3540: Credit Carryover and Recapture Summary (2025)
California · FTB · Used for tax years 2025
California Form 3540 summarizes carryovers of repealed tax credits and recapture of the Farmworker Housing Credit and Environmental Tax Credit. It reports prior-year credit carryovers, amounts used or assigned this year, amounts to be elected as refundable in future years, and ca
Who files this form
California Form 3540 is used to report carryovers of repealed tax credits in Part I and credit recapture for the Farmworker Housing Credit or Environmental Tax Credit in Part II.
Attach the completed form to your California tax return.
What you'll need
Have the information requested on the form available:
- Your name as shown on your California tax return and applicable taxpayer identification numbers.
- For carryovers: each repealed credit’s code and name, prior-year carryover available, amount used this year, amount assigned this year, amount to be elected as refundable in future years, and carryover to future years.
- For recapture: total credit claimed for all years and the facility operating period or remaining credit term used to calculate the proration percentage.
If you elect to make credits disallowed because of the $5,000,000 limitation refundable, you must also 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 in Part I, column (g), credit amounts you elect to make refundable because they were disallowed under the $5,000,000 limitation.
- To make an election for refundable credits, complete form FTB 3870. The form directs you to FTB 3870 for more information.
- Remember to attach Form 3540 to your California tax return.
Questions people ask
What does Part I report?
Part I reports carryovers of repealed credits, including amounts available from prior years, used this year, assigned this year, to be elected as refundable in future years, and carried over to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.
Which credits appear in the recapture section?
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 in column (a) by the proration percentage in column (b). 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.
Where can I find the privacy notice?
The form directs you to FTB 1131 EN-SP for the privacy notice.