a qualified taxpayer included income
for a qualified amount received from this settlement in a prior
taxable year, the taxpayer can file an amended tax return for that year
within the normal statute of limitations. For more information, see
Schedule CA (540NR) specific line instructions in Part II, Section B,
line 8z and R&TC Section 17139.3.
Discharge of Student Fees – For taxable years beginning on or after
January 1, 2022, and before January 1, 2027, California law allows
an exclusion from gross income for any amount of unpaid fees due
or owed by a student to a community college that was discharged
pursuant to California Education Code Section 32527. For more
information, see Schedule CA (540NR) specific line instructions in
Part II, Section B, line 8z and R&TC Section 17131.21.
Guaranteed Income Pilot Program Payment Exclusion – Beginning
on June 30, 2022, and before July 1, 2026, California law allows
an exclusion from gross income for any payments received by an
individual from a guaranteed income pilot program or project that
receives a grant pursuant to California Welfare and Institution Code
Section 18997. For more information, see Schedule CA (540NR)
specific line instructions in Part II, Section B, line 8z and R&TC
Section 17131.12.

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, 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 R&TC
in the instructions. Taxpayers should not consider the instructions as
authoritative law.
Conformity
For updates regarding federal acts, go to ftb.ca.gov and search for
conformity.
Federal Acts – In general, the R&TC does not conform to the changes
under the following federal acts. California taxpayers continue to
follow the IRC as of the specified date of January 1, 2015, with
modifications. For specific adjustments due to the following acts, see
Schedule CA (540NR) specific line instructions:
•	 American Rescue Plan Act (ARPA) of 2021 (enacted on
March 11, 2021)
•	 Consolidated Appropriations Act (CAA), 2021 (enacted on
December 27, 2020)
•	 Setting Every Community Up for Retirement Enhancement
(SECURE) Act (enacted on December 20, 2019)
Small Business and Nonprofit COVID-19 Supplemental Paid Sick
Leave Relief Grant – For taxable years beginning on or after January 1,
2021, and before January 1, 2030, California law allows an exclusion
from gross income for grant allocations received by a taxpayer
pursuant to the California Small Business and Nonprofit COVID-19

Schedule CA (540NR) Instructions  2023  Page 1

Supplemental Paid Sick Leave Relief Grant Program that is established
by Section 12100.975 of the Government Code. For more information,
see Schedule CA (540NR) specific line instructions in Part II, Section B,
line 8z and R&TC Section 17158.
Turf Replacement Water Conservation Program – For taxable years
beginning on or after January 1, 2022, and before January 1, 2027,
California law allows an exclusion from gross income for any amount
received as a rebate, voucher, or other financial incentive issued by a
public water system, as defined, local government, or state agency for
participation in a turf replacement water conservation program. For more
information, see Schedule CA (540NR) specific line instructions in Part II,
Section B, line 8z and R&TC Section 17138.2.
Fire Victims Trust Exclusion – For taxable years beginning before
January 1, 2028, California law allows a qualified taxpayer an exclusion
from gross income for any amount received from the Fire Victims
Trust, established pursuant to the order of the United States Bankruptcy
Court for the Northern District of California dated June 20, 2020, case
number 19-30088, docket number 8053. If a qualified taxpayer included
income for an amount received from the Fire Victims Trust in a prior
taxable year, the taxpayer can file an amended tax return for that year.
If the normal statute of limitations has expired, the taxpayer must
have filed a claim by September 29, 2023. For more information, see
Schedule CA (540NR) specific line instructions in Part II, Section B,
line 8z and R&TC Section 17138.5.
Thomas and Woolsey Wildfires Exclusion – For taxable years
beginning before January 1, 2027, California law allows a qualified
taxpayer an exclusion from gross income for any amount received in
a settlement from Southern California Edison for claims relating to the
2017 Thomas Fire or the 2018 Woolsey Fire. If a qualified taxpayer
included income for an amount received from these settlements in
a prior taxable year, the taxpayer can file an amended tax return for
that year. If the normal statute of limitations has expired, the taxpayer
must have filed a claim by September 29, 2023. For more information,
see Schedule CA (540NR) specific line instructions in Part II,
Section B, line 8z and R&TC Section 17138.6.
Reporting Requirements –Taxpayers may need to file form FTB 4197,
Information on Tax Expenditure Items, with the tax return to report
tax expenditure items as part of the Franchise Tax Board’s (FTB)
annual reporting requirements under R&TC Section 41. To determine
if you have an R&TC Section 41 reporting requirement, see the R&TC
Section 41 Reporting Requirements section in 540NR, Nonresident or
Part-Year Resident Booklet, or get form FTB 4197.
Expanded Definition of Qualified Higher Education Expenses – For
taxable years beginning on or after January 1, 2021, California law
conforms to the expanded definition of qualified higher education
expenses associated with participation in a registered apprenticeship
program and payment on the principal or interest of a qualified education
loan under the federal Further Consolidated Appropriations Act, 2020.
California Venues Grant – For taxable years beginning on or after
September 1, 2020, and before January 1, 2030, California law allows an
exclusion from gross income for grant allocations received by a taxpayer
pursuant to the California Venues Grant Program that is administered by
the Office of Small Business Advocate (CalOSBA). For more information,
see Schedule CA (540NR) specific line instructions in Part II, Section B,
line 8z and R&TC Section 17158.
California Microbusiness COVID-19 Relief Grant – For taxable years
beginning on or after January 1, 2020, and before January 1, 2025,
California law allows an exclusion from gross income for grant allocations
received by a taxpayer pursuant to the California Microbusiness
COVID-19 Relief Program that is administered by CalOSBA. For more
information, see Schedule CA (540NR) specific line instructions in Part II,
Section B, line 8z.
Other Loan Forgiveness – For taxable years beginning on or after
January 1, 2019, California law allows an exclusion from gross
income for borrowers of forgiveness of indebtedness described
in Section 1109(d)(2)(D) of the federal Coronavirus Aid, Relief,
and Economic Security (CARES) Act as stated by section 278,
Division N of the CAA, 2021. The CAA, 2021, allows deductions for
eligible expenses paid for with covered loan amounts. California law

Page 2  Schedule CA (540NR) Instructions  2023

conforms to this federal provision, with modifications. For California
purposes, these deductions generally do not apply to an ineligible entity.
“Ineligible entity” means a taxpayer that is either a publicly-traded
company or does not meet the 25% reduction from gross receipts
requirements under Section 311 of the CAA, 2021. For more information,
see Schedule CA (540NR) specific line instructions in Part II, Section B,
line 3 or go to ftb.ca.gov and search for AB 80.
Shuttered Venue Operator Grant – For taxable years beginning on or
after January 1, 2019, California law allows an exclusion from gross
income for amounts awarded as a shuttered venue operator grant
under the CAA, 2021. The CAA, 2021, allows deductions for eligible
expenses paid for with grant amounts. California law conforms to this
federal provision, with modifications. For California purposes, these
deductions do not apply to an ineligible entity. “Ineligible entity” means
a taxpayer that is either a publicly-traded company or does not meet the
25% reduction from gross receipts requirements under Section 311 of
Division N of the CAA, 2021. For more information, see Schedule CA
(540NR) specific line instructions in Part II, Section B, line 3, or R&TC
Section 17158.3.
Small Business COVID-19 Relief Grant Program – For taxable years
beginning on or after January 1, 2020, and before January 1, 2030,
California law allows an exclusion from gross income for grant
allocations received by a taxpayer pursuant to the COVID-19 Relief Grant
under Executive Order No. E 20/21-182 and the California Small Business
COVID-19 Relief Grant Program established by Section 12100.83 of the
Government Code. For more information, see Schedule CA (540NR)
specific line instructions in Part II, Section B, line 8z.
Income Exclusion for Rent Forgiveness – For taxable years beginning
on or after January 1, 2020, and before January 1, 2025, gross income
shall not include a tenant’s rent liability that is forgiven by a landlord or
rent forgiveness provided through funds grantees received as a direct
allocation from the Secretary of the Treasury based on the CAA, 2021. For
more information, see Schedule CA (540NR) specific line instructions in
Part II, Section B, line 8z.
Moving Expense Deduction – For taxable years beginning on or after
January 1, 2021, taxpayers should file California form FTB 3913, Moving
Expense Deduction, to claim moving expense deductions. Attach the
completed form FTB 3913 to Form 540NR, California Nonresident
or Part-Year Resident Income Tax Return. For more information, see
Schedule CA (540NR) specific line instructions in Part II, Section C,
line 14, and get form FTB 3913.
Paycheck Protection Program (PPP) Loans Forgiveness – For taxable
years beginning on or after January 1, 2019, California law allows an
exclusion from gross income for covered loan amounts forgiven under
the federal CARES Act, Paycheck Protection Program and Health Care
Enhancement Act, Paycheck Protection Program Flexibility Act of 2020,
the CAA, 2021, or the PPP Extension Act of 2021.
Also, the ARPA expands PPP eligibility to include “additional covered
nonprofit entities” which includes certain Code 501(c) nonprofit
organizations and Internet-only news publishers and Internet-only
periodical publishers. California law does not conform to this expansion
of PPP eligibility.
The CAA, 2021, allows deductions for eligible expenses paid for with
covered loan amounts. California law conforms to this federal provision,
with modifications. For California purposes, these deductions do not
apply to an ineligible entity. “Ineligible entity” means a taxpayer that is
either a publicly-traded company or does not meet the 25% reduction
from gross receipts requirements under Section 311 of Division N of the
CAA, 2021.
For more information, see specific line instructions for Schedule CA
(540NR) in Part II, Section B, line 3 or R&TC Section 17131.8 or go to
ftb.ca.gov and search for AB 80.
SECURE Act Repeal of Maximum Age 70½ – The SECURE Act repealed
the maximum age of 70½ for traditional IRA contributions. California law
does not conform to this federal provision. For more information, see
Schedule CA (540NR) specific line instructions in Part II, Section C, line 20.
Coronavirus Aid, Relief, and Economic Security (CARES) Act – The
CARES Act was enacted on March 27, 2020. In general, the R&TC does not
conform to the changes. California taxpayers continue to follow the IRC as

of the specified date of January 1, 2015, with modifications. California law
does not conform to the following federal provisions under the CARES Act:
•	 Exclusion for certain employer payment of student loans
•	 Health-savings account changes
The above list is not intended to be all-inclusive of the federal and state
conformities and differences. For more information, see specific line
instructions or refer to the R&TC.
Worker Status: Employees and Independent Contractors – Some
individuals may be classified as independent contractors for federal
purposes and employees for California purposes, which may also cause
changes in how their income and deductions are classified. Proposition
22 was operative as of December 16, 2020, and may affect a taxpayer’s
worker classification. For more information, see Schedule CA (540NR)
specific line instructions in Part II, Section A, line 1a; Part II, Section B,
line 3; Part II, Section C, line 15 and line 17; and Part III, line 4.
Rental Real Estate Activities – For taxable years beginning on or after
January 1, 2020, the dollar limitation for the offset for rental real estate
activities shall not apply to the low income housing credit program.
For more information, see R&TC Section 17561(d)(1). Get form
FTB 3801-CR, Passive Activity Credit Limitations, for more information.
Commercial Cannabis Activity – Beginning in taxable year 2020,
California allows individuals and other taxpayers operating under the
personal income tax law to claim credits and deduction of business
expenses paid or incurred during the taxable year in conducting
commercial cannabis activity. Sole proprietors are those that conduct a
commercial cannabis activity that is licensed under California Medicinal
and Adult-Use Cannabis Regulation and Safety Act (CA MAUCRSA). For
more information, see Schedule CA (540NR) specific line instructions in
Part II, Section B, line 3, and get form FTB 4197.
Excess Business Loss Limitation – The CARES Act made amendments
to IRC Section 461(l) by eliminating the excess business loss limitation of
noncorporate taxpayers for taxable year 2020 and retroactively removing
the limitation for taxable years 2018 and 2019. California law does not
conform to those amendments. Also, California law does not conform to
the federal changes in the ARPA and the federal Inflation Reduction Act of
2022 that extend the limitation on excess business losses of noncorporate
taxpayers for taxable years beginning after December 31, 2020, and
ending before January 1, 2029. Complete form FTB 3461, California
Limitation on Business Losses, if you are a noncorporate taxpayer and
your net losses from all of your trades or businesses are more than
$289,000 ($578,000 for married/RDP taxpayers filing a joint return). For
more information, see Schedule CA (540NR) specific line instructions in
Part II, Section B, line 8p, and get form FTB 3461.
Alimony – California law does not conform to changes made by the TCJA
to federal law regarding alimony and separate maintenance payments
that are not deductible by the payor spouse, and are not includable in the
income of the receiving spouse, if made under any divorce or separation
agreement executed after December 31, 2018, or executed on or before
December 31, 2018, and modified after that date (if the modification
expressly provides that the amendments apply). For more information,
see Schedule CA (540NR) specific line instructions in Part II, Section B,
line 2a and Section C, line 19a.
Federal Tax Reform – In general, California R&TC does not conform to
all of the changes under the TCJA. For adjustments due to the TCJA, see
the specific line instructions for the following items:
•	 Combat zone extended to Egypt’s Sinai Peninsula
•	 Moving expenses and reimbursements
•	 Limitation on deduction of business interest
•	 Limitation on employer’s deduction for fringe benefit expenses
•	 Limitation on wagering losses
•	 Sexual harassment settlements
•	 Global intangible low-taxed income (GILTI) under IRC Section 951A
•	 Qualified equity grants
•	 Expanded use of IRC Section 529 account funds
•	 Living expenses for members of Congress
•	 Limitation on state and local tax deduction
•	 Mortgage and home equity indebtedness interest deduction
•	 Limitation on charitable contribution deduction
•	 College athletic seating rights
•	 Casualty or theft loss(es)
•	 Miscellaneous itemized deductions

Registered Domestic Partners (RDPs) – RDPs will compute their
limitations based on the combined federal adjusted gross income (AGI)
of each partner’s individual tax return filed with the Internal Revenue
Service (IRS).
For column A, Part II and Part III, combine each line item of your
federal amounts from each partner’s individual federal tax return.
For more information on RDPs, get FTB Pub. 737, Tax Information
for Registered Domestic Partners. The combined federal AGI used
to compute limitations is different from the recalculated federal AGI
used on Form 540NR, line 13. In situations where RDPs have no RDP
adjustments, these amounts may be the same.
Military Personnel – Servicemembers domiciled outside of California
and their spouses/RDPs may exclude the servicemember’s military
compensation from gross income when computing the tax rate on
nonmilitary income. Requirements for military servicemembers domiciled
in California remain unchanged. Military servicemembers domiciled in
California must include their military pay in total income. In addition,
they must include their military pay as California source income when
stationed in California. However, military pay is not California source
income when a servicemember is permanently stationed outside of
California. Beginning 2009, the federal Military Spouses Residency Relief
Act may affect the California income tax filing requirements for spouses
of military personnel. For more information, get FTB Pub. 1032.
Amended Tax Returns – If you are an active duty military servicemember
domiciled outside California and you included your military compensation
in income from all sources, you may file an amended tax return for tax
years with an open statute of limitations. For more information, get
FTB Pub. 1032 and see instructions for amended returns in the 540NR
booklet.
Single Member Limited Liability Company (SMLLC) – If you are a single
member limited liability company, that is organized or doing business
in California, or registered with the California Secretary of State (SOS),
you are required to file Form 568, Limited Liability Company Return
of Income, pay the annual tax and LLC Fee (if applicable), in addition
to filing your tax return. Get Form 568, Limited Liability Company Tax
Booklet, for more information.
Part-Year Residents – Complete the Part-Year Resident Worksheet at
the end of Schedule CA (540NR) instructions to determine the amounts
to enter on Part II, Section A, line 1a through line 7 and Section B, line 1
through line 10, column E.
Tips to avoiding common mistakes on this schedule:
•	 Column A – Copy the amounts from your federal tax return. Use
the (b) amounts on line 2, line 3, line 4, line 5, and line 6, from your
federal tax return. Form 1040, U.S. Individual Income Tax Return,
line 11, or Form 1040-SR, U.S. Tax Return for Seniors, line 11,
should equal Schedule CA (540NR), Part II, line 27, column A.
•	 Column B (Part II, Section A, Line 1a through Line 7, and Section B,
Line 1 through Line 7 and line 9a) – Subtract income that is not
taxable to a California resident such as California lottery winnings and
social security benefits. Do not use column B to deduct income that
was earned while a nonresident of California or from sources outside
of California. There must be a difference in state and federal tax law.
Generally, if a full-year California resident cannot subtract income
in column B, a nonresident or part-year resident may not subtract
income in column B.
•	 Column C (Part II, Section A, Line 1a through Line 7, and
Section B, Line 1 through Line 7 and line 9a) – Add income
that was not taxed on your federal tax return but is taxable to a
California resident, such as foreign income or interest/dividends
from non-California municipal bonds.
•	 Column D – Combine the columns (column A - column B +
column C). Part II, line 27, column D, should equal Form 540NR,
line 17. The amounts in this column represent income earned
from all sources as if you were a full‑year California resident, after
applying California and federal law differences.
•	 Column E – Enter all income from all sources while a resident of
­California and income from California sources while a nonresident.

Schedule CA (540NR) Instructions  2023  Page 3

Purpose
Use Schedule CA (540NR) to determine California taxable income by doing
the following:
•	 Identify the domiciles and current and past residency i­nformation.
•	 Enter the amounts of income and deductions reported on your f­ederal
tax return.
•	 Adjust the income and deductions reported on your federal tax return
for differences in California and federal law.
•	 Determine the portion of income reported on your federal tax return
that was earned or received while you were a California resident.
•	 Determine the portion of income reported on your federal tax return
that was earned or received from California sources while you were a
nonresident.
•	 Determine your allowable standard deduction or itemized deductions.

Specific Line Instructions
Part I Residency Information
Answer all the questions in this part for you and your spouse/RDP. If a
question does not apply, then leave the line blank. For more information, get:
•	 FTB Pub. 1031, Guidelines for Determining Resident Status
•	 FTB Pub. 1032, Tax Information for Military Personnel
Use the two letter state abbreviations to complete this section. If you do
not know your state abbreviation, visit the United States Postal Service
website at usps.com for assistance. If you did not reside in the United
States or a U.S. Possession, use the code “FC.” The code “FC” is the
abbreviation for foreign country.
Line 2 – Domicile and Military
If you served in the military, your state of domicile is generally the state
where you were living when you first entered military service. If you were
not in the military, your domicile is the place you consider your permanent
home, the place to which you, whenever absent, intend to return.
Line 6 – The number of days I spent in California
The total number of days in California should include all days in California
for any purpose including residency, business, and vacation.
Line 7 – I owned a home/property in California
This includes property owned directly or indirectly through a trust or
other entity.
Line 8 – Before 2023: I was a California resident for the period of
Enter your most recent period of California residency. If you became a
nonresident during taxable year 2023, use December 31, 2022 as your
end date.

Part II Income Adjustment Schedule
Column A — Federal Amounts
Enter all the amounts shown on your federal tax return on the
corresponding lines in column A.
If married/RDP filing separately under either exception described in the
instructions for Form 540NR, enter in column A the amounts you would have
reported on a separate federal tax return. Attach a statement to the tax return
showing how the income and expenses were split between you and your
spouse/RDP.
Section A, Line 1a through Line 7, and Section B, Line 1 through Line 9a
Enter in Section A, line 1a through line 7, and Section B, line 1 through
line 9a the same amounts entered on your federal Form 1040, 1040-SR,
or 1040-NR, U.S. Nonresident Alien Income Tax Return, line 1a through
line 7; and federal Schedule 1 (Form 1040), Additional Income and
Adjustments to Income, line 1 through line 9.
Line 10 – Total
Combine the amounts in Section A, line 1z through line 7, and Section B,
line 1 through line 7, and line 9a, as applicable. Enter the total on line 10.
This number should be the same as the amount on federal Form 1040,
1040-SR, or 1040-NR, line 9.
Section C, Line 11 through Line 18 and Line 20 through Line 25
Enter the same amounts entered on your federal Schedule 1 (Form 1040),
line 11 through line 18 and line 20 through line 25.

Page 4  Schedule CA (540NR) Instructions  2023

Line 19a and Line 19b
Enter on line 19a the same amount entered on your federal Schedule 1
(Form 1040), line 19a. Enter on line 19b the social security number
(SSN) or individual taxpayer identification number (ITIN) and last name
of the person to whom you paid alimony.
Line 26 – Add line 11 through line 23 and line 25.
Line 27 – Total
Subtract line 26 from line 10. This amount should be the same as the
amount on federal Form 1040, 1040-SR, or 1040-NR, line 11.

Column B and Column C — Subtractions and
Additions
Use these columns to enter subtractions and additions to federal
amounts in column A that are necessary because of the differences
between ­California and federal law. Enter all amounts in Section A, line 1a
through line 7 and Section B and Section C, line 1 through line 26 as
positive numbers unless instructed otherwise.
Do not deduct income that was earned while a nonresident of California
or from sources outside of California. There must be a difference in tax
law. Generally, if a California resident cannot subtract the income in
column B, a nonresident or part-year resident may not subtract income
from column B.
If you are a nonresident alien, use column B and column C to adjust
federal AGI to include income from all sources, even if you were not
required to report it on your federal tax return. ­California does not
have special rules limiting total AGI from all sources to U.S. source or
effectively connected income of nonresident aliens.
You may need one of the following FTB publications to complete
column B and column C:
•	 1001, Supplemental Guidelines to ­California Adjustments
•	 1005, Pension and Annuity Guidelines
•	 1031, Guidelines for Determining Resident Status
•	 1032, Tax Information for Military Personnel
•	 1100, Taxation of Nonresidents and Individuals Who Change
­Residency
To get forms and publications, go to ftb.ca.gov/forms.
Section A – Income
Line 1a through Line 1i and Line 1z
Generally, no adjustments are made on these lines. If you did not receive
any of the following types of income, make no entry on line 1a through
line 1i and line 1z in either column B or column C.
Combat zone foreign earned income exclusion – For taxable years
beginning on and after January 1, 2018, California does not conform
to the federal foreign earned income exclusion for amounts received
by certain U.S. citizens or resident aliens with an abode in the U.S.,
specifically contractors or employees of contractors supporting the U.S.
Armed Forces in designated combat zones. Enter the amount excluded
from federal income on Part II, Section B, line 8d, column C.
Native American earned income exemption – California does not tax
federally recognized tribal members living in California Indian country
who earn income from any federally recognized California Indian country.
Military compensation is considered income from reservation sources.
Enrolled members who receive reservation sourced per capita income
must reside in their affiliated tribe’s Indian country to qualify for tax exempt
status. Enter on applicable line 1a through line 1h, column B the earnings
included in federal income that are exempt for California. Attach form
FTB 3504, Enrolled Tribal Member Certification, to Form 540NR. For more
information, get form FTB 3504.
Tax treaty – If you excluded income exempted by U.S. tax treaties on
your federal Form 1040 or 1040-SR (unless specifically exempted for
state purposes), enter the excluded amount on applicable line 1a through
line 1h, column C.
Sick pay received under the Federal Insurance Contributions Act and
Railroad Retirement Act – California excludes this item from income.
Enter on line 1a or line 1h as applicable, column B the amount of sick
pay benefits received under the Federal Insurance Contributions Act and
Railroad Retirement Act included in the amount in column A.

a. Total Amount from Federal Form(s) W-2, Box 1
Employees and independent contractors – Some taxpayers may be
classified as independent contractors for federal purposes and as
employees for California purposes. If the taxpayer is classified as an
employee for California purposes, enter the amount reported as gross
income of the business from federal Schedule C (Form 1040), Profit or
Loss from Business, line 7, as wages on line 1a, column C.
Military pay adjustment – Compensation for military service of a
servicemember domiciled outside of California is exempt from California
tax. It is excluded from AGI from all sources. For more information, get
FTB Pub. 1032.
Active duty military servicemembers domiciled outside of California may
claim an adjustment for active duty military pay.
To claim the adjustment, write “MPA” to the left of column A or include
it according to your software’s instructions and enter only the amount of
your active duty military pay on line 1a, column B. Exclude this amount
from column E.
Nonresident compensation of merchant seamen and employees of rail
carriers, motor carriers, and air carriers – Exclude the following from
gross income: compensation for the performance of duties of certain
merchant seamen, rail carriers, motor carriers, and air carriers. Enter
the amount included in federal income on line 1a, column B. For more
information, get FTB Pub. 1031.
d. Medicaid Waiver Payments Not Reported on Federal Form(s) W-2
Income exclusion for In-Home Supportive Services (IHSS)
supplementary payments – If you are an IHSS provider who received
IHSS supplementary payments that were included in federal wages, enter
the IHSS supplementary payments on line 1d, column B. IHSS providers
only receive a supplementary payment if they paid a sales tax on the
IHSS services they provide. The supplementary payment is equal to the
sales tax paid plus any increase in the federal payroll withholding paid
due to the supplementary payment.
h. Other Earned Income
Ridesharing fringe benefit differences – Under federal law, certain
qualified transportation benefits are excluded from gross income. Under
the R&TC, there are no monthly limits for the exclusion of these benefits
and California’s definitions are more expansive. Enter the amount of
ridesharing benefits received and included in federal income on line 1h,
column B.
Exclusion for compensation from exercising a California Qualified
Stock Option (CQSO) – To claim this exclusion:
•	 Your earned income is $40,000 or less from the corporation granting
the CQSO.
•	 The market value of the options granted to you must be less than
$100,000.
•	 The total number of shares must be 1,000 or less.
•	 The corporation issuing the stock must designate that the stock
issued is a CQSO at the time the option is granted.
If you included in federal income an amount qualifying for this exclusion,
enter that amount on line 1h, column B.
Employer health savings account (HSA) contribution – Enter the amount
of any employer HSA contribution from federal Form W-2, Wage and Tax
Statement, box 12, code W on line 1h, column C.
i. Nontaxable Combat Pay Election
Combat zone extended to Egypt’s Sinai Peninsula – Federal law
extended combat zone tax benefits to the Sinai Peninsula of Egypt.
California law does not conform. Enter the amount of combat pay
excluded from federal income on line 1i, column C. Get FTB Pub. 1032
for more information.
Line 2 – Taxable Interest
If you did not receive any of the kinds of income listed (within this line
instructions), make no entry on this line in either column B or column C.
Enter in column B the interest that you received from:
•	 U.S. saving bonds (except for interest from series EE U.S. savings
bonds issued after 1989 that qualified for the Education Savings Bond
Program exclusion).
•	 U.S. Treasury Bills, notes, and bonds.
•	 Any other bonds or obligations of the United States and its territories.

•	 Interest from Ottoman Turkish Empire settlement payments.
•	 Interest income from children under age 19 or students under age
24 included on the child’s federal tax return and reported on the
California tax return by the parent. For more information, get form
FTB 3803, Parents’ Election to Report Child’s Interest and Dividends.
Certain mutual funds pay “exempt-interest dividends.” If the mutual fund
has at least 50% of its assets invested in tax-exempt U.S. obligations
and/or in California or its municipal obligations, that amount of dividend
is exempt from California tax. The proportion of dividends that are
tax-exempt will be shown on your annual statement or statement issued
with federal Form 1099-DIV, Dividends and Distributions. For more
information, get FTB Pub. 1001.
Enter in column C the interest you identified as tax-exempt interest on
your federal Form 1040, 1040-SR, or 1040-NR, line 2a; and which you
received from:
•	 The federally exempt interest dividends from other states, or their
municipal obligations and/or from mutual funds that do not meet the
50% rule as previously stated.
•	 Non-California state bonds.
•	 Non-California municipal bonds issued by a county, city, town, or
other local government unit.
•	 Obligations of the District of Columbia issued after
December 27, 1973.
•	 Non-California bonds if the interest was passed through to you from
S corporations, trusts, partnerships, or Limited Liability Companies
(LLCs).
•	 Interest or other earnings from an HSA are not treated as tax deferred.
Interest or earnings in an HSA are taxable in the year earned.
•	 Interest on any bond or other obligation issued by the Government of
American Samoa.
•	 Interest income from children under age 19 or students under age
24 included on the parent’s federal tax return and reported on the
California tax return by the child.
Make no entries in either column B or column C for interest earned on
Federal National Mortgage Association (Fannie Mae) Bonds, Government
National Mortgage Association (Ginnie Mae) Bonds, and Federal Home
Loan Mortgage Corporations (FHLMC) securities, or grants paid to
low‑income individuals.
Get FTB Pub. 1001 if you received interest income from the items
listed (within this line instructions) that is passed through to you from
S corporations, trusts, partnerships, or LLCs.
Line 3 – Ordinary Dividends
Generally, no difference exists between the amount of dividends reported
in column A and the amount reported using California law. However,
California taxes dividends derived from other states and their municipal
obligations.
Enter in column B dividend income from children under age 19 and
students under age 24, included on the parent’s or child’s federal tax
return and reported on the California tax return by the opposite taxpayer.
Enter in column C dividend income from children under age 19 and
students under age 24, excluded on the parent’s or child’s federal tax
return and reported on the California tax return by the opposite taxpayer.
For more information, get form FTB 3803.
Get FTB Pub. 1001 if you received dividend income from:
•	 Noncash patronage dividends from farmers’ cooperatives or mutual
associations.
•	 A controlled foreign corporation (CFC).
•	 Distribution of pre-1987 earnings from S corporations.
•	 Undistributed capital gains for regulated investment company (RIC)
shareholders.
Line 4a and Line 4b – IRA Distributions
Beginning with tax year 2002, calculate your IRA basis as if you were
a California resident for all prior years. Generally, no adjustments are
made on this line. However, there may be significant differences in the
taxable amount of a distribution (including a distribution from conversion
of a traditional IRA to a Roth IRA) depending on when you made your
IRA contributions. California did not conform to the $2,000 or 100% of
compensation annual contribution limit permitted under federal law from
1982 through 1986. During these years, California limited the deduction to
the lesser of 15% of compensation or $1,500 and disallowed a deduction

Schedule CA (540NR) Instructions  2023  Page 5

altogether to individuals who were active participants in qualified government
plans. Any amount an individual contributed in excess of California
deduction limits during these years creates a basis in the IRA.
Differences also occur if your California IRA deductions were different
from your federal deductions because of differences between California
and federal self‑employment income.
If the taxable amount using California law is:
•	 Less than the amount taxable under federal law, enter the difference in
column B.
•	 More than the amount taxable under federal law, enter the difference
in column C.
Get FTB Pub. 1005 for more information and worksheets for figuring the
adjustment to enter on this line, if any.
Coverdell Education Savings Account (ESA) formerly known as
Education (ED) IRA – If column A includes a taxable distribution from an
ED IRA, you may owe additional tax on that amount. Get form FTB 3805P,
Additional Taxes on Qualified Plans (Including IRAs) and Other TaxFavored Accounts.
Line 5a and Line 5b – Pensions and Annuities
Generally, no adjustments are made on this line. However, if you received
Tier 2 railroad retirement benefits or partially taxable distributions from a
pension plan, you may need to make the following adjustments.
If you received a federal Form RRB-1099-R, Annuities or Pensions by the
Railroad Retirement Board, for railroad retirement benefits and included
all or part of these benefits in taxable income in column A, enter the
taxable benefit amount in column B.
If you began receiving a retirement annuity between July 1, 1986, and
January 1, 1987, and elected to use the three-year rule for California
purposes and the annuity rules for federal purposes, enter in column C
the amount of the annuity payments you excluded for federal purposes.
You may have to pay an additional tax if you received a taxable distribution
from a qualified retirement plan before reaching age 59½ and the
distribution was not rolled over into another qualified plan. Get form
FTB 3805P for more information.
Line 6 – Social Security Benefits
California excludes U.S. social security benefits or equivalent Tier 1
railroad retirement benefits from taxable income. Enter in column B
the amount of taxable U.S. social security benefits or equivalent Tier 1
railroad retirement benefits shown on line 6b, column A.
Line 7 – Capital Gain or (Loss)
Generally, no adjustments are made on this line. California taxes long
and short term capital gains as regular income. No special rate for long
term capital gains exists. However, the California basis of the assets
listed (within this line instructions) may be different from the federal
basis due to differences between California and federal laws. If there are
differences, use Schedule D (540NR), California Capital Gain or Loss
Adjustment, to calculate the amount to enter on line 7.
•	 Gain or loss from the sale of investments inside an HSA.
•	 Gain on the sale of qualified small business stock under IRC
Section 1045 and IRC Section 1202.
•	 Basis amounts resulting from differences between C
­ alifornia and
federal law in prior years.
•	 Gain or loss on stock and bond ­transactions.
•	 Installment sale gain reported on form FTB 3805E, Installment Sale
Income.
•	 Gain on the sale of personal residence where depreciation was
­allowable.
•	 Pass-through gain or loss from partnerships, fiduciaries,
S corporations, or LLCs.
•	 Capital loss carryover from your 2022 ­California Schedule D (540NR).
•	 Capital gain from children under age 19 or students under age 24
included on the parent’s or child’s federal tax return and reported on the
California tax return by the opposite taxpayer. For more information, get
form FTB 3803.
Get FTB Pub. 1001 for more information about:
•	 Disposition of S corporation stock acquired before 1987.
•	 Capital gain exclusion for sale of principal residence by a surviving
spouse.

Page 6  Schedule CA (540NR) Instructions  2023

•	 Gain on the sale or disposition of a qualified assisted housing
development to low-income residents or to specified entities
maintaining housing for low‑income residents.
•	 Undistributed capital gain for RIC shareholders.
•	 Gain or loss on the sale of property inherited before January 1, 1987.
•	 Capital loss carrybacks.
Section B – Additional Income
Line 1 – Taxable Refunds, Credits, or Offsets of State and Local
Income Taxes
California does not tax the state income tax refund. Enter in column B the
amount of state tax refund entered in column A.
Line 2a – Alimony Received
Under federal law, the TCJA, alimony and separate maintenance
payments are not includable in the income of the receiving spouse,
if made under any divorce or separation agreement executed after
December 31, 2018, or executed on or before December 31, 2018, and
modified after that date (if the modification expressly provides that the
amendments apply). California law does not conform. If you received
alimony not included in your federal income, enter the alimony received
in column C.
If you are a nonresident alien and received alimony not included in your
federal income, enter the alimony on this line in column C.
Line 3 – Business Income or (Loss)
Adjustments to federal business income or loss you reported in column A
generally are necessary because of the difference between California
and federal law relating to depreciation methods, special credits, and
accelerated write-offs. As a result, the recovery period or basis used to
figure ­California depreciation may be different from the amount used for
federal purposes.
Adjustments are figured on form FTB 3885A, Depreciation and
Amortization Adjustments, and are most commonly necessary because of
the following:
•	 Before January 1, 1987, California did not allow depreciation under the
federal accelerated cost recovery system. Continue to figure C
­ alifornia
depreciation for those assets in the same manner as prior years.
•	 On or after January 1, 1987, California provides special credits and
accelerated write-offs that affect the ­California basis of qualifying
­assets. Refer to the bulleted list below.
Use form FTB 3801, Passive Activity Loss Limitations, to figure the total
adjustment for line 3 if you have:
•	 One or more passive activities that produce a loss.
•	 One or more passive activities that produce a loss and any nonpassive
activity reported on federal Schedule C (Form 1040).
Use form FTB 3885A to figure the total adjustment for line 3 if you have:
•	 Only nonpassive activities which produce either gains or losses (or a
combination of gains and losses).
•	 Passive activities that produce gains.
Other loan forgiveness – Under federal law, the CAA, 2021, allows
deductions for eligible expenses paid for with covered loan amounts.
California law conforms to this federal provision, with modifications. For
California purposes, if you are an ineligible entity and deducted eligible
expenses for federal purposes, enter the total amount of those expenses
deducted on line 3, column C.
Paycheck Protection Program loans forgiveness – Under federal law, the
CAA, 2021, allows deductions for eligible expenses paid for with covered loan
amounts. California law conforms to this federal provision with modifications.
For California purposes, if you are an ineligible entity and deducted eligible
expenses for federal purposes, enter the total amount of those expenses
deducted on line 3, column C.
Also, the ARPA expands PPP eligibility to include “additional covered
nonprofit entities” which includes certain Code 501(c) nonprofit
organizations and Internet-only news publishers and Internet-only
periodical publishers. California law does not conform to this expansion
of PPP eligibility. If you met the PPP eligibility requirements and excluded
the amount from gross income for federal purposes, enter the excluded
amount on line 3, column C.
Shuttered venue operator grant – Under federal law, the CAA, 2021, allows
deductions for eligible expenses paid for with grant amounts. California

law conforms to this federal provision with modifications. For California
purposes, if you are an ineligible entity and deducted eligible expenses for
federal purposes, enter the total amount of those expenses deducted on
line 3, column C.
Employees and independent contractors – Some taxpayers may be
classified as independent contractors for federal purposes and as
employees for California purposes. If the taxpayer is classified as an
employee for California purposes, enter the amount of federal business
income from line 3, column A, on line 3, column B. Enter the amount of
federal business loss from line 3, column A, on line 3, column C.
Commercial cannabis activity – Under federal law, deductions for
business expenses of a trade or business paid or incurred during the
taxable year in conducting commercial cannabis activity are disallowed.
California does not conform. California allows cannabis business licensed
under CA MAUCRSA to claim these expenses. Enter the amount of these
expenses on line 3, column B.
Limitation on deduction of business interest – Under federal law, every
business, regardless of its form, is generally subject to a disallowance of
a deduction for net interest expense in excess of 30% of the business’s
adjustable taxable income. California law does not conform. Figure the
difference between the amounts allowed using federal law and California
law. Enter the difference on line 3, column B.
Limitation on employer’s deduction for fringe benefit expenses – Under
federal law, deductions for entertainment expenses are disallowed; the
current 50% limit on the deductibility of business meals is expanded
to meals provided through an in-house cafeteria or otherwise on the
premises of the employer; deductions for employee transportation fringe
benefits (e.g., parking and mass transit) are denied; and no deduction is
allowed for transportation expenses that are the equivalent of commuting
for employees (e.g., between the employee’s home and the workplace),
except as provided for the safety of the employee. California does not
conform. Figure the difference between the amounts allowed using
federal law and California law. Enter the difference on line 3, column B or
column C.
Limitation on wagering losses – Under federal law, all deductions
for expenses incurred in carrying out wagering transactions, and not
just gambling losses, are limited to the extent of gambling winnings.
California law does not conform. Figure the difference between the
amounts allowed using federal law and California law. Enter the difference
on line 3, column B.
Sexual harassment settlements – Under federal law, no deduction
is allowed for any settlement, payout, or attorney fees related to
sexual harassment or sexual abuse if such payments are subject to a
nondisclosure agreement. California law does not conform. Enter the
amount received and included in federal income on line 3, column B.
Penalty assessed by professional sports league – California does
not allow a business expense deduction for any fine or penalty paid or
incurred by an owner of a professional sports franchise assessed or
imposed by the professional sports league that includes that franchise. If
the fine or penalty was deducted for federal purposes, enter this amount
on line 3, column C.
Business expense deduction disallowance – California disallows a
deduction for a business expense related to a payment to the Edge
College and Career Network, LLC, to a taxpayer who meets all of the
following:
•	 They are charged as a defendant in any of several specified criminal
complaints as listed in R&TC Section 17275.4.
•	 There is a final determination of their guilt with regard to a violation of
any offense arising out of that criminal complaint.
•	 There is a finding that they took the deduction unlawfully.
For more information, see R&TC Section 17275.4. Enter the amount of
this deduction on line 3, column C.
Get FTB Pub. 1001 for more information about:
Income related to:
•	 Business, trade, or profession carried on within ­California that is an
integral part of a unitary business carried on both within and outside
­California.
•	 Pro-rata share of income received from a CFC by a U.S. shareholder.

Basis adjustments related to:
•	 Property acquired prior to becoming a ­California resident.
•	 Sales or use tax credit for property used in a former Enterprise
Zone (EZ), Local Agency Military Base Recovery Area (LAMBRA), or
Targeted Tax Area (TTA).
•	 Reduced recovery periods for fruit-bearing grapevines replaced
in a California vineyard on or after January 1, 1992, as a result of
phylloxera infestation; or on or after January 1, 1997, as a result of
Pierce’s disease.
•	 Expenditures for tertiary injectants.
•	 Property placed in service on an Indian reservation after
December 31, 2017, and before January 1, 2022.
•	 Amortization of pollution control facilities.
•	 Discharge of real property business ­indebtedness.
•	 Vehicles used in an employer-sponsored ridesharing program.
•	 An enhanced oil recovery system.
•	 Joint Strike Fighter property costs.
•	 The cost of making a business accessible to disabled individuals.
•	 Property for which you received an energy conservation subsidy from
a public utility on or after January 1, 1995, and before January 1, 1997.
•	 Research and experimental expenditures.
•	 Reduction of capitalized costs attributable to the federal Work
Opportunity Credit.
Business deductions related to:
•	 Wages paid in a former EZ, LAMBRA, Manufacturing Enhancement
Area (MEA), or TTA.
•	 Abandonment or tax recoupment fees for open-space easements and
timberland preserves.
•	 Research expense.
•	 Employer wage expense for the federal Work Opportunity Credit.
•	 Pro-rata share of deductions received from a CFC by a U.S.
shareholder.
•	 Interest paid on indebtedness in connection with company-owned life
insurance policies.
•	 Premiums paid on life insurance policies, annuities or endowment
contracts issued after June 8, 1997, where the owner of the business
is directly or indirectly a policy beneficiary.
•	 Commercial Revitalization Deductions for Renewal Communities.
•	 Small Employer Health Insurance Credit.
Line 4 – Other Gains or (Losses)
Generally, no adjustments are made on this line. However, the ­California
basis of your other assets may differ from your federal basis due to
differences between ­California and federal law. Therefore, you may have
to adjust the amount of other gains or losses. Get Schedule D‑1, Sales of
Business Property, for more information.
Line 5 – Rental Real Estate, Royalties, Partnerships, S Corporations,
Trusts, etc.
Adjustments to federal income or loss you reported in column A
generally are necessary because of the difference between ­California
and federal law relating to depreciation methods, special credits, and
accelerated write‑offs. As a result, the recovery period or basis used to
figure ­California depreciation may be different from the recovery period
or amount used for federal purposes. For more information, see the
­instructions for Part II, Column B and Column C, Section B, line 3.
California law does not conform to federal law for material ­participation
in rental real estate activities. Beginning in 1994, and for federal purposes
only, rental real estate activities conducted by persons in real property
businesses are not automatically treated as passive activities. Get form
FTB 3801 for more information.
Use form FTB 3801 to figure the total adjustment for line 5 if you have:
•	 One or more passive activities that produce a loss.
•	 One or more passive activities that produce a loss and any nonpassive
activity reported on federal Schedule E (Form 1040), Supplemental
Income and Loss.
Use form FTB 3885A to figure the total adjustment for line 5 if you have:
•	 Only nonpassive activities which produce either gains or losses (or a
combination of gains and losses).
•	 Passive activities that produce gains.

Schedule CA (540NR) Instructions  2023  Page 7

LLCs that are classified as partnerships for C
­ alifornia purposes and
limited liability partnerships (LLPs) are subject to the same rules as
other partnerships. LLCs report distributive items to members on
Schedule K‑1 (568), Member’s Share of Income, Deductions, Credits,
etc. LLPs report to partners on Schedule K-1 (565), Partner’s Share of
Income, Deductions, Credits, etc.
Get FTB Pub. 1001 for more information about accumulation distributions
to beneficiaries for which the trust was not required to pay C
­ alifornia tax
because the beneficiary’s interest was contingent.
Line 6 – Farm Income or (Loss)
Adjustments to federal income or loss you report in column A generally
are necessary because of the difference between California and federal
law relating to depreciation methods, special credits, NOLs, and
accelerated write‑offs. As a result, the recovery period or the basis
you should use to figure ­California depreciation may be different from
the amount used for federal purposes, and you may need to make an
adjustment to your farm income or loss. For more information about the
types of income and adjustments that often require adjustments, see the
instructions for Part II, Column B and Column C, Section B, line 3.
Use form FTB 3801 to figure the total adjustment for line 6 if you have:
•	 One or more passive activities that produce a loss.
•	 One or more passive activities that produce a loss and any nonpassive
activity reported on federal Schedule F (Form 1040), Profit or Loss
From Farming.
Use form FTB 3885A to figure the total adjustment for line 6 if you have:
•	 Only nonpassive activities which produce either gains or losses (or a
combination of gains and losses).
•	 Passive activities that produce gains.
Line 7 – Unemployment Compensation
California excludes unemployment compensation from taxable income.
Enter on line 7, c­ olumn B, the amount of unemployment compensation
shown in column A.
Paid Family Leave Insurance (PFL) benefits, also known as F­ amily
Temporary Disability Insurance – Payments received from the PFL
Program are reported on federal Form 1099-G, Certain Government
Payments. California excludes payments received from the PFL program
from taxable income. Enter on line 7, column B, the amount of PFL
payments shown in column A. For more information, get FTB Pub. 1001.
Line 8 – Other Income
a.	 Federal Net Operating Loss – Enter the amount of the federal NOL
included on line 8a, column A, as a positive number in column C. Get
form FTB 3805V to figure the allowable California NOL.
b.	Gambling
California lottery winnings – California excludes California lottery
winnings from taxable income. Enter in column B the amount of
California lottery winnings included in the federal amount on line 8b,
column A.
Make no adjustment for lottery winnings from other states. They are
taxable by California. If you reduced gambling income for California
lottery income, you may need to reduce the losses included in the federal
itemized deductions on Part III, line 16, column A. Enter these losses on
Part III, line 16, column B.
c.	 Cancellation of Debt
Mortgage forgiveness debt relief – California law does not conform
to federal law regarding the exclusion of income from discharge of
indebtedness from the disposition of your principal residence occurring
after December 31, 2017. Enter the amount of discharge on line 8c,
column C.
Certain employer payments of student loans – California does not
conform to the CARES Act regarding the exclusion of student loan
payments made on behalf of an employee by an employer. Enter the
amount of loan payment on line 8c, column C.

Page 8  Schedule CA (540NR) Instructions  2023

Student loan discharged due to closure of a for-profit school –
California law allows an income exclusion for income that would result
from the discharge of any student loan of an eligible individual. An
individual is eligible for the exclusion if any of the following apply during
the taxable year.
1.	The individual is granted a discharge of any student loan because:
a.	The individual successfully asserts that the school did something
wrong or failed to do something that it should have done.
b.	The individual could not complete a program of study due to the
school closing.
2.	The individual attended a Brightwood College school on or before
December 5, 2018, and is granted a discharge of any student loan
made in connection with attending that school, and that discharge is
not covered under item 1.
3.	The individual attended a location of The Art Institute of California and
is granted a discharge of any student loan made in connection with
attending that school, and that discharge is not covered under item 1.
Enter in column B the amount of this type of income if it was included on
line 8c, column A, as income for federal purposes.
d.	 Foreign Earned Income Exclusion from Federal Form 2555
Federal foreign earned income and housing exclusion – Enter in
column C, as a positive number, the amount excluded from federal
income on federal Schedule 1 (Form 1040), line 8d.
Combat zone foreign earned income exclusion – Enter the amount
excluded from federal income on line 8d, column C, as a positive number.
e.	 Income from Federal Form 8853
Rollover from an Archer MSA to an HSA – Since California does not
recognize HSAs, a rollover from an Archer MSA to an HSA is treated as
distribution not used for qualified medical expenses. For California, the
distribution is included in California taxable income and the additional
12.5% tax applies. For more information, get form FTB 3805P.
Enter the amount rolled over from an Archer MSA to an HSA on line 8e,
column C.
MSA distribution used for menstrual care products – For Archer MSA
purposes, California does not conform to the inclusion of amounts paid for
menstrual care products as qualified medical expenses. Enter the amount
of MSA distribution used to pay for menstrual care products on line 8e,
column C.
f.	 Income from Federal Form 8889
HSA distributions for unqualified medical expense – Distributions from
an HSA not used for qualified medical expenses, and included in federal
income, are not taxable for California purposes. Enter the distribution not
used for qualified medical expenses on line 8f, column B.
k. Stock Options
Qualified equity grants – California law does not conform to federal law
regarding the election to defer the recognition of income attributable to
qualified stock. If you elected to defer income for federal purposes, make
an adjustment on line 8k, column C.
n.	 IRC Section 951(a) Inclusion – Under federal law, if you are a U.S.
shareholder of a CFC, you must include IRC Section 951(a) amount in
your income. California law does not conform. If you included the amount
as income for federal purposes on line 8n, column A, enter the amount
on line 8n, column B.
o.	 IRC Section 951A(a) Inclusion – Under federal law, if you are a
U.S. shareholder of a CFC, you must include your GILTI in your income.
California law does not conform. If you included GILTI as income for federal
purposes on line 8o, column A, enter the amount on line 8o, column B.
p.	 IRC Section 461(l) Excess Business Loss Adjustment – For taxable
years beginning after December 31, 2018, California law generally
confo