3540: Credit Carryover and Recapture Summary (2024)
California · FTB · Used for tax years 2024
California Form 3540 summarizes carryovers of repealed tax credits and recapture amounts for the Farmworker Housing Credit and Environmental Tax Credit. It reports prior-year carryovers, credits used or assigned this year, amounts to be elected as refundable in future years, and
What you'll need
The 2024 form asks for:
- Name(s) as shown on your California tax return.
- Taxpayer identification information, with fields for an SSN or ITIN, California corporation number, FEIN, and California Secretary of State file number.
- For credit carryovers, the credit code and name, prior-year carryover available, amounts used or assigned this year, amounts to be elected as refundable in future years, and carryover to future years.
- For credit recapture, the total credit claimed for all years and the information needed to calculate the proration percentage.
If you elect to make credits disallowed because of the $5,000,000 limitation refundable, you must complete form FTB 3870.
How to file
Attach Form 3540 to your California tax return. The supplied form does not provide a mailing address or e-file instructions.
Common mistakes
- Do not include credits elected to be refundable in column (g), credit carryover to future years. This warning applies to credits disallowed because of the $5,000,000 limitation.
- If you make that refundable-credit election, complete form FTB 3870.
- Remember to attach Form 3540 to your California tax return.
Questions people ask
What does Part I report?
Part I reports carryovers for repealed credits, including amounts available from prior years, used this year, assigned this year, to be elected as refundable in future years, and carried over to future years.
Can credits disallowed because of the $5,000,000 limitation be elected as refundable?
The form describes an election to make these credits refundable. You must complete form FTB 3870 and exclude the elected amount from column (g). The form directs you to FTB 3870 for more information.
Which credits are listed in Part II for recapture?
Part II lists the Farmworker Housing Credit, code 207, and the Environmental Tax Credit, code 218.
How is the credit recapture amount calculated?
Multiply the total credit claimed for all years by the proration percentage. For the Farmworker Housing Credit, the percentage is 360 months minus the number of months the facility operated, divided by 360 months. For the Environmental Tax Credit, it is the remaining term of five years divided by five years.