Tax Rate Increase
For taxable years beginning on or after January 1, 2012, the maximum personal income tax rate is 12.3 percent.
Standard Deductions
The standard deduction amount for single or separate taxpayers increased from $3,769 to $3,841 for tax year 2012. For joint, surviving spouse/RDP, or head of household taxpayers, the standard deduction increased from $7,538 to $7,682 for tax year 2012.
Personal Exemptions
The personal exemption amount for single, separate, and head of household taxpayers increased from $102 to $104 for the 2012 tax year. For joint or surviving spouse/RDP, the personal exemption credit increased from $204 to $208.
Dependent Exemptions Credit
The dependent exemption credit increased from $315 per dependent claimed in 2011 to $321 each for 2012.
Voluntary Contributions
Personal income taxpayers may contribute to the following four new funds:
California YMCA Youth and Government Fund
California Youth Leadership Fund
School Supplies for Homeless Children Fund
State Parks Protection Fund/Parks Pass Purchase
Net Operating Loss
For taxable years beginning on or after January 1, 2012, California reinstated the net operating loss (NOL) carryover deduction. For more information, see form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations — Individuals, Estates, and Trusts or form FTB 3805Q, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations – Corporations.
Donated Fresh Fruits or Vegetables Credit
For taxable years beginning on or after January 1, 2012, and before January 1, 2017, qualified taxpayers who donate fresh fruits or fresh vegetables to a California food bank may receive a credit equal to 10 percent of the donation’s costs. For more information, see FTB 3811, Donated Fresh Fruits or Vegetables Credit, or go to ftb.ca.gov and search for credit for fresh fruits.
Community Development Financial Institutions Investment Credit
The Community Development Financial Institutions Investment Credit has been extended for taxable years beginning on or after January 1, 2012, and before January 1, 2017.
Redesign of FTB 3540, Credit Carryover and Recapture Summary
A credit recapture section was added to recapture the Employer Childcare Program Credit and the Farm Worker Housing Credit.
Repealed Credits
For taxable years beginning on or after January 1, 2012, the Employer Childcare Program Credit (Code 189) and the Employer Childcare Contribution Credit (Code 190) were repealed and form FTB 3501, Employer Childcare Program/Contribution Credit, became obsolete. Use form FTB 3540 to claim the unused credit carryover of these credits.
Instructions for FTB 3834, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts
We updated form FTB 3834 to provide a column for the filing year. The cumulative effect of applying the look-back method is taken into account beginning in the filing year even though look-back interest is not computed for that year. Income is hypothetically reallocated to or from the filing year or to or from the redetermination years. Look-back does not create or decrease income; it only hypothetically changes the tax year of recognition.
Exempt Organization Annual Information Return, California e-Postcard – For taxable years beginning January 1, 2012, organizations with gross receipts normally equal to or less than $50,000, can fulfill their annual filing requirement using FTB 199N, Annual Electronic Filing Requirement for Smaller Exempt Organizations (California e-Postcard). FTB 199N is an electronic filing method available only on our website. For more information, go to ftb.ca.gov and search for 199n.
Limited Liability Company Tax Law Changes
Penalty for non-registered, suspended, or forfeited limited liability company (LLC) – For taxable years beginning January 1, 2013, we will assess a $2,000 penalty against an LLC (domestic/foreign) that is doing business within the state while not registered to do business within the state or while suspended or forfeited and fails to file its required tax return upon notice and demand.
Corporation Tax Law Changes
Benefit Corporation – Beginning on or after January 1, 2012, a new type of corporation called a “benefit corporation” can be formed with the purpose of creating general public benefit, provided certain requirements are met. An existing corporation can become a “benefit corporation,” if certain procedures are followed. In addition, a “benefit corporation” can be created through a merger or reorganization, if certain requirements are met. (For more information, see the Corporations Code, commencing with Section 14600.)
Flexible Purpose Corporation – Beginning on or after January 1, 2012, a new type of corporation called a “flexible purpose corporation” can be formed, provided certain requirements are met. An existing corporation can merge or convert into a “flexible purpose corporation,” upon completion of certain requirements. A “flexible purpose corporation” must have a special purpose, which may include, but is not limited to, charitable and public purpose activities that could be carried out by a nonprofit public benefit corporation. (For more information, see the Corporations Code, commencing with Section 2500.)
