California Instructions and Forms for Schedule CA (540)

Instructions and Forms for Schedule CA (540)
2024 Instructions for Schedule CA (540) California Adjustments — Residents
2024 Instructions for Schedule CA (540)
California Adjustments — 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

General Information

Wildfire Relief Payment – For taxable years beginning after
December 31, 2019, and before January 1, 2026, the Federal Disaster Tax
Relief Act of 2023 allows an exclusion from gross income for any amount
received by an individual as a qualified wildfire relief payment. Generally,
California law does not conform. If any qualified amount was excluded
from income for federal purposes and California law provides no similar
exclusion, include that amount in income for California purposes. For
more information, see Schedule CA (540), California Adjustments –
Residents, specific line instructions in Part I, Section B, line 8z. For
specific wildfire relief payments excluded for California purposes, see
General Information.
Net Operating Loss Suspension – For taxable years beginning on or after
January 1, 2024, and before January 1, 2027, California has suspended
the net operating loss (NOL) carryover deduction. Taxpayers may
continue to compute and carryover an NOL during the suspension period.
However, taxpayers with net business income or modified adjusted gross
income of less than $1,000,000 or with disaster loss carryovers are not
affected by the NOL suspension rules.
The carryover period for suspended losses is extended by:
•	 Three years for losses incurred in taxable years beginning before
January 1, 2024.
•	 Two years for losses incurred in taxable years beginning on or after
January 1, 2024, and before January 1, 2025.
•	 One year for losses incurred in taxable years beginning on or after
January 1, 2025, and before January 1, 2026.
For more information, see California Revenue and Taxation Code (R&TC)
Section 17276.24, and get form FTB 3805V, Net Operating Loss (NOL)
Computation and NOL and Disaster Loss Limitations – Individuals,
Estates, and Trusts.
Special Rules for Certain Distributions from Qualified IRC Section 529
Tuition Plans – The federal Consolidated Appropriations Act (CAA),
2023, allows qualified Internal Revenue Code (IRC) Section 529 tuition
plans that have been maintained for 15 years to rollover to a Roth
Individual Retirement Arrangement (IRA) without a tax or penalty. Under
the federal law, rollover distributions from an IRC Section 529 plan to a
Roth IRA after December 31, 2023, will be treated in the same manner
as the earnings and contributions of a Roth IRA. California law does
not conform to this federal provision. Rollover distribution from an IRC
Section 529 plan to a Roth IRA is includible in California taxable income
and subject to an additional tax of 2½%. For more information, see
Schedule CA (540), specific line instructions in Part I, Section B, line 8z.
Catch-Up Contributions for Certain Individuals – For taxable years
beginning on or after January 1, 2024, the federal CAA, 2023, provides
for the indexing for the $1,000 catch-up contribution to an IRA for
individuals age 50 or older. The CAA, 2023, also increases certain
contribution amounts, including catch-up contributions for individuals
age 50 or over as defined in IRC Section 414(v). California law does
not conform to these federal provisions. Any amount contributed that
exceeds the contribution amount allowed for California may need to
be included in income for California purposes. Any distribution from
contributions in excess of the California limit may become taxable when
distributed. For more information, see Schedule CA (540) specific line
instructions in Part I, Section C, line 20.
Wildfire Mitigation Payment – For taxable years beginning on or after
January 1, 2024, and before January 1, 2029, California law allows
a qualified taxpayer an exclusion from gross income for any amount
received as a California qualified wildfire loss mitigation payment through
the California Wildfire Mitigation Financial Assistance Program. For more
information, see Schedule CA (540) specific line instructions in Part I,
Section B, line 8z and R&TC Section 17138.8.

In general, for taxable years beginning on or after January 1, 2015,
California law conforms to the IRC as of January 1, 2015. However,
there are continuing differences between California and federal law.
When California conforms to federal tax law changes, we do not always
adopt all of the changes made at the federal level. For more information,
go to ftb.ca.gov and search for conformity. Additional information
can be found in FTB Pub. 1001, Supplemental Guidelines to California
Adjustments, and the Business Entity tax booklets.
The instructions provided with California tax forms are a summary of
California tax law and are only intended to aid taxpayers in preparing
their state income tax returns. We include information that is most useful
to the greatest number of taxpayers in the limited space available. It is
not possible to include all requirements of the R&TC in the instructions.
Taxpayers should not consider the instructions as authoritative law.
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 (540)
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)
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 (540) specific line instructions in
Part I, 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 (540) specific line instructions in Part I, 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 (540) specific line instructions in Part I,
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

Schedule CA (540) Instructions  2024  Page 1

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 (540) specific line instructions in Part I, 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 (540) specific line instructions in Part I, 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 (540) specific line instructions in
Part I, Section B, line 8z and R&TC Section 17131.12.
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 Supplemental Paid
Sick Leave Relief Grant Program that is established by Section 12100.975
of the Government Code. For more information, see Schedule CA (540)
specific line instructions in Part I, 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 (540) specific line instructions in Part I,
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
within the normal statute of limitations. For more information, see
Schedule CA (540) specific line instructions in Part I, 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 within the normal
statute of limitations. For more information, see Schedule CA (540)
specific line instructions in Part I, 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 540, Personal Income Tax Booklet, or
get form FTB 4197.

Page 2  Schedule CA (540) Instructions  2024

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 (540) specific line instructions in Part I, 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 (540) specific line
instructions in Part I, 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 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 (540) specific line instructions in Part I, 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 (540) specific line instructions in Part I, Section B, line 3
and 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 (540) specific
line instructions in Part I, 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 (540) specific line instructions in
Part I, 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 540, California Resident Income
Tax Return. For more information, see Schedule CA (540) specific line
instructions in Part I, 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 (540)
in Part I, Section B, line 3 and 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 (540) specific line instructions in Part I, 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 (540) specific line instructions in Part I, Section A, line 1a; Part I,
Section B, line 3; Part I, Section C, line 15 and line 17; and Part II, 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 – For taxable years beginning on or
after January 1, 2020, and before January 1, 2030, California allows
individuals and other taxpayers operating under the personal income
tax law to claim credits and deductions 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 (540) specific line instructions in Part I,
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 $305,000 ($610,000 for
married/RDP taxpayers filing a joint return). For more information, see
Schedule CA (540) specific line instructions in Part I, 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 (540) specific line instructions in Part I, 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 harrasment 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 I and Part II, 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 540, 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.
The federal Veterans Auto and Education Improvement Act (VAEIA) of
2022 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.

Schedule CA (540) Instructions  2024  Page 3

For more information, get Form 540NR, California Nonresident or
Part-Year Resident Income Tax Return, and FTB Pub. 1032, Tax
Information for Military Personnel.
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.

Purpose
Use Schedule CA (540) to make adjustments to your federal adjusted
gross income and to your federal itemized deductions using C
­ alifornia
law.

Specific Line Instructions
Part I  Income Adjustment Schedule
Column A — Federal Amounts
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, U.S.
Individual Income Tax Return, or Form 1040-SR, U.S. Tax Return for
Seniors, 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.
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.
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 match the amount
entered on federal Form 1040 or 1040-SR, line 11.

Column B and Column C — Subtractions and
Additions
Use these columns to enter subtractions and additions to the federal
amounts in column A that are necessary because of differences between
California and federal law. Enter all amounts as positive numbers unless
instructed otherwise.
You may need one or more 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, you will not make any adjustments 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.

Page 4  Schedule CA (540) Instructions  2024

Active duty military pay – Special rules apply to active duty military
taxpayers. Get FTB Pub. 1032 for more information.
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 I, 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 540. 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.
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 an amount qualifying for this exclusion in federal income,
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 you received from:
•	 U.S. savings 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 full-time 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 or 1040-SR, 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 discussed.
•	 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 earned 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 full-time 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 you
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, estates, 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 m
­ unicipal
obligations.
Add dividends received from the following and enter in column B:
•	 Dividend income from children under age 19 or full-time 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.

Add dividends received from the following and enter in column C:
•	 Controlled foreign corporation (CFC) dividends in the year distributed.
•	 Regulated investment company (RIC) capital gains in the year
distributed.
•	 Distributions of pre-1987 earnings from an S corporation.
•	 Dividend income from children under age 19 or full-time 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 dividends from:
•	 Non-cash patronage dividends from farmers’ cooperatives or
mutual associations.
•	 A CFC.
•	 Distributions of pre-1987 earnings from S corporations.
•	 Undistributed capital gains for RIC shareholders.
Line 4a and Line 4b – IRA Distributions
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 contributions to 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.
If you have an IRA basis and were a nonresident in prior years, you may
need to restate your California IRA basis. Get FTB Pub. 1100 for more
information.
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 Tax-Favored 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

Schedule CA (540) Instructions  2024  Page 5

basis due to differences between California and federal laws. If there
are differences, use Schedule D (540), 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 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 2023 ­California Schedule D (540).
•	 Capital gain from children under age 19 or full-time 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.
•	 Gain on sale or disposition of 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
California 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 C
­ alifornia basis of qualifying
assets. Refer to the bulleted list below.

Page 6  Schedule CA (540) Instructions  2024

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
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 law 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 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 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 C
­ alifornia 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.
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. For more information, see the instructions for
Part I, 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
business 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
combination of gains and losses).
•	 Passive activities that produce gains.
LLCs that are classified as partnerships for California 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 ­California 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 basis you 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, see the instructions for Part I,
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
combination of gains and losses).
•	 Passive activities that produce gains.

Schedule CA (540) Instructions  2024  Page 7

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 Family
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 II, line 16, column A. Enter these losses on
Part II, 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.
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.

Page 8  Schedule CA (540) Instructions  2024

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
conforms to the changes under the TCJA in regard to the disallowance
of excess business loss deductions of non-corporate taxpayers. For
California purposes, any disallowed loss will be treated as a carryover
excess business loss instead of an NOL carryover for the subsequent
taxable year. Also, California law does not conform to amendments under
the CARES Act, the ARPA, and the Inflation Reduction Act of 2022. See
General Information for more information.
If you are a noncorporate taxpayer and your net losses from all of your
trades or businesses are more than $305,000 ($610,000 for married/RDP
taxpayers filing a joint return), get form FTB 3461 to figure the excess
business loss adjustment for California purposes. Enter the amount
from form FTB 3461, line 16 or line 17, whichever applies, on line 8p,
column C. Attach form FTB 3461 to the tax return.
Enter the amount of the federal excess business loss adjustment included
on line 8p, column A, on line 8p, column B.
See line 8z for instructions on excess business losses carryover from
prior years.
z.	 Other Income
Identify the type of income reported in the space provided. If there is
more than one item to report on line 8z, attach a statement that lists each
item and enter the total of all individual items in column B or column C as
instructed below.
Wildfire relief payment – Federal law allows gross income exclusion
for any amount received by an individual as a qualified wildfire relief
payment as described in the Federal Disaster Tax Relief Act of 2023,
Section 3. California law does not conform. If any qualified amount was
excluded from income for federal purposes and California law provides
no similar exclusion, enter that amount on line 8z, column C. For specific
wildfire relief payments excluded for California purposes, see General
Information.
Special rules for certain distributions from qualified IRC Section 529
tuition plans – The CAA, 2023, allows qualified IRC Section 529 tuition
plans that have been maintained for 15 years to rollover to a Roth IRA
without a tax or penalty. Under the federal law, rollover distributions from
an IRC Section 529 plan to a Roth IRA after December 31, 2023, will be
treated in the same manner as the earnings and contributions of a Roth
IRA. California law does not conform to this federal provision. Rollover
distribution from an IRC Section 529 plan to a Roth IRA is includible
in California taxable income. For California purposes, enter the rollover
distribution amount from an IRC Section 529 plan to a Roth IRA that was
excluded from income for federal purposes on line 8z, column C.
Wildfire mitigation payment – California law allows a qualified taxpayer
an exclusion from gross income for any amount received as a California
qualified wildfire loss mitigation payment through the California Wildfire
Mitigation Financial Assistance Program. If any qualified amount was
included as income for federal purposes, enter the amount on line 8z,
column B.
California HOPE for Children Trust Account Program – 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. If you included an amount qualifying
for this exclusion as income for federal purposes, enter the amount on
line 8z, column B.

Interagency Council on Homelessness payment exclusion – 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. If
you included this amount as income for federal purposes on line 8z,
column A, enter the amount on line 8z, column B.
Kincade wildfire exclusion – 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 2019
Kincade Fire. If any qualified amount was included as income for federal
purposes on line 8z, column A, enter the amount on line 8z, column B.
Zogg wildfire exclusion – 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 any qualified amount was included as income for federal
purposes on line 8z, column A, enter the amount on line 8z, column B.
Discharge of student fees – 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. If you include the amount
discharged as income for federal tax purposes on line 8z, column A, enter
the amount on line 8z, column B.
Guaranteed income pilot program payment exclusion – 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. If you included this amount as income for federal
purposes on line 8z, column A, enter the amount on line 8z, column B.
Small business and nonprofit COVID-19 supplemental paid sick
leave relief – 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 Supplemental Paid Sick Leave
Relief Grant Program that is established by Section 12100.975 of the
Government Code. If you included an amount qualifying for this exclusion
as income for federal purposes on line 8z, column A, enter the amount on
line 8z, column B.
Turf replacement water conservation program – California law allows
an exclusion from gross income for any amount received as a rebate,
vo