3864: Group Nonresident Return Election (2024)

Who files this form

A business entity or corporation choosing to file a group nonresident return must complete Form FTB 3864 each year on behalf of its electing nonresident individuals.

To be included, an individual must:

• Be a full-year nonresident of California.
• Have no California source income other than income from the business entity or corporation, unless the other California source income is reported on another group nonresident return.

Partnerships, LLCs, corporations, estates, trusts, and other entities cannot be included. The form provides an exception for grantors of certain grantor trusts described in IRC Sections 671-679 that are not recognized as separate taxable entities.

What you'll need

Have the following information and documents ready:

• The business entity’s or corporation’s name, FEIN, and California corporation number or Secretary of State file number.
• Business address, principal California business address, telephone number, business activity, and the state where the principal business activity is conducted.
• Counts of electing and non-electing shareholders, partners, members, or directors.
• Form 540NR for the group return and the appropriate business entity or corporation return.
• A power of attorney signed by each electing nonresident individual authorizing inclusion in the group return. Keep these in the business’s files. Do not attach them to the return.

The form directs filers to FTB Pub. 1067 for guidance on preparing the group Form 540NR.

How to file

1. Complete Form FTB 3864 for the annual group return election.
2. Have an authorized general partner, member-manager, corporate officer, or attorney-in-fact sign it. Complete the signature area, including title, date, telephone number, printed name, and business entity name.
3. Attach the completed, signed form to the group nonresident return, Form 540NR, and to the appropriate business entity return.

The business entity must file Form 100S, 565, or 568, as appropriate. A corporation must file Form 100 or 100S.

The supplied form does not specify a mailing address or e-filing method.

Common mistakes

• Using a fiscal year for the group return. The group return must use a calendar year. For the 2024 group return, a fiscal-year business entity reports the individual’s distributive share of California source income from its taxable year ending in 2024. A fiscal-year corporation reports directors’ compensation received in 2024.
• Forgetting the annual signed election. Attach a completed, signed Form FTB 3864 each year.
• Attaching powers of attorney. Keep them in the business’s files instead.
• Assuming an individual can reverse the election after filing. Once the group return is filed for the year, the individual’s election is irrevocable.

Questions people ask

What tax rate applies to individuals in the group return?

Each included individual’s California source income is taxed at the highest marginal rate of 12.3%.

How does the additional 1% mental health tax work?

An included individual with more than $1 million in California taxable income owes the additional 1% tax on their entire California taxable income, not just the amount above $1 million. If the individual participates in multiple group returns, the threshold applies to their combined California taxable income from all those returns. The business entity or corporation must find out whether the threshold is exceeded and report and pay the additional tax on the group return.

Who makes estimated tax payments for the group?

The business entity or corporation must make the group’s estimated tax payments under its FEIN, as instructed in FTB Pub. 1067.

Are directors allowed deductions or credits on the group return?

No. The form states that directors are not allowed any deductions or credits.

Official sources

• https://www.ftb.ca.gov/forms/2024/2024-3864.pdf