California Local Agency Military Base Recovery Area Business Booklet

Local Agency Military Base Recovery Area Business Booklet
2018 Form 3807 - Local Agency Military Base Recovery Area Business Booklet
2018

Local Agency Military Base Recovery Area
Business Booklet

3807

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

This booklet contains:
Form FTB 3807, Local Agency Military Base Recovery Area Deduction and Credit Summary

2018 Instructions for Form FTB 3807
Local Agency Military Base Recovery Area Businesses

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

Contents
General Information .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  2
How to Claim Deductions and Credits .  .  .  .  .  3
Part I Credits and Recapture  .  .  .  .  .  .  .  .  .  .  .  .  4
Hiring Credit .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  4
Hiring Credit Recapture .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  5
Sales or Use Tax Credit Carryover .  .  .  .  .  .  .  .  6
Worksheet IIA, Hiring Credit and Recapture  6
Part II Portion of Business Attributable
  to the LAMBRA  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  6
Worksheet III, Section A, Income or Loss
 Apportionment  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 9
Part III Net Operating Loss (NOL) Carryover
  and Deduction .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 9
Worksheet III, Section B, Income or
Loss Apportionment  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10
Worksheet IV, Computation of NOL Carryover
  and Carryover Limitations .  .  .  .  .  .  .  .  .  .  .  . 12
Instructions for Schedule Z – Computation
  of Credit Limitations .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 13
Form FTB 3807, Local Agency Military
  Base Recovery Area Deduction
  and Credit Summary  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 17
Schedule Z, Computation of Credit
 Limitations .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 18
Principal Business Activity Codes  .  .  .  .  .  .  .  . 19
How to Get ­California Tax Information .  .  .  .  . 22

General Information
In general, for taxable years beginning on or
after January 1, 2015, California law conforms
to the Internal Revenue Code (IRC) as of
January 1, 2015. However, there are continuing
differences between California and federal
law. When California conforms to federal tax
law changes, we do not always adopt all of
the changes made at the federal level. For
more information, go to ftb.ca.gov and search
for conformity. Additional information can
be found in FTB Pub. 1001, Supplemental
Guidelines to California Adjustments, the
instructions for California Schedule CA (540 or
540NR), and the Business Entity tax booklets.
The instructions provided with California tax
forms are a summary of California tax law
and are only intended to aid taxpayers in
preparing their state income tax returns. We
include information that is most useful to the
greatest number of taxpayers in the limited
space available. It is not possible to include
all requirements of the California Revenue
and Taxation Code (R&TC) in the instructions.
Taxpayers should not consider the instructions
as authoritative law.
Repeal of Geographically Targeted Economic
Development Area Tax Incentives
The California legislature repealed and made
changes to all of the Geographically Targeted
Economic Development Area (G-TEDA)
Tax Incentives. Enterprise Zones (EZ) and

Page 2  FTB 3807 Booklet  2018

Local Agency Military Base Recovery Areas
(LAMBRA) were repealed on January 1, 2014.
The Targeted Tax Areas (TTA) and
Manufacturing Enhancement Areas (MEA)
both expired on December 31, 2012. For more
information, go to ftb.ca.gov and search for
repeal tax incentives.
LAMBRA Incentives Repealed
For taxable years beginning on or after
January 1, 2014, taxpayers cannot generate the
following LAMBRA incentives:
yy Sales or Use Tax Credit
yy Business Expense Deduction
yy Net Operating Loss (NOL)
However, taxpayers can claim the sales or
use tax credit carryover or NOL carryover
deduction from previous years.
LAMBRA Hiring Credit
For taxable years beginning on or after
January 1, 2014, taxpayers cannot generate
any LAMBRA hiring credit. However,
qualified taxpayers within the LAMBRA
who hired qualified employees on or before
December 31, 2013, and paid or incurred
qualified wages during the 60-month period
immediately following the hire date, shall
continue to qualify for the hiring credit.
LAMBRA Credits Carryover Period
The portion of any LAMBRA sales or use tax
credit or hiring credit remaining for carryover
to taxable years beginning on or after
January 1, 2014, shall be carried over only to
the succeeding 10 taxable years if necessary,
or until the credit is exhausted, whichever
occurs first. Any hiring credits generated in the
current taxable year for employees hired on or
before December 31, 2013, and unusable in
the current taxable year, may be carried over to
the succeeding 10 taxable years.
Minimum Wage
For any employer who employs 25 or fewer
employees, the California minimum wage is:
yy $10.50 per hour from January 1, 2018,
through December 31, 2018.
yy $11.00 per hour from January 1, 2019,
through December 31, 2019.
For any employer who employs 26 or more
employees, the California minimum wage is:
yy $11.00 per hour from January 1, 2018,
through December 31, 2018.
yy $12 per hour from January 1, 2019,
through December 31, 2019.
Pass-Through Entities
For purposes of this booklet, the term
“pass‑through entity” refers to an
S corporation, estate, trust, partnership, and
limited liability company (LLC). References
to “partnerships” include LLCs classified as
partnerships.
Single-Sales Factor Formula
R&TC Section 25128.7 requires all business
income of an apportioning trade or business,

other than an apportioning trade or business
under R&TC Section 25128(b), to apportion
its business income to California using
the single‑sales factor formula. For more
information, get Schedule R, Apportionment
and Allocation of Income, or go to ftb.ca.gov
and search for single sales factor. However,
business income apportioned to the LAMBRA
continues to be apportioned based on the
property and payroll factors.
Assignment of Credits
Credit earned by members of a combined
reporting group may be assigned to an
affiliated corporation that is an eligible member
of the same combined reporting group. A
credit assigned may only be claimed by the
affiliated corporation against its tax liability.
For more information, see instructions for
Schedule Z, Computation of Credit Limitations,
on page 13, Assignment of Credit; get form
FTB 3544, Election to Assign Credit Within
Combined Reporting Group; form FTB 3544A,
List of Assigned Credit Received and/or
Claimed by Assignee; or go to ftb.ca.gov and
search for credit assignment.

Introduction
Economic Development Area
(EDA) Tax Incentives
California established four types of EDAs that
had related tax incentives. These incentives
were established to stimulate growth and
development in selected areas that were
economically depressed. EDA tax incentives
applied only to certain business transactions
that were undertaken after an EDA had
received final designation from the Housing
and Community Development (HCD). Final
designation was when the HCD designated
an area to be an EDA. Tax incentives were
available to individuals and businesses that
operated or invested within the geographic
boundaries of the following EDAs:
yy Enterprise Zones (repealed on
January 1, 2014)
yy Local Agency Military Base Recovery Areas
(repealed on January 1, 2014)
yy Manufacturing Enhancement
Areas (designation expired on
December 31, 2012)
yy Targeted Tax Areas (designation expired on
December 31, 2012)
Additional information on other EDAs can be
found in the following FTB tax booklets:
yy FTB 3805Z, Enterprise Zone Business
Booklet
yy FTB 3808, Manufacturing Enhancement
Area Business Booklet
yy FTB 3809, Targeted Tax Area Business
Booklet

References in this booklet to the "LAMBRA" are
interpreted as "the boundaries of the former
LAMBRA as it existed on December 31, 2013."

Reporting Requirement
California statutes require the Franchise Tax
Board (FTB) to provide information to the
California Legislature regarding the number
of businesses using the EDA tax incentives,
types of EDA tax incentives being used, and the
EDAs in which the businesses are claiming the
tax incentives.
Complete items A through I on Side 1 of
form FTB 3807, Local Agency Military Base
Recovery Area Deduction and Credit Summary,
as applicable. This information will be used to
meet the FTB’s statutory reporting requirement.

Purpose
This booklet provides specific information on
the types of available LAMBRA tax incentives.
Taxpayers operating or investing in a business
located within a designated LAMBRA may be
eligible for the following credit and/or claim
the following credit carryover and carryover
deduction:
yy Hiring Credit
yy Sales or Use Tax Credit Carryover
yy NOL Carryover Deduction
Use this booklet to determine the correct
amount of credits and deductions that a
business may claim for operating or investing
in a business located within a designated
LAMBRA. Complete the worksheets in this
booklet for each credit and deduction for which
the business is eligible. Then enter the total
credits and deductions on form FTB 3807.

LAMBRA Designation
LAMBRAs were established to stimulate
growth and development in areas that
experienced military base closures. These
are the designated LAMBRAs with their
designation dates. Note: All LAMBRAs are
repealed as of January 1, 2014.
Southern California Logistics Airport
	 Designation Date:  2/1/1996
Castle Airport
(formerly Castle Air Force Base)
	 Designation Date:  6/1/1996
Mare Island
(formerly Mare Island Naval Base)
	 Designation Date:  1/1/1999
San Bernardino International Airport
and Trade Center
	 Designation Date:  4/1/2000
Alameda Point
(formerly Alameda Naval Air Station)
	 Designation Date:  6/1/2000
Mather/McClellan
(formerly Mather Field/McClellan Park)
	 Designation Date:  7/1/2000

San Diego Naval Training Center
(formerly Liberty Station)
	 Designation Date:  6/1/2001
Tustin Legacy
(formerly Tustin Marine Corps Air Station
in Tustin)
	 Designation Date:  9/1/2001
For the most updated information regarding
the correct LAMBRA designation periods, and
for questions regarding business eligibility
or zone related information, and geographic
boundaries, contact the HCD or the local
program manager in which the business is
located. Go to hcd.ca.gov and search for
directory of zone contacts to find Directory of
Economic Development Areas.
For information that is zone-specific but not
tax-specific, you may contact the ­HCD. See
LAMBRA Contact Information on page 22.

Forms List
The titles of forms referred to in this booklet
are:
Form 100	
California Corporation Franchise
or Income Tax Return
Form 100S	 California S Corporation
Franchise or Income Tax Return
Form 100W	 California Corporation Franchise
or Income Tax Return –
Water’s-Edge Filers
Form 109	
California Exempt Organization
Business Income Tax Return
Form 540	
California Resident Income
Tax Return
Long Form 	 California Nonresident or
  540NR	
Part­‑Year Resident Income
Tax Return
Form 541	
California Fiduciary Income
Tax Return
Form 565	
Partnership Return of Income
Form 568	
Limited Liability Company
Return of Income
Schedule CA	 California Adjustments –
 (540)	
Residents
Schedule CA	 California Adjustments –
  (540NR)	
Nonresidents or Part-Year
Residents
Schedule P	 Alternative Minimum Tax and
  (540)	
Credit Limitations – Residents
Schedule P	 Alternative Minimum Tax and
  (540NR)	
Credit Limitations –
Nonresidents and Part-Year
Residents
Schedule R	 Apportionment and Allocation
of Income
FTB Pub. 1061	 Guidelines for Corporations
filing a Combined Report
Schedule C	 S Corporation Tax Credits
 (100S)
Schedule D-1	 Sales of Business Property
Schedule K-1 	 Shareholder’s Share of Income,
  (100S)	
Deductions, Credits, etc.
Schedule K-1	 Beneficiary’s Share of Income,
  (541)	
Deductions, Credits, etc.

Schedule K-1 	 Partner’s Share of Income,
  (565)	
Deductions, Credits, etc.
Schedule K-1	 Member’s Share of Income,
  (568)	
Deductions, Credits, etc.
FTB 3544	
Election to Assign Credit Within
	
Combined Reporting Group
FTB 3544A	 List of Assigned Credit
Received and/or Claimed by
Assignee

Who Can Claim the LAMBRA Tax
Incentives?
The LAMBRA credits and deductions are
available to individuals, sole proprietors,
corporations, estates, trusts, and partnerships
operating or investing in a business located
within a designated LAMBRA.

How to Claim Deductions and
Credits
To claim any LAMBRA deduction or credit,
attach a completed form FTB 3807 to your
­California tax return.
Attach a separate form FTB 3807 for each
business you operate or invest in that is
located within a LAMBRA. Also complete the
following schedule and/or worksheets to report
credits and deductions incurred:
yy Corporations: Complete Schedule Z and all
the worksheets, except for Worksheet III,
Income or Loss Apportionment - LAMBRA,
Section B.
yy Sole proprietors: Complete Schedule Z and
all the worksheets.
yy Trusts, estates, and partnerships:
Complete Worksheet IIA, Hiring Credit and
Recapture - LAMBRA, and Worksheet III,
Section A.
yy Individual investors receiving pass-through
LAMBRA credits: Complete Worksheet III,
Section B and Schedule Z. All other
investors complete Worksheet III, Section A
and Schedule Z.
yy Individual investors receiving a pass‑through
loss, and having an overall NOL: Complete
Worksheet III, Section B and Worksheet IV,
Computation of NOL Carryover and
Carryover Limitations - LAMBRA. All other
investors complete Worksheet IV.
Schedule Z is on Side 2 of form FTB 3807.
Note: There is no Worksheet I for this booklet.
Claim LAMBRA business tax incentives on the
following tax returns:
Form 540 filers: 	 Form 540, lines 43
through 45, as applicable.
Long Form 540NR 	 Long Form 540NR,
filers: 	
lines 58 through 60, as
applicable.
Form 100 filers: 	 Form 100, line 20, and
lines 24 through 26, as
applicable.
Form 100S filers:	 Form 100S, line 18, and
lines 22 through 24, as
applicable.

FTB 3807 Booklet  2018  Page 3

Form 100W filers:	 Form 100W, line 20, and
lines 24 through 26, as
applicable.
Form 109 filers:	 Check the “Yes” box for
the LAMBRA Question I
at the top of Form 109,
Side 1.
Keep all completed worksheets and supporting
documents for your records.

Form FTB 3807 – Instructions
for Items A through I
For corporations, estates, trusts, partnerships,
exempt organizations, and sole proprietors,
who operate a business in the LAMBRA,
complete items A through I.
Investors of pass-through entities, complete
items A through D.
Principal Business Activity (PBA) Codes
The PBA codes are based on the North
American Industry Classification System
(NAICS) published by the United States Office
of Management and Budget. Use the PBA and
NAICS codes in the chart listed on pages 19
through 21 to classify your business. Enter the
PBA code of the business on form FTB 3807,
Side 1.

Part I – Credits and Recapture
Line 1a – Hiring Credit
Note: All LAMBRAs are repealed as of
January 1, 2014.
For employers engaged in a trade or business
in a repealed LAMBRA, the hiring credit can
be taken for qualified employees hired on
or before December 31, 2013, for the full
60-month period of the hiring credit. The hiring
credit may not be taken for any employees
hired on or after January 1, 2014. Hiring
credits and carryovers may still be claimed to
the extent of business income apportioned to
the former repealed LAMBRA. The portion of
any credit remaining for carryover to taxable
years beginning on or after January 1, 2014,
shall be carried over only to the succeeding
10 taxable years if necessary, or until the
credit is exhausted, whichever occurs first.
Any hiring credits generated in the current
taxable year for employees hired on or before
December 31, 2013, and unusable in the
current taxable year, may be carried over to the
succeeding 10 taxable years.
Employers hiring qualified employees, were
required to obtain VoucherCert 10-07 from the
local agency responsible for verifying employee
eligibility on or before December 31, 2014.
Do not file VoucherCert 10-07 with your tax
return. Keep the voucher for your records. For
vouchering questions, go to hcd.ca.gov and
search for vouchering.
Employers conducting a trade or business
within a LAMBRA may claim the hiring credit
for hiring a qualified disadvantaged individual
or a qualified displaced employee.

Page 4  FTB 3807 Booklet  2018

Qualified Disadvantaged Individual
A qualified disadvantaged individual is an
individual who meets all of the following:
yy Was hired after the LAMBRA received its
final designation.
yy Spends at least 90% of work time for the
qualified employer on activities directly
related to the conduct of a trade or
business located within the LAMBRA.
yy Performs at least 50% of the work for the
qualified employer within the boundaries of
the LAMBRA.
yy Anyone who immediately before starting
work for the employer was any of the
following:
  1.	 A person who has been determined
eligible for services under the federal
Job Training Partnership Act (JTPA).
  2.	 A person eligible to be a voluntary
or mandatory registrant under the
Greater Avenues for Independence Act
of 1985 (GAIN).
  3.	 An economically disadvantaged
­individual 16 years of age or older.
  4.	 A qualified dislocated worker.
  5.	 An individual who is enrolled in or has
completed a state rehabilitation plan.
  6.	 A service-connected disabled veteran.
  7.	 A veteran of the Vietnam era.
  8.	 A veteran who recently separated from
military service.
  9.	 An ex-offender.
10.	 A person who is a recipient of any of
the following:
•	 Federal Supplemental Security
Income (SSI) benefits.
•	 Aid to Families with Dependent
Children (AFDC).
•	 Supplemental Nutrition Assistance
Program (SNAP).
•	 State and local general assistance.
11.	 A Native American.
Qualified Displaced Employee
A qualified displaced employee is an individual
who meets all of the following:
yy Was hired after the LAMBRA received its
final designation.
yy Spends at least 90% of work time for the
qualified employer on activities directly
related to the conduct of a trade or
business located within the LAMBRA.
yy Performs at least 50% of the work for the
qualified employer within the boundaries of
the LAMBRA.
yy Is a civilian or military employee of a base
or former base who has been displaced as a
result of a federal base closure act.
For more information, refer to the federal JTPA
or its successor, the Workforce Investment
Act (WIA).
The percentage of wages used to compute
the credit depends on the number of years
the employee works for the employer in
the LAMBRA. The applicable percentage
begins at 50% and declines 10% for each
year of employment. After the fifth year of
employment, no credit can be generated.

Qualified Wages
Qualified wages means the wages paid or
incurred by the employer during the taxable
year to a qualified disadvantaged individual
or a qualified displaced employee that does
not exceed 150% of the minimum wage. The
wages must be paid or incurred on or after the
designation date.
Wages that qualify for the hiring credit are
those wages paid to a qualified employee
for the consecutive 60-month period
beginning on the first date the employee
commenced employment with the employer.
For this purpose, commencement of
employment or the hire date is the first day of
employment for which the individual receives
wages/compensation. For an employer
that operates a business that has regularly
occurring seasonal or intermittent employment
decreases and increases, ­reemployment of
an individual is not a new hire; rather, it is a
continuation of the prior employment and does
not constitute commencement of employment
for the qualified wages test. Qualified wages
are the smaller of the following:
yy The actual hourly rate paid or incurred by
the employer for work performed by the
employee during the taxable year.
yy 150% of the minimum hourly
wage established by the Industrial
Welfare Commission.
Where the ­California minimum wage is higher
than the federal minimum wage, the ­California
minimum wage is used for purposes of
computing the LAMBRA hiring credit.
For any employer who employs 25 or fewer
employees, the California minimum wage
is $10.50 per hour from January 1, 2018
through December 31, 2018. For purposes
of computing the EZ hiring credit, 150% of
the minimum wage is $15.75 per hour. For
more information in regard to the California
minimum wage, see General Information.
For the example below, the minimum wage
prior to July 1, 2014, was $8.00 per hour. For
purposes of computing the LAMBRA hiring
credit, 150% of the minimum wage was
$12.00 per hour.
Example:
John Anderson was hired on January 1, 2013.
John’s hourly rate for the first month was the
minimum wage $8.00. At the beginning of
the second month, his hourly rate increased
to $8.50. In the third month, John’s hourly
rate increased to $12.50. The hourly rate that
qualifies for the credit is limited to 150%
of the minimum wage, or $12.00 per hour.
The amount of qualified wages is computed
as follows:
Month(s)

1
2
3

Hours x
per month
175
170
170

Hourly = Qualified wages
rate
per month
allowed
$	8.00
$1,400.00
8.50
$1,445.00
12.00
$2,040.00

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

Line 1b – Hiring Credit Recapture
Employers recapture (add back to the tax
liability) the amount of credit attributable
to an employee’s wages if you terminate an
employee at any time during the longer of the
following:
yy The first 270 days of employment (whether
or not consecutive).
yy 90 days of employment plus 270
calendar days.
Employers of seasonal employees, recapture
the amount of hiring credit attributable
to the employee’s wages if both of the
following apply:
yy The employer terminates the employee
before the completion of 270 days
of employment.
yy The 270 days is during the 60-month
period beginning the day the employee
commences employment with
the employer.
A “day of employment” means any day the
employee receives wage compensation
(including a paid sick day, holiday, or
vacation day).
Employers add to the current year’s tax
the amount of credit claimed in the year
of termination and all prior years in which
the credit was claimed for the terminated
­employee.
The credit recapture does not apply if the
termination of employment was any of the
following:
yy Voluntary on the part of the employee.
yy In response to misconduct of the ­employee.
yy Caused by the employee becoming disabled
(unless the employee was able to return
to work and the employer did not offer to
re-employ the individual).
yy Carried out so that other qualified
individuals could be hired, creating a net
increase in both the number of qualified
employees and the number of hours
worked.
yy Due to a substantial reduction in the
employer’s trade or business operations.

Instructions for
Worksheet IIA – Hiring Credit
and Recapture
Section A – Credit Computation
Line 1, column (a) – Enter the name of
each qualified employee. Attach additional
schedule(s) if necessary.
Line 1, column (b) through column (f) – Enter
in the appropriate column, the qualified wages
paid or incurred during the taxable year to each
qualified employee listed in column (a).
Line 2, column (b) through column (f) – Add
the amount of qualified wages in each column.
Line 3, column (b) through column (f) –
Multiply the total in each column of line 2 by
the percentage in each column.
Line 5 – If you can claim the federal jobs
tax credit from the Work Opportunity Tax
Credit (WOTC) on your 2018 federal tax
return then reduce the LAMBRA hiring credit
by that amount. The reduction applies for
those employees who are hired on or after
January 1, 2010, and before August 31, 2011,
(excluding unemployed veterans and
disconnected youths as described in IRC
Section 51(d)(14)).
No other C
­ alifornia jobs tax credit may be
claimed for the same wage expense paid to the
employees shown in line 1, column (a).
Line 6 – For partnerships, enter the amount
from line 6 on form FTB 3807, Side 1, Part I,
line 1a. Also, include the current year hiring
credit amount on Forms 565 and 568,
Schedule K, line 15f and the distributive share
of the credit to partners and members on
Schedule K-1, line 15f. In addition, add the
entire amount of the credit on Schedule K,
line 1, column (c).
For corporations, individuals, estates, and
trusts, enter the amount from line 6 on
Schedule Z, as follows:
yy Part II, line 8B, column (b) for corporations,
individuals, estates, and trusts.
yy Part III, line 10, column (b) for
S corporations.
yy Part IV, line 12, column (b) for corporations
and S corporations subject to paying only
the minimum franchise tax.
Important: Affiliated corporations that received
credits assigned under R&TC Section 23663,
do not enter the assigned credits received on
this worksheet. Those credits are entered and
tracked on form FTB 3544A.
Credit Limitations
yy The cumulative qualified wages used
to compute the credit cannot exceed
$2,000,000. The limit applies for each
taxable year, regardless of the number
of qualified disadvantaged individuals
employed.
yy The amount of hiring credit claimed
may not exceed the amount of tax on
LAMBRA business income in any year. Use
Schedule Z to compute the credit limitation.

yy The portion of any credit remaining for
carryover to taxable years beginning on or
after January 1, 2014, shall be carried over
only to the succeeding 10 taxable years if
necessary, or until the credit is exhausted,
whichever occurs first.
yy Businesses reduce any deduction for wages
by the amount of this credit.
yy In the case where the business is qualified
to take the LAMBRA hiring credit as well as
another credit (e.g., EZ, MEA, or TTA hiring
credit) for the same wage expense, the
business may only claim one credit.
yy S corporations may claim only 1/3 of
the LAMBRA hiring credit against the
1.5% entity-level tax (3.5% for financial
S corporations.) S corporations can
pass through 100% of the credit to their
shareholders. S corporations reduce their
wage deduction by 1/3 of the amount
on Worksheet IIA, Section A, line 6 and
on Form 100S, line 7. In addition, the
S corporation must make an adjustment
for the entire amount of the credit on
Schedule K (100S), line 1, column (c).
Example: In 2018, an S corporation
qualified for a $3,000 LAMBRA hiring
credit. The S corporation can claim a credit
for $1,000 and reduce its wage deduction
by $1,000 ($3,000 X 1/3) on Form 100S,
line 7. On Form 100S, Schedule K, line 1,
column (c), the S corporation would add
$3,000 to the S corporation’s ordinary
income or loss to reflect the credit passed
through to the shareholder(s).
For additional information about the
treatment of credits for S corporations, see
instructions for Schedule Z.

Section B – Credit Recapture
Line 1, column (a) – Enter the name of
the terminated employee. Attach additional
schedule(s) if necessary.
Line 1, column (b) – Enter the amount of
credit recapture for each employee listed in
column (a).
Line 2 – Enter the amount from line 2,
column (b) on form FTB 3807, Side 1, Part I,
line 1b.
Also include the amount of hiring credit
recapture on your ­California tax return or
schedule as follows:
yy Form 100, Schedule J, line 5.
yy Form 100S, Schedule J, line 5 and
Schedule K-1 (100S), line 17d.
yy Form 100W, Schedule J, line 5.
yy Form 109, Schedule K, line 4.
yy Form 540, line 63.
yy Long Form 540NR, line 73.
yy Form 541, line 37 and
Schedule K-1 (541), line 14d.
yy Form 565, Schedule K, line 20c and
Schedule ­K-1 (565), line 20c.
yy Form 568, Schedule K, line 20c and
Schedule K-1 (568), line 20c.

FTB 3807 Booklet  2018  Page 5

Indicate that you included the hiring credit
recapture on your tax return by writing
“FTB 3807” in the space provided on the
schedule or form.
Partnerships identify the recapture amounts for
their partners and members on Schedule K-1
(565 or 568).
S corporation shareholders recapture the
portion of the credit that was previously
claimed, based on the terminated employee’s
wages. Also identify the recapture amount
for shareholders on Schedule K-1 (100S).
This amount will differ from the amount
recaptured by the S corporation on Form 100S,
Schedule J.

FTB 3807, Part I, Line 1c – Sales
or Use Tax Credit Carryover
All LAMBRAs are repealed as of
January 1, 2014. For taxable years beginning
on or after January 1, 2014, taxpayers cannot
generate any sales or use tax credit.
Credit Limitations
yy A sales or use tax credit carryover may be
claimed to the extent of business income
apportioned to the former LAMBRA. Use
Schedule Z to compute the credit limitation.
yy The portion of any credit remaining for
carryover to taxable years beginning on or
after January 1, 2014, shall be carried over
only to the succeeding 10 taxable years if
necessary, or until the credit is exhausted,
whichever occurs first.

For information about the treatment of credits
for S corporations, see instructions for
Schedule Z inside this booklet.

Part II – Portion of Business
Attributable to the LAMBRA
LAMBRA business tax credits are limited to
the tax on business income attributable to
operations within the LAMBRA. LAMBRA
deductions are limited to the business income
attributable to operations within the LAMBRA.
If the business is located within and outside
a LAMBRA or in more than one LAMBRA,
determine the portion of total business
operations that are attributable to each
LAMBRA. If a taxpayer conducts businesses
in more than one LAMBRA, the LAMBRA
apportionment factor and credit limitations are
computed separately for each LAMBRA.

Business Income vs.
Nonbusiness Income
Business income is defined as income arising
from transactions and activities in the regular
course of the trade or business. Business
income includes income from tangible
and intangible property if the acquisition,
management, and disposition of the property
constitute integral parts of the taxpayer’s
regular trade or business operations.
Nonbusiness income is all income other

than business income. See Cal. Code Regs.,
tit. 18 section 25120 for further references and
examples of nonbusiness income.
For corporations and entities doing
business in and outside of the LAMBRA,
use Worksheet III, Section A to determine the
LAMBRA apportionment factor to determine
the amount of business income attributable to
the LAMBRA.
Pass-through entities report to their
shareholders, beneficiaries, partners, and
members the following items:
1.	 The distributive (or pro-rata for
S corporations) share of the business
income apportioned to the LAMBRA.
2.	 The distributive (or pro-rata for
S corporations) share of the business
capital gains and losses apportioned to the
LAMBRA included in item 1.
3.	 The distributive (or pro-rata for
S corporation) share of the LAMBRA
property and payroll to corporate partners,
members, shareholders, beneficiaries.
Report these items as other information on
Schedule K-1 (100S, 541, 565 or 568.)
For an individual, use Worksheet III, Section B
to determine business income attributable
to the LAMBRA. Business income includes
but is not limited to California business
income or loss from federal Form 1040
(Schedule C, Profit or Loss from Business
(Sole Proprietorship); Schedule C-EZ, Net

 Worksheet IIA  Hiring Credit and Recapture – LAMBRA
Section A  Credit Computation. You cannot take the LAMBRA hiring credit and another credit for the same wage expense.
	
Qualified wages paid or incurred for year of employment
	(a) 	
(b) 	
(c) 	
(d) 	
(e) 	
	
Employee’s name	
1st year	
2nd year	
3rd year	
4th year	

(f)
5th year	

1	 												
	

												

	

												

	

												

	 												
2	 Total. See instructions  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 										
3	 Multiply line 2 by the percentage in each .  .  .  . 	 	.50		.40		.30		.20		.10	
	 column. See instructions  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 										
4	 Add the amounts on line 3, column (b) through column (f) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 4			
5	 Enter the amount of 2018 federal jobs tax credit allowed. See instructions .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 5			
6	 Subtract the amount on line 5 from the amount on line 4 and enter the result here. See instructions .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 6			
Section B  Credit Recapture
		
(a) 	
(b)
	
Terminated employee’s name	
Recapture amount
1	 	
2	 Total amount of credit recapture. Add the amounts in column (b). See instructions for
where to report on your California tax return .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 2		

Page 6  FTB 3807 Booklet  2018

Profit from Business; Schedule D, Capital
Gains and Losses; Schedule E, Supplemental
Income and Loss; Schedule F, Profit or
Loss from Farming) and California Schedule
D-1, Sales of Business Property or federal
Form 4797, Sales of Business Property, if
California Schedule D-1 is not needed, as well
as wages. Be sure to include casualty losses,
disaster losses, and any business deductions
reported on federal Form 1040, Schedule A,
Itemized Deductions.
Generally, all income which arises from the
conduct of trade or business operations of a
taxpayer is business income.
If you elected to claim part or all of your
current year disaster loss under IRC
Section 165(i)(1) on prior year's tax return,
do not include the amount of the loss that was
claimed in your current year business income
from the LAMBRA.

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

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

Example: Computation of LAMBRA business
income apportioned to each entity operating
within the LAMBRA
Parent Corporation A has two subsidiaries,
B and C. Corporations A and B operate within
the LAMBRA. The combined group operates
within and outside California and apportions its
income to California using Schedule R. Assume
the combined group’s business income
apportioned to California was $1,000,000 and
Corporation A’s and B’s share of California
business income is $228,000 and $250,000,
respectively. Corporation A’s and B’s separate
LAMBRA and separate California property and
payroll factor amounts are shown below.
Business income apportioned to the LAMBRA
was determined as follows:
	
A	B
Property Factor
LAMBRA property	
$1,000,000	 $  800,000
California property	
$1,000,000	 $1,200,000
  Apportionment %	
100%	66.66%
Payroll Factor
LAMBRA payroll	
$  800,000	 $  800,000
California payroll	
$  800,000	 $1,000,000
  Apportionment %	 100%	80%
Average
Apportionment %	
100%	73.33%
(Property + Payroll Factors)
     2
Apportioned
Business Income	
$  228,000	 $  250,000
LAMBRA business
Income	
$   228,000	 $  183,325
(Average Apportionment %
X California Business Income)

Instructions for Worksheet III –
Income or Loss Apportionment
If the business operates solely within a single
LAMBRA and all its property and payroll are
solely within that single LAMBRA, enter 100%
(1.00) on Section A, line 4, column (c). Do not
complete the rest of Worksheet III.

Section A – Income Apportionment
Use Worksheet III, Section A, to determine
the amount of business income apportioned
to the LAMBRA. The apportioned LAMBRA
business income determines the amount of the
tax incentives that can be used. A taxpayer’s
LAMBRA business income is its California
business income multiplied by the specific
LAMBRA apportionment percentage computed
in Worksheet III, Section A.
Property Factor
When determining the income apportioned to
the LAMBRA, the numerator of the property
factor is the average value of the real and
tangible personal property owned or rented
by the business and used within the LAMBRA
during the taxable year to produce LAMBRA
business income. See Worksheet III, Section A,
column (b). The denominator of the property
factor is the total average value of all the
taxpayer’s real and tangible personal property

FTB 3807 Booklet  2018  Page 7

owned or rented and used during the taxable
year within California. See Worksheet III,
Section A, column (a).
Payroll Factor
When determining income apportioned to the
LAMBRA, the numerator of the payroll factor
is the taxpayer’s total compensation paid to
the employees for working within the LAMBRA
during the taxable year. See Worksheet III,
Section A, column (b). The denominator
of the payroll factor is the taxpayer’s total
compensation paid to employees working
in California. See Worksheet III, Section A,
column (a).

business tax incentives, see the example
below for computing business income in the
LAMBRA.
Example:

Section B – Income or Loss
Apportionment

Part III – Taxpayer’s Trade or
Business

Form 540 and Form 540NR filers, use
Worksheet III, Section B to determine the
amount to enter on the following:
yy Worksheet IV, line 1 and line 6
yy Schedule Z, Part I, line 1 and line 3
Do not include disaster losses in any amounts
used in the table.
Only California source business income is
apportioned to the LAMBRA. A taxpayer’s
LAMBRA business income is its California
apportioned business income computed using
Schedule R, multiplied by the specific LAMBRA
apportionment percentage computed using
Worksheet III, Section A.
The first step is to determine which portion
of the taxpayer’s net income is “business
income” and which portion is “nonbusiness
income.” Only business income is apportioned
to the LAMBRA. See Part II, Portion of
Business Attributable to the LAMBRA, for
a complete discussion of business and
nonbusiness income.

Business Income or Loss
Use business income or loss from federal
Form 1040 Schedules C, C-EZ, E, and F, plus
California adjustments from Schedule CA
(540 or 540NR) for each trade or business.
Also include business capital gains and losses
from California Schedule D and business gains
and losses from Schedule D-1 (or federal
Form 4797, if California Schedule D-1 is not
needed) as adjusted on Schedule CA (540 or
540NR).

Part I – Individual Income and
Expense Items
Wages
Taxpayers with wages from a company located
within and outside a LAMBRA must determine
the LAMBRA wage income by entering the
percentage of time that they worked within
the LAMBRA in column (b). The percentage of
time should be for the same period the wages
entered on line 1 were earned. This percentage
must be determined based on their record of
time and events such as a travel log or entries
in a daily planner.

Part II – Pass-Through Income or
Loss
Individuals with a Schedule K-1
The individual partner, member, or shareholder
completes Worksheet III, Section B, Part II, and
Schedule Z.
Multiple Pass-Through Entities
If you are a shareholder, beneficiary, partner,
or member in multiple pass-through entities
with businesses located within and outside a
LAMBRA from which you received LAMBRA

Page 8  FTB 3807 Booklet  2018

	
	
	
	
 Pass-through	
  entity	
ABC, Inc.	
A, B, & C	
ABC, LLC	

Trade or
business
income from
Schedule K-1	 Entity’s LAMBRA	 LAMBRA
(100S, 541,	 apportionment	 apportioned
565, or 568)	
percentage	
income
$40,000	
30,000	
10,000	

80%	
$32,000
10%	   3,000
50%	
5,000

Total	$40,000

Income Computation
Located Entirely Within the LAMBRA
Line 6 – Line 9: If your business operation
reported on federal Form 1040 Schedule C,
C-EZ, E, F, or other schedule is entirely within
the LAMBRA, enter the income or loss from
this activity in column (a), and enter 1.00 in
column (b).
Line 11 and Line 12: If the gain or loss
reported on Schedule D or Schedule D-1 as
adjusted on Schedule CA (540 or 540NR)
was attributed to an asset used in an activity
conducted entirely within the LAMBRA, enter
the gain or loss reported in column (a) and
enter 1.00 in column (b).
Located Entirely Within California
Line 6 – Line 9: If your business operation
reported on federal Form 1040 Schedule C,
C-EZ, E, F, or other schedule is entirely within
California, enter the income or loss from
this activity in column (a). To determine the
apportionment percentage in column (b),
complete Worksheet III, Section A. Enter the
percentage from Worksheet III, Section A,
line 4, column (c) on Worksheet III, Section B,
column (b).
Line 11 and Line 12: If the gain or loss
reported on Schedule D or Schedule D-1 as
adjusted on Schedule CA (540 or 540NR)
was attributed to an asset used in an activity
conducted entirely within California, enter
the gain or loss reported in column (a). To
determine the apportionment percentage in
column (b), complete Worksheet III, Section A.
Enter the percentage from Worksheet III,
Section A, line 4, column (c) on Worksheet III,
Section B, column (b).

Located Within and Outside the LAMBRA and
California
Line 6 – Line 9: If your business operation
reported on federal Form 1040 Schedule C,
C-EZ, E, F, or other schedule is within and
outside the LAMBRA and California, get
Schedule R and complete line 1 through
line 18b and line 28 through line 31. Enter the
amount from Schedule R, line 18b and line 31
in column (a) of this worksheet. To determine
the apportionment percentage in column (b),
complete Worksheet III, Section A. Enter the
percentage from Worksheet III, Section A,
line 4, column (c) on Worksheet III, Section B,
column (b).
When computing Schedule R, disregard any
reference to Forms 100, 100S, 100W, 100X,
565, or 568. Also disregard any reference to
Schedules R-3, Net Income (Loss) from the
Rental of Nonbusiness Property; R-4, Gain
(Loss) from the Sale of Nonbusiness Assets; or
R-5, Computation of Interest Offset.
Nonresidents who have an apportioning
business that operates within the LAMBRA
should have already computed Schedule R, and
can use those amounts when that schedule
is referenced.
Residents complete a Schedule R in order to
determine their California source business
income for purposes of the LAMBRA
credit computation.
Line 11 and Line 12: If the gain or loss
reported on Schedule D or Schedule D-1 as
adjusted on Schedule CA (540 or 540NR)
was attributed to an asset used in an activity
conducted within and outside a LAMBRA
and California, get Schedule R and complete
Schedule R-1, Apportionment Formula.
Multiply the gain or loss reported by the
percentage on Schedule R-1, Part A, line 2 or
Part B, line 5 and enter the result in column (a).
To determine the apportionment percentage in
column (b), complete Worksheet III, Section A.
Enter the percentage from Worksheet III,
Section A, line 4, column (c) on Worksheet III,
Section B, column (b).
Line 14: If you are computing the LAMBRA
business income and the result on
Worksheet III, Section B, line 14, column (c) is
a positive amount and:
yy You have LAMBRA NOL carryovers, enter
the amount on Worksheet IV, line 1 and
line 6 (skip line 2 through line 5).
yy You have LAMBRA credits or credit
carryovers, enter the amount on
Schedule Z, Part 1, line 1 and line 3 (skip
line 2).
If the amount is negative, you do not have any
business income attributable to the LAMBRA
and you cannot utilize any LAMBRA NOL
carryover, credit(s), or credit carryover(s) in
the current taxable year.

Part III – Net Operating Loss
(NOL) Carryover and Deduction
All LAMBRAs are repealed as of
January 1, 2014. Taxpayers can no longer
generate a LAMBRA NOL beginning on or after
January 1, 2014. However, taxpayers can claim
an NOL carryover deduction from prior years.
A business that operates or invests within a
LAMBRA that generated an NOL in a taxable
year beginning before January 1, 2008, can
carry the NOL forward 15 years. For NOLs
incurred in taxable years beginning on or
after January 1, 2008, California has extended
the NOL carryover period to 20 taxable years
following the year of the loss.
Financial institutions using the bad debt
reserve method may carryover the loss for a
maximum of five taxable years. In addition, up
to 100% of the NOL generated in a LAMBRA
can be carried forward.
For taxable years beginning in 2010 and
2011, California suspended the NOL carryover
deduction. Taxpayers continued to compute
and carryover NOLs during the suspension
period. However, corporations with net income
after state adjustments (pre-apportioned

income) or individuals with modified adjusted
gross income of less than $300,000, or with
disaster loss carryovers were not affected by
the NOL suspension rules.
If corporations are required to be included
in a combined report, the 2010 and 2011
NOL limitation amount of $300,000 or
more shall apply to the aggregate amount
of pre‑apportioned income for all members
included in the combined report.
Corporations use Form 100 or Form 100W,
line 17, or Form 100S, line 14 less line 16, to
determine net income after state adjustments
(pre-apportioned income).
Individuals use the amount shown on your
federal tax return for the same taxable year
without regard to the federal NOL deduction
(Form 540/540NR, line 13, plus the federal
NOL deduction listed on Schedule CA
(540/540NR) column C, line 21c).
For taxable years beginning in 2008 and
2009, California suspended the NOL carryover
deduction. Taxpayers continued to compute
and carryover NOL during the suspension
period. However, corporations with taxable
income or individuals with net business
income of less than $500,000 or with disaster

loss carryovers were not affected by the NOL
suspension rules.
The carryover periods for any NOL or NOL
carryover, for which a deduction is disallowed
because of the 2008 – 2011 suspensions, are
extended by:
yy One year for losses incurred in taxable years
beginning on or after January 1, 2010, and
before January 1, 2011.
yy Two years for losses incurred in taxable
years beginning before January 1, 2010.
yy Three years for losses incurred in taxable
years beginning before January 1, 2009.
yy Four years for losses incurred in taxable
years beginning before January 1, 2008.
For more information, get form FTB 3805Q, Net
Operating Loss (NOL) Computation and NOL
and Disaster Loss Limitations (Corporations),
or form FTB 3805V, Net Operating Loss (NOL)
Computation and NOL and Disaster Loss
Limitations (Individuals).
For taxable years beginning in 2002 and 2003,
California suspended the NOL carryover
deduction. Taxpayers continued to carryover
an NOL during the suspension period. The
carryover period for suspended losses was
extended by two years for losses incurred

 Worksheet III  Income or Loss Apportionment –­­ LAMBRA
Section A – Income Apportionment
Use Worksheet III, Section A, if your business has net	
income from sources within and outside a LAMBRA.	
		

(a)	
Total within	
California	

(b)	
Total within	
a LAMBRA	

(c)
Percentage within a LAMBRA
column (b) ÷ column (a)

PROPERTY FACTOR
1	 Average yearly value of owned real and tangible
personal property used in the business (at original
cost). See instructions. Exclude property not connected
with the business and the value of construction in
progress.
	Inventory  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 				
	Buildings .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 				
	 Machinery and equipment  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 				
	 Furniture and fixtures .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 				
	 Delivery equipment .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 				
	Land .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 				
	 Other tangible assets (attach schedule) .  .  .  .  .  .  .  .  .  .  .  .  . 	 				
	 Rented property used in the business. See instructions. 	 						
	 Total property values  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 							
PAYROLL FACTOR
2	 Employees’ wages, salaries, commissions, and other
compensation related to business income included in
the return.
	 Total payroll  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 							
3	 Total percentage, sum of the percentages in column (c) 							
4	 Average apportionment percentage (1/2 of line 3).
	 Enter here and on form FTB 3807, Side 1, line 2  .  .  .  .  .  . 							
The average apportionment percentage shown on line 4 represents the portion of the taxpayer’s total business that is attributable to activities conducted
within the LAMBRA. Factors with zero balances in the totals of column (a) will not be included in the computation of the average apportionment
percentage. For example, if the taxpayer does not have any payroll within or outside the LAMBRA, the average a­ pportionment percentage would be
computed by dividing line 3 by one instead of by two as normally instructed.

FTB 3807 Booklet  2018  Page 9

before January 1, 2002, and by one year for
losses incurred on or after January 1, 2002,
and before January 1, 2003. The deduction for
disaster losses was not affected by the NOL
suspension rules.
The business cannot generate NOLs from
activities within the LAMBRA area before the
first taxable year beginning on or after the date
the LAMBRA is officially designated.
Limitation
A LAMBRA NOL carryover deduction can offset
only business income attributable to operations
within the LAMBRA.
Election
If you elected and designated the carryover
category (general or specific, EZ, or LAMBRA
NOL) on the original tax return for the year of a
loss, file form FTB 3807 for each year in which
a LAMBRA NOL deduction is being taken. The
election is irrevocable.

If you elected the LAMBRA NOL deduction,
you are prohibited by law from carrying over
any other type of NOL, relating to LAMBRA
activities, from this year.
Alternative Minimum Tax
Taxpayers claiming a LAMBRA NOL carryover
deduction, determine your NOL for alternative
minimum tax (AMT) purposes. Use Schedule P
(100, 100W, 540, 540NR, or 541) to compute
the NOL for AMT purposes.
S Corporations
LAMBRA NOLs incurred prior to
becoming an S corporation cannot be
used against S corporation income.
See IRC Section 1371(b).
However, an S corporation is allowed to deduct
a LAMBRA NOL incurred after the S election
is made. An S corporation may use the NOL
carryover as a deduction against income

subject to the 1.5% entity-level tax (3.5% for
financial S corporations). The expenses (and
income) giving rise to the loss are also passed
through to the shareholders in the year the loss
is incurred.
Combined Report
Corporations that are members of
a unitary group filing a combined report,
separately compute the loss carryover
for each corporation in the group (R&TC
Section 25108) using their individual
apportionment factors. Unlike the NOL
treatment on a federal consolidated tax return,
a loss carryover for one member included
in a combined report may not be applied to
the intrastate apportioned income of another
member included in a combined report.

 Worksheet III  Income or Loss Apportionment – LAMBRA (continued)
Section B  Income or Loss Apportionment
Part I  Individual Income and Expense Items. See instructions.
		
	(a)	
(b)	
			
Amount	
Percentage of time providing services	
				
in the LAMBRA	

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

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

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

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

		
	(a)	
			
Business income or loss	
				

(b)	
Apportionment percentage	
for the LAMBRA	

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

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

(b)	
Apportionment percentage	
for the LAMBRA	

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

11	 Schedule D .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 										
12	 Schedule D-1 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 										
13	 Total. Add line 11, column (c) and line 12, column (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	 	
14	 Total. Add line 3, line 10, and line 13, column (c), and line 5, column (b) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 	 	

Page 10  FTB 3807 Booklet  2018

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

Instructions for Worksheet IV –
Computation of NOL Carryover
and Carryover Limitations
Individuals, exempt trusts, and corporations
with current year income and prior
year LAMBRA NOL carryover complete
Worksheet IV.
A LAMBRA NOL carryover deduction can offset
only business income attributable to operations
within the LAMBRA. Use this worksheet
to compute the LAMBRA NOL carryover
deduction for individuals, exempt trusts, and
corporations.
Line 1 – See Part II for a complete discussion
of business and nonbusiness income.
Form 540 and Form 540NR filers:
Be sure to include casualty losses, disaster
losses, and any business deductions reported
on Schedule A as itemized deductions.
Exception: If you elected to claim part or all
of your current year disaster loss under IRC
Section 165(i)(1) on prior year's return, do not
include the amount of loss that was claimed
in your current year business income for the
LAMBRA.
Line 2 – In modifying your income, deduct
your capital losses only up to your capital
gains. Enter as a positive number any net
capital losses included in line 1.
Line 3 – Corporations reduce income by the
disaster loss deduction and the deduction for
excess net passive income.
Line 6 – This is your modified taxable
income (MTI). Reduce this amount by your
LAMBRA NOL carryover deduction. The
LAMBRA NOL carryover deduction may not
be larger than your MTI. If your MTI is a loss
in the current year or if it limits the amount of
NOL you may use this year, carry over the NOL
to future years.
Line 7 – Enter the amount from line 6 in line 7,
column (d). If this amount is zero or negative,
transfer the amounts from line 8b through 8q,
column (b) to column (e). Go to line 9.
Line 8a through 8q: Enter the amounts on
line 8a through line 8q as positive numbers.
In column (c), enter the smaller of the amount
in column (b) or the amount in column (d)
from the previous line.

In column (d), enter the result of subtracting
column (c) from the balance on the previous
line in column (d).
In column (e), enter the result of subtracting
the amount in column (c) from the amount in
column (b), as applicable.
Example:
(b)
Carryover
from prior
year
$ 500

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

Line 9 – Total the amounts in column (b) and
column (e). Enter the totals from column (b)
and column (e) on form FTB 3807, Side 1,
line 3a and line 3c, accordingly.
Your LAMBRA NOL carryover deduction
for 2018 is the total of column (c). Enter
this amount on your California tax return or
schedule as follows:
yy Form 100, line 20
yy Form 100S, line 18
yy Form 100W, line 20
yy Form 109, line 6
yy Schedule CA (540), line 21e, column B
yy Schedule CA (540NR), line 21e, column B

Schedule Z – Computation of
Credit Limitations
Credit Limitations
The amount of credit you can claim on your
California tax return is limited by the amount
of tax attributable to LAMBRA business
income. The amount of tax attributable to the
LAMBRA business income is computed in this
schedule. For corporations and other entities
doing business in the LAMBRA, the LAMBRA
business income is computed in this schedule
using the LAMBRA apportionment factor
formula computed on Worksheet III, Section A.
For individuals, the LAMBRA business income
is computed on Worksheet III, Sections B.
Use Schedule Z on form FTB 3807, Side 2 to
compute this limitation.
Assignment of Credit
Credit earned by members of a combined
reporting group may be assigned to an
affiliated corporation that is an eligible member
of the same combined reporting group. A
credit assigned may only be claimed by the
affiliated corporation against its tax liabilities.
The eligible assignee shall be treated as if it
originally generated the assigned credit. Any
credit limitations or restrictions that applied
to the assignor will also apply to the eligible
assignee. The amount of LAMBRA credits
you may claim on your California tax return
is limited to the tax attributable to a specific
LAMBRA. For zone credits assigned, the
assignee must have a tax liability as a result
of income generated in the same zone that the
original credit was generated.

Other Limitations
If a taxpayer owns an interest in a disregarded
business entity, the amount of the credit that
can be utilized is limited to the difference
between the taxpayer’s regular tax computed
with the income of the disregarded entity,
and the taxpayer’s regular tax computed
without the income of the disregarded entity.
Partnerships allocate the credit among the
partners according to the partner’s distributive
share as determined in a written partnership
agreement. See R&TC Section 17039(e)(2).
Credits you are otherwise eligible to claim
may be limited. Do not apply credits against
the minimum franchise tax (corporations and
S corporations), the annual tax (partnerships,
LLCs classified as partnerships, and QSub), the
alternative minimum tax (corporations, exempt
organizations, individuals, and fiduciaries), the
built-in gains tax (S corporations), or the excess
net passive income tax (S corporations).
Refer to the credit instructions in your tax
booklet for more information.
S Corporations and the Application of
LAMBRA Credits
An S corporation may use its LAMBRA
credits to reduce LAMBRA business tax both
at the corporate and shareholder levels. An
S corporation may use 1/3 of the LAMBRA
credits to reduce the tax on the S corporation’s
LAMBRA business income. In addition,
S corporation shareholders may claim their
pro‑rata share of the entire amount of the
LAMBRA credits computed under the Personal
Income Tax Law.
Example: In 2018, an S corporation qualified
for a $3,000 LAMBRA hiring credit. The
S corporation will be able