2424: Water’s-Edge Foreign Investment Interest Offset (2024)
California · FTB · Used for tax years 2024
California Form 2424 calculates the water’s-edge foreign investment interest offset using the corporation’s dividend deduction and interest expense attributable to foreign investment. The form is attached to Form 100W or Form 100S, and the offset is reported on Schedule R.
Who files this form
Form 2424 calculates the Water’s-Edge Foreign Investment Interest Offset and is attached to Form 100W or Form 100S.
Start with the dividend deduction from Schedules H (100W or 100S), Part II, line 4, column (g). If that deduction is zero, the interest offset is zero and the form says not to complete Form 2424.
What you'll need
The form calls for these forms and details:
- Form 100W or Form 100S, with Form 2424 attached to the back.
- Schedules H (100W or 100S), Part II, line 4, column (g), for the dividend deduction.
- The key corporation’s name and California corporation number.
- Total interest expense and amounts specifically assignable to foreign investment, domestic investment, or other property.
- Unassigned interest expense on debt incurred before January 1, 1988, and on or after that date.
- Interest expense related to debt proceeds deposited in restricted accounts, as described on line 8.
- Unassigned foreign investment and unassigned total assets.
- Schedule R, where the final offset is also entered.
How to file
Attach Form 2424 to the back of Form 100W or Form 100S.
Enter the amount from Form 2424, line 17, on Schedule R, Side 1, line 1b.
Common mistakes
- Completing the form when line 1 is zero. The form says the interest offset is zero in that case and tells you not to complete the form.
- Leaving the form unattached. Attach it to the back of Form 100W or Form 100S.
- Overlooking the rule for remaining interest expense. The form states that the remaining interest expense is subject to R&TC Section 24344(b).
Questions people ask
Where does the dividend deduction on line 1 come from?
Use Schedules H (100W or 100S), Part II, line 4, column (g). If line 1 is zero, the interest offset is zero and you should not complete the form.
How is the foreign investment percentage calculated?
Divide unassigned foreign investment on line 11 by unassigned total assets on line 12. Enter the percentage on line 13.
How is the final interest offset calculated?
On line 16, enter the smaller of line 1 or line 15. Multiply line 16 by 75% (.75) and enter the result on line 17.
Where do I report the final offset?
Enter the line 17 amount on Schedule R, Side 1, line 1b. Attach Form 2424 to the back of Form 100W or Form 100S.