3554: New Employment Credit (2025)
California · FTB · Used for tax years 2025
California Form 3554 calculates the 2025 New Employment Credit and is attached to your California tax return. It reports changes in full-time employment, available and claimed credits, carryovers, and credit recapture.
Who files this form
California Form 3554 is used to report the New Employment Credit with your California tax return. It includes entries for credit generated, pass-through credits, prior-year carryover, credit claimed, and credit recapture.
For taxpayers generating the credit, the form says to stop if:
- The taxpayer did not receive a tentative credit reservation for all claimed employees.
- The net increase in full-time employees on line 17 is zero or less. The form says you do not qualify in that case.
What you'll need
Have the following information available to complete the form:
- Names and taxpayer identification numbers for the filer and the taxpayer generating the credit, plus applicable California Secretary of State file numbers.
- Tentative credit reservation information for all claimed employees.
- The business’s Principal Business Activity (PBA) code and information needed to answer the industry question in item B.
- California employee counts for the base year and tax year 2025, including hours worked by full-time hourly employees employed for less than 52 weeks and weeks worked by full-time salaried employees employed for less than 52 weeks.
- The total number of qualified full-time employees and the tentative credit amount.
- Schedule K-1 (100S, 541, 565, or 568), if reporting pass-through New Employment Credits.
- Prior-year credit carryover amounts and Form FTB 3544, if reporting assigned credits.
How to file
Attach Form 3554 to your California tax return.
The supplied form does not provide a mailing address or e-filing instructions.
Common mistakes
- Do not continue if item A is “No.” The form requires a tentative credit reservation for all claimed employees.
- Do not include more than 2,000 hours per employee on lines 3 and 11.
- Do not continue if line 17 is zero or less. The form says you do not qualify.
- Do not enter an applicable percentage greater than 1.0000 on line 19.
- Do not include assigned credit claimed on Form FTB 3544, Part B, in line 25a.
- Enter 0 on line 25b if you are not a corporation.
- Remember to attach Form 3554 to your California tax return.
Questions people ask
How is the net increase in full-time employees calculated?
Subtract base-year annual full-time equivalents on line 8 from current-year annual full-time equivalents on line 16. Enter the result on line 17. If it is zero or less, the form says to stop because you do not qualify.
Where do I report a pass-through New Employment Credit?
Enter credits from Schedule K-1 (100S, 541, 565, or 568) on line 22.
How is the total available credit calculated?
Line 24 adds the credit generated on line 21, pass-through credits on line 22, and prior-year credit carryover on line 23.
How do I calculate the credit carryover available for future years?
Add lines 25a, 25b, and 25c, then subtract that total from line 24. Enter the result on line 26.