The FTB will be hosting an interested parties meeting on April 3, 2009 to discuss new provisions introduced in AB 1452 and SBx1 28 regarding the assignment of tax credits between unitary affiliates. Details can be found here on FTB’s website.
They have released a draft tax Form 3544, with instructions, for public comment. The following is from section C of the instructions:
The eligible assignee shall be treated as if it originally earned the assigned credit. Any limitations or restrictions that applied to the assignor will also apply to the eligible assignee. The assignor shall disclose the existence and nature of any limitations on the assigned credits to the eligible assignee and to the FTB. Such limitations may include, but are not limited to: limitations imposed on the credit to certain types of income, such as income from one of the California Enterprise Zones; limitations imposed by California’s incorporation of IRC Section 383; or limitations on the number of years the assigned credits may be carried forward. In addition to the requirement to separately list credits earned in separate taxable years, the assignor must also separately list credits which are subject to separate and distinct limitations and disclose each of those separate and distinct limitations in a statement to be attached to this form.
For example, a taxpayer has MIC credits that were earned from assets placed in service prior to January 1, 2004. Those credits have not been used and were carried forward and assigned in the 2009 taxable year. Those credits would expire in the 2011 taxable year, based on the original date that the taxpayer originally earned the credit. The credits would expire for the assignee in 2011, unless the carryover period was extended.
In addition, the use of the EZ credits is limited to the tax that is the result of income from the zone in which the credit was earned. This rule applies to the assignee as well. For zone credits assigned, the assignee must have a tax liability as a result of income generated in the same zone that the original credit was generated. For example, if the original credit was generated in the Fresno enterprise zone of the assignor, then the assignee must have a tax liability that was the result of income from Fresno enterprise zone.
In addition, when a corporation has a “ownership change” as defined in IRC Section 382, tax credits may be subject to a limitation imposed under IRC Section 383. In such situations, the annual use of credits is limited to an amount determined under IRC Section 383.