California Alternative Minimum Tax and Credit Limitations - Fiduciaries

Alternative Minimum Tax and Credit Limitations - Fiduciaries
2024 Instructions for Schedule P (541)
2024 Instructions for Schedule P (541)

Alternative Minimum Tax and Credit Limitations – Fiduciaries
References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2015, and to the C
­ alifornia Revenue and Taxation Code (R&TC).

What’s New
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. For
more information, see California Revenue and Taxation Code (R&TC)
Section 17276.24, and get form FTB 3805V, Net Operation Loss (NOL)
Computation and NOL and Disaster Loss Limitations — Individuals,
Estates and Trusts.
Business Credit Limitation – For taxable years beginning on or after
January 1, 2024, and before January 1, 2027, there is a $5,000,000
limitation on the application of business credits. The total of all business
credits including the carryover of any credit for the taxable year may
not reduce the “net tax” by more than $5,000,000. This limitation does
not apply to the Low-Income Housing Credit or the Pass-Through Entity
Elective Tax Credit. The credit for prior year alternative minimum tax
(AMT) is not subject to the credit limitation. Business credits should be
applied against “net tax” before other credits.
For each taxable year of the limitation, taxpayers may make an
irrevocable election to receive an annual refundable credit amount, in
future tax years, for business credits disallowed due to the $5,000,000
limitation. The election must be made annually by completing
form FTB 3870, Election for Refundable Credit and attaching it to an
original, timely filed tax return.
If a taxpayer does not choose to make the election outlined above,
business credits disallowed due to the limitation may be carried over.
The carryover period for disallowed credits is extended by the number of
taxable years the credit was not allowed.
For more information, refer to R&TC Sections 17039.4 and 17039.5, get
form FTB 3870, and see the instructions for Part IV, Credits That Reduce
Tax.
Enhanced Oil Recovery Credit Repeal – For taxable years beginning
on or after January 1, 2024, the Enhanced Oil Recovery Credit has
been repealed. Taxpayers may now only claim available carryovers. For
more information, get form FTB 3540, Credit Carryover and Recapture
Summary.
Intangible Drilling and Development Costs – California law does
not allow the Internal Revenue Code (IRC) Section 263(c) deduction
for intangible drilling and development costs in the case of oil and
gas wells paid or incurred on or after January 1, 2024. Since R&TC
Section 17260(c) is specific to oil and gas wells, geothermal well
intangible drilling and development costs are still afforded preferential
treatment under R&TC Section 17201(c). Therefore, the tax preference
item still applies for geothermal wells for California personal income tax
purposes.
Percentage Depletion – For taxable years beginning on or after
January 1, 2024, California law does not allow the calculation of
depletion as a percentage of gross income from the property for
specified natural resources, including coal, oil shale, oil and gas wells.
R&TC Sections 17681.3 and 17681.6 allowing state nonconformity
to federal rules for percentage depletion of certain refiner exclusions
as well as the temporary suspension of taxable income limit for
marginal production have also been repealed. For more information,
see R&TC Section 17681.

General Information
In general, for taxable years beginning on or after January 1, 2015,
California law conforms to the IRC as of January 1, 2015. However,
there are continuing differences between California and federal law.

When California conforms to federal tax law changes, we do not always
adopt all of the changes made at the federal level. For more information,
go to ftb.ca.gov and search for conformity. Additional information
can be found in FTB Pub. 1001, Supplemental Guidelines to California
Adjustments, the instructions for California Schedule CA (540),
California Adjustments – Residents, or Schedule CA (540NR), California
Adjustments – Nonresidents or Part-Year Residents, 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.
Pass-Through Entity (PTE) Elective Tax Credit
For taxable years beginning on or after January 1, 2022, the PTE elective
tax credit ordering has changed. The PTE elective tax credit should be
applied against the net tax after the other state tax credit. Refer to R&TC
Section 17039 for more information.
Elective Tax for PTE and Credit for Owners
For taxable years beginning on or after January 1, 2021, and before
January 1, 2026, California law allows an entity taxed as a partnership
or an “S” corporation to annually elect to pay an elective tax at a rate
of 9.3% based on its qualified net income (QNI). The election shall be
made on an original, timely filed return and is irrevocable for the taxable
year.
The law allows a credit against the personal income tax to a taxpayer,
other than a partnership, that is a partner, shareholder, or member of
a qualified entity that elects to pay the elective tax, in an amount equal
to 9.3% of the partner’s, shareholder’s, or member’s pro rata share
or distributive share and guaranteed payments of QNI subject to the
election made by the qualified entity. Generally, a disregarded business
entity and its partners or members cannot receive the credit, except
for a disregarded single member limited liability company (SMLLC)
that is owned by an individual, fiduciary, estate, or trust subject to
personal income tax. For more information, go to ftb.ca.gov and search
for pte elective tax and get the following PTE elective tax forms and
instructions:
#	 Form FTB 3893, Pass-Through Entity Elective Tax Payment Voucher
#	 Form FTB 3804, Pass-Through Entity Elective Tax Calculation
#	 Form FTB 3804-CR, Pass-Through Entity Elective Tax Credit
This credit can reduce regular tax below the tentative minimum tax
(TMT).
Net Operating Loss (NOL) Carrybacks
For taxable years beginning on or after January 1, 2019, NOL carrybacks
are not allowed.

A	Purpose
California tax law gives special treatment to some items of income
and allows special deductions and credits for some items of expense.
Many taxpayers who benefit from these provisions must pay at least
a minimum amount of tax, the AMT, and/or limit the amount of their
credits.

B	 Who Must File
Fiduciaries must use Schedule P (541), Alternative Minimum Tax and
Credit Limitations – Fiduciaries, to figure the following:
#	 Income distribution deduction on an AMT basis
#	 Estate’s or trust’s alternative minimum taxable income (AMTI)
#	 Estate’s or trust’s AMT

Schedule P (541) Instructions  2024  Page 1

Fiduciaries must also use Schedule P (541) if any of the following apply:
#	 Figure credits that must be limited by the TMT (Part III, line 8)
#	 Figure credits that may reduce the AMT (Part III, line 10)
#	 Claim more than one credit
Every estate or trust that takes an income distribution deduction under
IRC Section 651 or Section 661 must complete Schedule P (541), Part I,
to figure its AMTI, and Part II to figure the income distribution deduction
on an AMT basis. Part III should be completed only if the estate or trust
is liable for AMT (Part I, line 10 is more than $60,029) or is claiming
credits. In all instances, attach Schedule P (541) to Form 541, California
Fiduciary Income Tax Return.

C	Recordkeeping
For the AMT, certain items of income, deductions, etc., receive different
tax treatment than for the regular tax. Therefore, you need to refigure
items for the AMT that you figured for the regular tax. In some cases,
you may wish to do this by completing the applicable tax form a second
time. If you do complete another form, do not attach it to your tax
return, but keep it for your records.
For regular tax, some deductions may result in carryovers to future taxable
years. Examples are investment interest expense, NOL, and capital loss.
Because you may have to refigure these items to determine AMT for the
estate or trust, the carryover amount may be different for AMT than for
regular tax. Although the carryovers that you figure for AMT do not affect
the carryovers for regular tax, you must keep track of the AMT carryovers
in order to complete your Schedule P (541) in future years.

D	 S Corporations, Partnerships, or Limited
Liability Companies (LLCs)
If the estate or trust is a shareholder of an S corporation, partner in a
partnership, or a member of an LLC, you must take into account the
estate’s or trust’s distributive share of income and deductions that
enter into the computation of the estate’s or trust’s adjustments and tax
preferences.
If the estate or trust is a beneficiary of another estate or trust, you
must include the adjustment for AMT shown on Schedule K-1 (541),
Beneficiary’s Share of Income, Deductions, Credits, etc., line 12a.

E	 Allocation of Deductions to Beneficiaries
The distributable net AMTI of the estate or trust does not include
amounts of depreciation, depletion, or amortization that are allocated
to the beneficiaries, just as the distributable net income of the estate or
trust does not include these items for regular tax.
Report separately on Schedule K-1 (541), line 12, any adjustments or
tax preferences attributable to depreciation, depletion, or amortization
that were allocated to ­beneficiaries.

F	 Optional Write-off for Certain Adjustments
and Tax Preferences
Under IRC Section 59(e), the estate or trust may elect to deduct certain
adjustments and tax preferences ratably over a period of time. If this
election is made, the optional write-off period is used for regular tax and
there is no AMT adjustment on Schedule P (541). The items for which
this election can be made are:
#	 Circulation expenditures under IRC Section 173(a).
#	 Research and experimental expenditures under IRC Section 174(a).
#	 Intangible drilling and developmental expenditures under
IRC Section 263(c).
#	 Development expenditures for mines and natural deposits under
IRC Section 616(a).
#	 Mining and exploration expenditures under IRC Section 617(a).
#	 Grapevines replanted as a result of phylloxera infestation or
Pierce’s Disease.
The estate or trust may elect to deduct circulation expenditures over
three years and intangible drilling and developmental expenditures

Page 2  Schedule P (541) Instructions  2024

over 60 months. The estate or trust may elect to deduct the remaining
items over 10 years. For intangible drilling and developmental
expenditures, the write-off period begins with the month the expenditure
was paid or incurred.
The election must be made in the year of the expenditure and may be
revoked only with the consent of the Franchise Tax Board (FTB). If the
estate or trust made the election for any of the above items, do not
adjust for those items on this schedule. See IRC Section 59(e) for more
information.
Additional information
For more information, get federal Schedule I (Form 1041), Alternative
Minimum Tax – Estates and Trusts.

G	 Alternative Minimum Taxable Income (AMTI)
Exclusion
A qualified taxpayer shall exclude income, positive and negative
adjustments, and preference items attributable to any trade or business
when figuring AMTI. These adjustments and preference items must
also be excluded when calculating any deductions that may result in
AMT carryovers. You are a qualified taxpayer if you meet both of the
following:
#	 Own or have an ownership interest in a trade or business.
#	 Have aggregate gross receipts, (less returns and allowances)
during the taxable year of less than $1,000,000 from all trades
or businesses for which you are the owner or have an ownership
interest. Gross receipts may include, but are not limited to, items
reported on federal Schedules C, Profit or Loss from Business;
D, Capital Gains and Losses; E, Supplemental Income and Loss
(other than income from a trust); or F, Profit or Loss from Farming;
and from federal Form 4797, Sales of Business Property (figured in
accordance with California law); or California Schedule D‑1, Sales
of Business Property (if required to complete it), that are associated
with a trade or business. In the case of an ownership interest, you
include only the proportional share of gross receipts of any trade or
business from a S corporation, partnership, regulated investment
company (RIC), a real estate investment trust (REIT), or real estate
mortgage investment conduit (REMIC) in accordance with your
ownership interest in the enterprise.
Aggregate gross receipts, less returns and allowances means the sum
of the gross receipts of the trades or businesses which you own and the
proportionate interest of the gross receipts of the trades or businesses
which you own and of pass-through entities in which you hold an interest.
Gross receipts, less returns and allowances means the sum of the
gross receipts from the production of business income, as defined in
R&TC Section 25120(a), and the gross receipts from the production of
nonbusiness income, as defined in R&TC Section 25120(d).
Proportionate interest means:
1.	 In the case of a pass-through entity which reports a profit for the
taxable year, your profit interest in the entity is reported as of the end
of your taxable year.
2.	 In the case of a pass-through entity which reports a loss for the
taxable year, your loss interest in the entity is reported as of the end
of your taxable year.
3.	 In the case of a pass-through entity which is sold or liquidates during
the taxable year, your capital account interest in the entity is reported
as of the time of the sale or liquidation.
Proportionate interest includes an interest in a pass-through entity
including a S corporation, partnership, RIC, REIT, or REMIC.
Eligibility
The AMTI exclusion is only available for the AMTI of the estate or trust.
The exclusion may not be passed through to beneficiaries. Therefore,
if the estate or trust qualifies for this exclusion, it must complete two
Schedules P (541): one for the estate’s or trust’s computation of AMTI
and AMT, and one for the computation of AMTI, adjustments and
preference items on Schedule K-1 (541).

The fiduciary should complete the first Schedule P (541) for the estate
or trust as follows:
1.	 Make no entry for AMT adjustments and tax preferences attributable
to any trade or business of the estate or trust (line 4 items).
2.	 Enter all taxable income attributable to any trade or business of the
estate or trust on line 7b.
The fiduciary should complete the second Schedule P (541) for the
beneficiary as follows:
1.	 Enter the AMT adjustments and tax preferences attributable to any
trade or business of the estate or trust on the appropriate lines
(line 4 items).
2.	 Make no entry on line 7b.
See second Schedule P (541) when entering AMTI and adjustments
and taxable preference items on Schedule K-1 (541), line 12. The
estate or trust should also have completed a second Schedule P (541)
for the prior taxable year, and refer to it to compute the amount for
Schedule K-1 (541), line 11(d), if applicable.

Specific Line Instructions
Part I – Fiduciary’s Share of Alternative Minimum Taxable
	
Income (AMTI)
Line 2 – Net operating loss (NOL) deduction
For more information, see form FTB 3805V.
Line 4 – Adjustments
For line 4a through line 4s, enter each adjustment as a positive amount
unless instructed otherwise.
Line 4a – Interest
In determining the AMTI, qualified residence interest, other than
qualified housing interest defined in IRC Section 56(e), is not allowed
as a deduction. Only home mortgage interest that meets the definition
of “qualified housing interest” is deductible for AMT purposes. The AMT
adjustment is that portion of home mortgage interest deductible for
regular tax purposes that is not qualified housing interest.
Qualified housing interest. Qualified housing interest is interest paid
or accrued by the trust or estate on debt incurred to acquire, construct,
or substantially rehabilitate a residence held by the estate or trust that
secures the debt and is utilized by a beneficiary of the estate or trust as his
or her primary residence or second home. The beneficiary must also have
a present interest or an interest in the residuary of the estate or trust.
Investment interest expense. Also enter on this line any investment
interest expense adjustment. If you completed form FTB 3526,
Investment Interest Expense Deduction, refigure the investment interest
expense using a second form FTB 3526.
Complete line 1 through line 8. Follow the form FTB 3526 instructions
for line 1 through line 8, except for the following:
#	 When completing line 1, include any interest expense from
Schedule P (541), line 4a, that was paid or accrued on indebtedness
properly attributable to property held for investment within the
meaning of IRC Section 163(d)(5). An example is interest on a home
equity loan whose proceeds were invested in stocks or bonds. This
interest might be deductible as home mortgage interest for regular
tax, but is not deductible for AMT.
#	 When entering the 2023 disallowed investment interest expense on
line 2, use the 2023 AMT disallowed investment interest expense.
#	 When completing line 4f, refigure the gross investment income,
any net gain from the disposition of property held for investment,
and any investment expenses, by taking into account all of the AMT
adjustments and tax preferences that apply.
The adjustment is the difference between the AMT form FTB 3526,
line 8, and the regular tax form FTB 3526, line 8. If the amount figured
for AMT is more than that figured for regular tax, enter the adjustment
as a negative amount.

Line 4b – Personal property taxes and real property taxes
Enter on this line any state and local personal property taxes and state,
local, or foreign real property taxes that are included on Form 541, line 11.
Line 4c – Miscellaneous itemized deductions from Form 541, line 15b
Miscellaneous itemized deductions subject to the 2% adjusted gross
income (AGI) limitation are not deductible for AMT purposes.
Line 4d – Refund of personal property taxes and real property taxes
Enter on this line any refunds of taxes the estate or trust received
in 2024 if all the following apply:
#	 Are those described in line 4b above
#	 Are attributable to a taxable year after 1986
#	 Were deducted in a taxable year after 1986
Line 4e – Depreciation of property placed in service after 1986
If you filed federal Schedules C, E, or F and have tangible property
which you began depreciating after 1986, you must use the Alternative
Depreciation System (ADS) to calculate AMT depreciation as follows:
Property placed in service before 1999. For property placed in service
before 1999, refigure the AMT depreciation using the ADS, with the
same convention used for the regular tax. See the following table for the
method and recovery period to use.
IF the property is…

THEN use the…

IRC Section 1250(c) property

Straight-line method over
40 years.

Tangible property (other than
the IRC Section 1250(c) property)
depreciated using straight-line
for the regular tax

Straight-line method over
property’s AMT class life.

Any other tangible property

150% declining balance
method, switching to
straight-line the first
tax year it gives a larger
deduction, over the
property’s AMT class life.

Property placed in service after 1998. For property placed in
service after 1998, no adjustment is necessary if the property is
IRC Section 1250(c) property or tangible property, other than IRC
Section 1250(c) property; depreciated using the straight-line or 150%
declining balance method for the regular tax. For any other tangible
property, use the 150% declining balance method, switching to
straight‑line the first taxable year it gives a larger deduction, and the
same convention and recovery period used for the regular tax.
For more information, get federal Schedule I (Form 1041); federal
Pub. 946, How to Depreciate Property; or see IRC Section 168(g).
Certain grapevines. Grapevines that were replanted as a result
of phylloxera infestation or Pierce’s Disease that are depreciated
over 5 years for regular tax must be depreciated over 10 years for AMT.
S corporation shareholders, partners, LLC members. Enter the amount
shown on the Schedule K-1 (100S, 565, or 568), Share of Income,
Deductions, Credits, etc., issued by your S corporation, partnership, or
LLC for post-1986 depreciation.
Enter on line 4e the difference between depreciation for regular tax and
depreciation for AMT. To figure the AMT adjustment on this line, subtract
the depreciation figure calculated for AMT from the depreciation allowed
for regular tax. If the depreciation calculated for AMT is greater than the
depreciation allowed for regular tax, enter the adjustment as a negative
amount. Do not include depreciation from the following:
#	 An activity for which the estate or trust is not at risk
#	 Amounts received from a S corporation, partnership, or LLC if the
basis limitations under IRC Section 704(d) or Section 1366(d) apply
#	 A passive activity
#	 A tax shelter farm activity

Schedule P (541) Instructions  2024  Page 3

Instead, include these depreciation adjustments when figuring the
adjustments on line 4l, line 4m, or line 4n, whichever applies.
Line 4f – Circulation and research and experimental expenditures
paid or incurred after 1986
If the estate or trust elected the optional 3-year write-off period for
circulation expenditures and/or the optional 10-year write-off period for
research and experimental expenditures under IRC Section 59(e), skip
this line.
Circulation expenditures. For regular tax, IRC Section 173 allows a
deduction for the full amount of circulation expenditures in the taxable
year paid or incurred. For AMT, these expenditures must be amortized
over three years beginning with the year the expenditures were paid or
incurred. Enter on this line the difference between the AMT deduction
and the regular tax deduction. If the AMT deduction is more than the
regular tax deduction, enter the difference as a negative amount.
Research and experimental expenditures. For regular tax, IRC
Section 174(a) allows a deduction for research and experimental
expenditures in the taxable year paid or incurred. For AMT, these
expenditures must be amortized over a 10-year period. To figure the
AMT adjustment, subtract the amortization figured for AMT from the
amortization allowed for regular tax. If the AMT amortization is greater
than regular tax amortization, enter the adjustment as a negative
amount. Otherwise, enter the difference as a positive amount.
See IRC Section 56(b)(2)(B) for special rules that apply to losses related
to circulation, research, or experimental expenditures.
Line 4g – Mining exploration and development costs paid or incurred
after 1986
If the estate or trust elected the optional 10-year write-off under IRC
Section 59(e), skip this line.
For regular tax, IRC Sections 616(a) and 617(a) allow a deduction for
mining exploration and development costs in the taxable year paid
or incurred. For AMT, these costs must be capitalized and amortized
over 10 years beginning with the taxable year the expenditures were paid
or incurred. Enter the difference between the AMT mining amortization
and the regular tax mining deduction. If the AMT mining amortization is
more than the regular tax mining deduction, enter the adjustment as a
negative amount.
See IRC Section 56(a)(2)(B) for special rules that apply to losses related
to mining property.
Line 4h – Long-term contracts entered into after February 28, 1986
For AMT, the percentage-of-completion method of accounting ­described
in IRC Section 460(b) generally must be used. This rule does not apply
to home construction contracts, as defined in IRC Section 460(e)(6).
To figure the AMT adjustment, subtract the amount computed using the
percentage-of-completion method for AMT from the amount allowed for
regular tax. If the amount for AMT is less than the amount computed for
regular tax, enter the difference as a negative amount.
Line 4i – Amortization of pollution control facilities placed in service
after 1986
For regular tax, the estate or trust may elect to amortize the basis of a
certified pollution control facility over 60 months.
For facilities placed in service before 1999, the AMT deduction is figured
using the ADS described in IRC Section 168(g). Use the federal Class
Life Asset Depreciation Range System (ADR) under the straight-line
method.
For facilities placed in service after 1998, the AMT deduction is figured
under the modified accelerated cost recovery system (MACRS) using the
straight-line method.
To figure the AMT adjustment on line 4i, subtract the amount figured
for AMT from the amount allowed for regular tax. If the AMT pollution
control facilities depreciation is more than the regular tax pollution
control facilities amortization, enter the difference as a negative amount.
Line 4j – Installment sales of certain property
If, for regular tax purposes, the estate or trust used the installment
method to report any non-dealer disposition of property that occurred

Page 4  Schedule P (541) Instructions  2024

after August 16, 1986, but before the first day of your taxable year that
began in 1990, and if the obligation that arose from the disposition was
an installment obligation to which the proportionate disallowance rule
applied, refigure your income for AMT without regard to the installment
method.
Enter the difference between your AMT and regular tax income on this
line. If the AMT income is smaller, enter the difference as a negative
amount.
California conforms to the repeal of the installment method alternative
minimum tax adjustment for farmers for payments received in taxable
years beginning on or after January 1, 1997, for installment sales made
in income years beginning after December 31, 1987.
Line 4k – Adjusted gain or loss (including incentive stock options)
The estate or trust will have an entry on this line only if it reported a
gain or loss from the sale or exchange of business or income-producing
property on California Schedule D (541), Capital Gain and Loss,
Schedule D-1 or federal Form 4684, Casualties and Thefts.
Generally, if the estate or trust reported a gain or loss from the sale or
exchange of mutual funds, stocks, or bonds, there will not be an entry
on this line.
Figure the AMT adjustment for this line as follows:
Step 1 – Refigure the adjusted basis of the asset sold by taking into
account any AMT adjustments you made this year or in previous years
for depreciation (see line 4e), circulation and research and experimental
expenditures (see line 4f), mining cost (see line 4g), pollution control
facilities (see line 4i), and incentive stock options (see line 4k).
Step 2 – Refigure your gain or loss using the adjusted basis figured
in Step 1.
Step 3 – Figure the difference between the refigured gain or loss for
AMT and the gain or loss reported for regular tax. Enter the result on
line 4k. Enter the difference as a negative if any of the following apply:
#	 The AMT gain is less than the regular tax gain.
#	 The AMT loss is more than the regular tax loss.
#	 You have an AMT loss and a regular tax gain.
Incentive stock options (ISOs). For regular tax, no income is recognized
when an ISO, as defined in IRC Section 422(b), is granted or exercised.
However, this rule does not apply for AMT for ISOs exercised after
December 31, 1987. Instead, the estate or trust must include the excess,
if any, of:
#	 The fair market value (FMV) of the option (determined without regard
to any lapse restriction) at the first time the rights in the option
become transferable or when these rights are no longer subject to a
substantial risk of forfeiture, over
#	 The amount the estate or trust paid for the option.
Increase the AMT basis of any stock acquired through the exercise of an
ISO by the amount of the adjustment. Do not make an AMT adjustment
if the estate or trust exercised an ISO and disposed of that stock in the
same year.
Line 4l – Certain loss limitations
If you include adjustments or preferences on this line, do not include
them on any other line of this schedule. If the loss is from a passive
activity, use line 4n instead. If the loss is from a tax shelter farm activity
(that is not passive), use line 4m.
For AMT, refigure certain limited losses using the AMT adjustments and
tax preferences. Refigure the gains and losses from activities for which
the estate or trust is not at risk. Also, refigure the basis limitations that
apply to S corporations and partnerships. See IRC Sections 59(h), 465,
704(d), and 1366(d).
Enter on this line the difference between AMT limited losses (from
activities reported on federal Schedules C, E, F, or federal Form 4835,
Farm Rental Income and Expenses), and the regular tax limited losses
from these activities. If the AMT limited loss is less than the regular tax
limited loss, enter the difference as a negative amount.

Line 4m – Tax shelter farm activities
If you include AMT adjustments or tax preferences on this line, do not
include them on any other line of this schedule.
Complete this line only if the estate or trust has a gain or loss from a
tax shelter farm activity, as defined in IRC Section 58(a)(2), that is not a
passive activity. If the tax shelter farm activity is a passive activity, you
must include it with other passive activities on line 4n.
Refigure all gains and losses reported for regular tax from tax shelter
farm activities using the AMT adjustments and preferences.
Figure the tax shelter farm activity gain or loss for AMT using the same
rules used for regular tax except for the following:
#	 Do not take any refigured loss unless the estate or trust is insolvent,
see IRC Section 58(c)(1).
#	 Do not offset gains from other tax shelter farm activities with the
refigured loss.
Suspend and carry over the loss to future taxable years until one of the
following applies:
#	 There is a gain in a future taxable year from that same activity.
#	 The activity is disposed of.
Enter on this line the difference between the tax shelter farm loss for
AMT and regular tax.
Line 4n – Passive activities
If you include AMT adjustments or preferences on this line, do not
include them on any other line of this schedule.
The estate or trust may want to complete a second form FTB 3801,
Passive Activity Loss Limitations, and the other forms or schedules on
which passive activities are reported to figure this adjustment.
Several types of adjustments may be entered on this line.
Regular passive activities. Refigure the passive activity gains and
losses for AMT by taking into account all AMT adjustments, preferences
and AMT prior year unallowed losses that apply to the passive activity.
The adjustment is the difference between the AMT passive activity
income or loss (from activities reported on federal Schedules C, E, F, or
federal Form 4835) and the regular tax passive activity income or loss
from these activities.
Publicly traded partnership (PTP). If the estate or trust had a loss from
a PTP, it will have to refigure the loss using any AMT adjustments, tax
preferences, and any AMT prior year unallowed loss.
Tax shelter passive farm activities. Refigure any gain or loss from a tax
shelter passive farm activity. Take into account all AMT adjustments, tax
preferences, and AMT prior year unallowed losses. Do not include a tax
shelter passive farm activity loss on your AMT form FTB 3801. Instead,
carry the loss forward to offset against future tax shelter passive farm
activities.
Insolvency. If, at the end of the taxable year, the liabilities of the
estate or trust exceed the FMV of its assets, increase the passive
activity loss allowed by the excess (but not more than the total loss).
See IRC Section 58(c)(1).
Line 4o – Beneficiaries of other trusts or decedent’s estates
If the estate or trust is a beneficiary of another estate or trust, enter on this
line the amount from Schedule K-1 (541), line 12a. This is the estate’s or
trust’s share of the distributable AMTI from the other estate or trust.
Line 4p – Depletion
For AMT, if the depletion deduction for mines, wells, and other natural
deposits determined under IRC Section 611 exceeds the adjusted basis
of the property at the end of the taxable year, the estate or trust will have
a depletion adjustment. To figure the adjusted basis, use the rules in
IRC Section 1016 but do not reduce the adjusted basis by current-year
depletion. Figure the excess amount separately for each property. Enter
on this line only the depletion amount that exceeds the adjusted basis.
Get the instructions to federal Schedule I (Form 1041), line 5 for more
information.

L­ ine 4q – Intangible drilling costs (IDCs)
If the estate or trust elected the optional 60-month write-off under
IRC Section 59(e) for all property in this category, skip this line.
For AMT, IDCs from geothermal wells are preferences if the excess IDCs
exceed 65% of the net income from the wells. To figure excess IDCs:
A.	 Figure the amount of the IDCs allowed for regular tax under IRC
Section 263(c). Do not include any deduction for nonproductive
wells. Refigure the IDCs allowed for AMT by amortizing them
over 120 months, starting with the month the well was placed in
production. Then subtract the AMT IDCs from the regular tax IDCs
to get the excess IDCs. The estate or trust may elect to use any other
method that is allowed in determining cost depletion.
B.	 Figure net income by reducing the gross income, from all geothermal
wells that was received or accrued during the taxable year by any
deductions allocable to these properties (reduced by the excess
IDCs). Use only income and deductions allowed for AMT.
C.	 Multiply the net income by 65% (.65). Subtract the result from the
excess IDCs figured in Step A. This is the excess IDCs. Enter the
result on line 4q.
Line 4r – ­California qualified stock options
Include the amount of compensation excluded from the employee’s
gross income for regular tax from the exercise of ­California qualified
stock options (CQSOs). This amount is the difference between the FMV
of the corporation’s stock on the date the option is exercised and the
amount the employee paid for the stock.
Line 4s – Other adjustments
Include on this line:
#	 Patron’s adjustment. Distributions the estate or trust received from
a cooperative may be includible in income. Unless the distributions
are nontaxable, include on line 4s the total AMT patronage dividend
and per-unit retain allocation adjustment reported to the estate or
trust by the cooperative.
#	 Related adjustments. AMT adjustments and tax preferences may
affect deductions that are based on an income limit other than AGI
or modified AGI (e.g., farm conservation expenses). Refigure these
deductions using the income limit as modified for AMT. Include the
difference between the regular tax and AMT deduction on line 4r. If
the AMT deduction is more than the regular tax deduction, include
the difference as a negative amount.
Do not make an adjustment on line 4s for an item you refigured on
another line of Schedule P (541).
Line 7a – Alternative minimum tax NOL deduction
For taxable years beginning on or after January 1, 2024, and before
January 1, 2027, California has suspended the NOL carryover deduction.
Taxpayers may continue to compute and carryover an NOL during the
suspension period. However, taxpayers with net business income or
modified AGI of less than $1,000,000 or with disaster loss carryovers
are not affected by the NOL suspension rules. For more information, get
form FTB 3805V.
For loss years beginning after 1986, reduce any NOL by any
positive AMT adjustments in that year. Increase the NOL by negative
adjustments. Also, reduce the NOL by any tax preferences, but only to
the extent they increase the NOL figured for regular tax.
Line 7b – AMTI exclusion
Qualified taxpayers shall exclude income from any trade or business
when figuring AMTI. If you are a qualified taxpayer (see General
Information G, Alternative Minimum Taxable Income (AMTI) Exclusion),
enter your taxable trade or business income on line 7b. If zero or less,
enter -0-.

Part II – Income Distribution Deduction on an Alternative
Minimum Tax (AMT) Basis
Line 5 – Enter any capital gains that were paid or permanently set aside
for charitable purposes from the current year’s income included on
Form 541, Schedule A, Charitable Deduction, line 1c.

Schedule P (541) Instructions  2024  Page 5

Line 6 and Line 7 – Capital gains and losses must take into account any
basis adjustments from Part I, line 4k.
Line 15 – Income distribution deduction on an AMT basis
Allocate the income distribution deduction computed on an AMT basis
among the beneficiaries in the same manner as income was allocated
for regular tax. Report each beneficiary’s share on the respective
Schedule K-1 (541), line 12a.

Part III – Tentative Minimum Tax (TMT) and Alternative
Minimum Tax (AMT) Computation
Line 9 – Enter the total of the estate’s or trust’s regular tax from
Form 541, line 21a.

Part IV – Credits that Reduce Tax
Business Credit Limitation – For taxable years beginning on or after
January 1, 2024, and before January 1, 2027, there is a $5,000,000
limitation on the application of business credits. The total of all business
credits including the carryover of any credit for the taxable year may not
reduce the “net tax” by more than $5,000,000.
The credit for prior year AMT is not subject to the credit limitation.
How to compute the limitation
The limitation only applies to business credits and does not apply to the
following credits:
#	 Earned income tax credit
#	 Young child tax credit
#	 Foster youth tax credit
#	 Credit for household and dependent care
#	 Credit for elective tax under the Small Business Relief Act
#	 Credit for adoption costs
#	 Renter’s tax credit
#	 Personal exemption credit
#	 Credit for qualified joint custody head of household and a qualified
taxpayer with a dependent parent
#	 Credit for qualified senior head of household
#	 Credit for low-income housing
#	 Excess contributions of unemployment compensation
The credits listed above are required to be applied after any business
credits are applied.
For each taxable year of the limitation, taxpayers may make an
irrevocable election to receive an annual refundable credit amount, in
future tax years, for business credits disallowed due to the $5,000,000
limitation. The election must be made annually by completing form
FTB 3870 and attaching it to an original, timely filed tax return.
If a taxpayer does not choose to make the election outlined above,
business credits disallowed due to the limitation may be carried over.
The carryover period for disallowed credits is extended by the number of
taxable years the credit was not allowed.
Taxpayers are required to keep track of the disallowed business credits
on a worksheet and provide it to the FTB upon request.
Complete Part IV only if you have tax credits.
Use Part IV to determine the following:
#	 Amount of credit that may be used to offset tax.
#	 Tax that may be offset.
#	 Amount of credit, if any, that may be carried over to future years.
#	 Order in which to claim credits, if you have more than one credit to
claim.
Before you begin Part IV:
#	 Complete Form 541 through line 22.
#	 Figure the amount of your credits using the credit form or worksheet
identified in the Credit Table below. Attach the credit form to your tax
return if one is required.

Page 6  Schedule P (541) Instructions  2024

To complete Part IV:
#	 Complete line 1 through line 3 to figure the amount of excess tax you
may offset by credits.
#	 Identify which sections of Part IV you may take your tax credits.
Credits without carryover provisions are listed on Schedule P (541)
in Section A1 and Section B2 and may be taken only in those
sections. The table below identifies the sections of Part IV in which
you may take these tax credits.
#	 If you have credits in Section B, complete line 10 in addition to the
lines for your credits.
#	 If your credit is taken in Section A2 or Section B1, enter the credit code
and the credit name in the space provided. See the Credit Table below.
#	 Complete column (a) through column (d) for each line on which you
are taking a credit. See “Column Instructions” below.
#	 If your credits are taken in more than one section, complete each
section before going to the next section.
#	 Once you have completed Part IV, see “How to Claim Credits” below.
Section A Instructions
Line 3 – Subtract line 2 from line 1. If the amount is zero or less, go
to Question 1. If the amount is greater than zero, go to the Section A1
instructions.
1.	 Does the Credit Table show that you may take your credit only in
Section A1 or Section A2?
Yes	 You may not take the credit this year. Go to question 2.
No	 Go to Section B to figure the amount of credit you may take
this year. Then continue to Section C if your credit is listed in
that section.
2.	 Does the credit have carryover provisions?
Yes	 Enter the credit code, credit name, and credit amount in
column (a) of the section indicated by the table. Enter -0- in
column (b). Enter the credit amount in column (d). This is the
amount of the credit you may carry over and use in future years.
No	 You may not take the credit this year or in future years.
Section A1 Instructions
Line 4 – If you have a credit listed in this section, complete column (a)
through column (c).
For taxable years beginning on or after January 1, 2024, and before
January 1, 2027, if you did not claim all or a portion of the Prison
Inmate Labor credit due to the $5,000,000 business credit limitation,
only the disallowed portion of the credit may be carried over by the
number of taxable years the credit is not allowed.
Section A2 Instructions
Line 5 through Line 9 – Follow the Credit Table Instructions to find out
in which section to claim your credit. Then complete column (a) through
column (d) for each credit in each section before going to the next
section.
Credit for Prior Year Alternative Minimum Tax
The prior year AMT credit must be applied before any credits that can
reduce the regular tax below the TMT. Get form FTB 3510, Credit for
Prior Year Alternative Minimum Tax – Individuals or Fiduciaries, to see if
the estate or trust qualifies for the credit.
Section B1 Instructions
Line 11 through Line 14 – Follow the Credit Table Instructions to find
out in which section to claim your credit. Then complete column (a)
through column (d) before going to the next section.
Generally, it is to your advantage to apply credits with limited carryovers
before credits with no limitation on the carryover. However, you may
want to apply credits with no limitation on carryover first if that is more
advantageous in your case.
Section B2 Instructions
Line 15 – If you have other state tax credit, complete column (a)
through column (c). Get California Schedule S, Other State Tax Credit,
for more information.

Section B3 Instructions
Line 16 – If you have pass-through entity elective tax credit, complete
column (a) through column (d). Get form FTB 3804-CR, for more
information.
Section C Instructions
Line 18 and Line 19 – If you have any of the credits listed in this
section, complete column (a) through column (d) for each credit in the
order listed.
Column Instructions – In column:
(a)	 Enter the amount of credit available to offset tax.
(b)	 Figure the amount of credit you are able to use this year by entering
the smaller of the amount in column (a) or the amount in column (c)
from the previous line.
(c)	 Figure the amount of tax remaining to be offset by other credits
by subtracting the amount in column (b) from the balance in
column (c) of the previous line.
(d)	 Enter the amount of credit carryover available to use in future years
by subtracting the amount in column (b) and any business credit
amount elected to be refundable, in future years, on form FTB 3870,
if applicable, from the amount in column (a).
Credit Table Instructions
To use the table:
1.	 Find your credits listed in the tables below.
2.	 See which sections are identified in the columns under “Offset Tax in
Section:”
3.	 Take the credit only in sections the table identifies for your credit.
4.	 Use the credit in the earliest section possible.
5.	 Complete each section before going to the next section.
How to Claim Credits:
Claim credits by transferring them to Form 541 or Form 109, California
Exempt Organization Business Income Tax Return, as follows:
Form 541 filers: If only one credit is claimed, enter the credit code and
amount of the credit on Form 541, line 23. If two or more credits are
claimed, add the amounts from Part IV, column (b), line 4 through line 9
and line 11 through line 16. Enter the total on Form 541, line 23.
Form 109 filers: If one to three credits are claimed, enter the credit
name, code, and amount on Form 109, Schedule B, line 1 through line 3.
If more than three credits are claimed, see Form 109, Schedule B, Tax
Credits, instructions.

Credit Table
Code

Current Credits

233 California Competes Tax
California Motion Picture and
223
Television Production
247 Cannabis Equity Tax
235 College Access Tax
Disabled Access for Eligible
205
Small Businesses
Donated Agricultural Products
204 Transportation
246 High-Road Cannabis Tax
244 Homeless Hiring
172 Low-Income Housing
213 Natural Heritage Preservation
New California Motion Picture and
237
Television Production
New Donated Fresh Fruits or
238
Vegetables
234 New Employment
187 Other State Tax

Form

Offset Tax in Section

FTB 3531

B1

FTB 3541

A2

FTB 3821
FTB 3592

A2
B1

FTB 3548

A2

FTB 3547

A2

FTB 3820
FTB 3831
FTB 3521
FTB 3503

A2
A2
B1
B1

FTB 3541

A2

FTB 3814

A2

FTB 3554
Sch. S

A2
B2

Code

Current Credits

242 Pass-Through Entity Elective Tax
188 Prior Year Alternative Minimum Tax
162 Prison Inmate Labor
Program 3.0 California Motion Picture
239
and Television Production
183 Research
245 Soundstage Filming
243 State Historic Rehabilitation
Code Repealed Credits with Carryover Provisions

Form

Offset Tax in Section

FTB 3804-CR B3
FTB 3510
FTB 3507

A2
A1

FTB 3541

B1

FTB 3523
FTB 3541
FTB 3835

B1
B1
B1

Form

Offset Tax in
Section

175 Agricultural Products
196 Commercial Solar Electric System
181 Commercial Solar Energy

FTB 3540
FTB 3540
FTB 3540

A2
B1
B1

224 Donated Fresh Fruits or Vegetables

FTB 3540

A2

194 Employee Ridesharing

FTB 3540

A2

190 Employer Child Care Contribution

FTB 3540

A2

189 Employer Child Care Program

FTB 3540

A2

FTB 3540

A2

FTB 3540

A2

FTB 3540
FTB 3805Z
FTB 3805Z
FTB 3540
FTB 3540

A2
B1
B1
A2
A2

FTB 3807

A2

FTB 3807

A2

FTB 3540
FTB 3540
FTB 3540

A2
A2
A2

FTB 3808

A2

FTB 3540
FTB 3540
FTB 3540
FTB 3540
FTB 3540

B1
A2
A2
A2
A2

FTB 3540

A2

FTB 3540
FTB 3540
FTB 3809
FTB 3809
FTB 3540

B1
A2
B1
B1
A2

191
192
193
182
203
176
176
218
207
198
198
160
240
241
211
185
184
174
186
171
200
180
179
210
210
178

Employer Ridesharing (Large)
Employer Ridesharing (Small)
Employer Ridesharing (Transit Passes)
Energy Conservation
Enhanced Oil Recovery
Enterprise Zone Hiring
Enterprise Zone Sales or Use Tax
Environmental Tax
Farmworker Housing
Local Agency Military Base
Recovery Area Hiring
Local Agency Military Base Recovery
Area Sales or Use Tax
Low-Emission Vehicles
Main Street Small Business Tax
Main Street Small Business Tax II
Manufacturing Enhancement
Area Hiring
Orphan Drug
Political Contributions
Recycling Equipment
Residential Rental & Farm Sales
Ridesharing
Salmon & Steelhead Trout
Habitat Restoration
Solar Energy
Solar Pump
Targeted Tax Area Hiring
Target Tax Area Sales or Use Tax
Water Conservation

C

C

Franchise Tax Board Privacy Notice on Collection
Our privacy notice can be found in annual tax booklets or online. Go
to ftb.ca.gov/privacy to learn about our privacy policy statement, or
go to ftb.ca.gov/forms and search for 1131 to locate FTB 1131 EN-SP,
Franchise Tax Board Privacy Notice on Collection - Aviso de Privacidad
del Franchise Tax Board sobre la Recaudación. To request this notice by
mail, call 800.338.0505 and enter form code 948 when instructed.

Schedule P (541) Instructions  2024  Page 7