What’s new for filing 2022 tax returns
Filing status name changed to Qualifying Surviving Spouse/Registered Domestic Partner (RDP)
The filing status qualifying widow(er) is now called qualifying surviving spouse/RDP. The rules for the filing status have not changed.
Timeliness penalty abatementPass-Through Entity (PTE) Elective Tax and Other State Tax Credit calculation
For taxable years beginning on or after January 1, 2022, and before January 1, 2026, the calculation of the other state tax credit (OSTC) has changed. California law allows a qualified partner, member, or shareholder of an electing qualified entity to increase the net tax payable by the amount of the allowed PTE tax credit that reduced net tax, before application of the OSTC, in the same taxable year.
For more information, get Schedule S, Other State Tax Credit, or see California Revenue and Taxation Code (R&TC) Section 17052.10.
For more information, see Schedule CA (540) instructions.
Middle Class Tax Refund
The California Middle Class Tax Refund (MCTR) is a one-time payment issued to provide relief to qualified recipients. California excludes this payment from gross income. The Internal Revenue Service (IRS) issued guidance on February 10, 2023, that Californians do not need to report MCTR payments on their 2022 tax return, and that the IRS will not challenge the taxability of these payments for the 2022 tax year.
For more information about the IRS’s guidance visit IRS issues guidance on state tax payments to help taxpayers.
For more information, see Schedule CA (540) instructions.
Timeliness penalty abatement
For taxable years beginning on or after January 1, 2022, an individual taxpayer may elect to request a one-time abatement of a failure-to-file or failure-to-pay timeliness penalty either orally or in writing. The requirements for one-time abatement include:
- the taxpayer was not previously required to file a California personal income tax return or has not previously been granted abatement under R&TC Section 19132.5,
- the taxpayer has filed all required returns as of the date of the request for abatement, and
- the taxpayer has paid, or is in a current arrangement to pay, all tax currently due.
For more information, see R&TC Section 19132.5.
Young Child Tax Credit Expansion (YCTC)
For taxable years beginning on or after January 1, 2022, California expanded the YCTC eligibility to include an eligible individual with a qualifying child who would otherwise have been allowed the California EITC, but the individual has earned income of zero dollars or less, does not have net losses in excess of $32,490 in the taxable year, and does not have wages, salaries, tips, and other employee compensation in excess of $32,490 in the taxable year.
For more information, get Form 3514, or go to ftb.ca.gov and search for YCTC.
Foster Youth Tax Credit (FYTC)
For taxable years beginning on or after January 1, 2022, the refundable FYTC is available to an individual and/or spouse/RDP age 18 to 25, who is allowed the California EITC for the taxable year, was in foster care while 13 years of age or older and placed through the California foster care system. The maximum amount of credit allowable for each eligible taxpayer is $1,083. The credit amount phases out as earned income exceeds the threshold amount of $25,000, and completely phases out at $30,000.
For more information, see specific line instructions for Form 540 and Instructions for Form 540, and Form 3514, and Instructions for Form 3514. Also see R&TC Section 17052.2, or go to ftb.ca.gov and search FYTC.
Voter registration information
For taxable years beginning on or after January 1, 2022, we added a new Voter Registration Information checkbox on the tax return. For voter registration information, check the box on Form 540, Side 5 and go to sos.ca.gov/elections for more information. Also, see specific line instructions for Form 540, Voter Information Section and “Voting is Everybody’s Business” under Additional Information section for more information.
Principal business activity codes
The Principal Business Activity Codes have been updated and revised to reflect updates to the North American Industry Classification System (NAICS).
For more information, see business entity booklets.
Repeal of Net Operating Loss (NOL) suspension
For the 2022 taxable year, the NOL suspension has been repealed.
For more information, see R&TC Section 17276.23 and 24416.23 or get FTB 3805V, NOL Computation and NOL and Disaster Loss Limitations - Individuals, Estates, and Trusts or FTB 3805Q, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations - Corporations.
Repeal of credit limitation
For the 2022 taxable year, the credit limitation has been repealed. AB 85 chaptered June 29, 2020, included Credit Limitation – For taxable years beginning on or after January 1, 2020, and before January 1, 2023, there is a $5,000,000 limitation on the application of credits for taxpayers. The total of all credits including the carryover of any credit for the taxable year may not reduce the “tax” by more than $5,000,000.
SB 113 chaptered February 09, 2022, repealed credit limitation for the 2022 tax year. TFDD has include WN paragraphs in applicable products.
For more information, see R&TC Section 17039.3 and 23036.3.
Reporting requirements
Taxpayers may need to file FTB 4197, Information on Tax Expenditure Items, with the Franchise Tax Board (FTB) to report tax expenditure items as part of FTB’s annual reporting requirements under R&TC Section 41.
To determine if you have an R&TC Section 41 reporting requirement, see R&TC Section 41, Reporting Requirements section, or get FTB 4197.
Homeless Hiring Tax Credit (HHTC)
For taxable years beginning on or after January 1, 2022, and before January 1, 2027, an HHTC will be available to a qualified taxpayer that hires eligible individuals. The amount of the tax credit will be based on the number of hours the employee works in the taxable year. Employers must obtain a certification of the individual’s homeless status from an organization that works with the homeless and must receive a tentative credit reservation for that employee. Any credits not used in the taxable year may be carried forward up to three years.
For more information, get FTB 3831, Homeless Hiring Tax Credit or go to ftb.ca.gov and search for HHTC.
Soundstage Filming Tax Credit
For taxable years beginning on or after January 1, 2022, R&TC Section 17053.98(k) and 23698(k) allows a fourth film credit, the Soundstage Filming Tax Credit against tax. The credit is allocated and certified by the California Film Commission (CFC). The qualified taxpayer is allowed:
- a credit against income tax liability
- to sell the credit to an unrelated party (independent films only)
- to assign the credit to an affiliated corporation
- to apply the credit against qualified sales and use taxes
For more information, get FTB 3541, California Motion Picture and Television Production Credit, FTB 3551, Sale of Credit Attributable to an Independent Film, go to ftb.ca.gov and search for motion picture or go to the CFC website at film.ca.gov and search for soundstage filming tax credit.
State Historic Rehabilitation Tax Credit (SHRTC)
For taxable years beginning on or after January 1, 2021, a SHRTC is available to qualified taxpayers that received a tax credit allocation from the California Tax Credit Allocation Committee (CTCAC). The credit is for the rehabilitation of certified historic structures and for individual taxpayers, a qualified residence. Any credits not used in the taxable year may be carried forward up to eight years. Taxpayers should apply for the tax credit reservation with CTCAC and have received a tax credit allocation confirmation number from CTCAC prior to claiming the SHRTC on FTB 3835. While the credit was not funded, and cannot be claimed, for tax year 2021, the credit has been fully funded for the 2022 tax year.
For more information, get FTB 3835, State Historic Rehabilitation Tax Credit, or go to the California Office of Historic Preservation website at ohp.parks.ca.gov and search for SHRTC.
High Road Cannabis Tax Credit (HRCTC)
For taxable years beginning on or after January 1, 2023, and before January 1, 2028, a HRCTC will be available to a qualified taxpayer that is a licensed commercial cannabis business that meets specified criteria. The HRCTC is allowed in an amount equal to 25% of the total amount of the qualified taxpayer’s qualified expenditures in the taxable year not to exceed $250,000 per taxable year. Any credits not used in the taxable year may be carried forward up to eight years. A qualified taxpayer must request a tentative credit reservation from FTB during the month of July for each taxable year or within 30 days of the start of their taxable year if the qualified taxpayer’s taxable year begins after July.
For more information, go to ftb.ca.gov and search for HRCTC.
College Access Tax Credit
The sunset date for the College Access Tax Credit is extended until taxable years beginning before January 1, 2028.
For more information, get FTB 3592, College Access Tax Credit.
Small Business and Nonprofit COVID-19 Supplemental Paid Sick Leave Relief Grant
For taxable years beginning on or after January 1, 2021, and before January 1, 2030, California law allows an exclusion from gross income for grant allocations received by a taxpayer pursuant to the California Small Business and Nonprofit COVID-19 Supplemental Paid Sick Leave Relief Grant Program that is established by Section 12100.975 of the Government Code.
For more information, see Schedule CA (540) instructions and business entity booklets or R&TC Section 17158 and 24312.
Thomas and Woolsey Wildfires Exclusion
For taxable years beginning before January 1, 2027, California law allows a qualified taxpayer an exclusion from gross income for any amount received in a settlement from Southern California Edison for claims relating to the 2017 Thomas Fire or the 2018 Woolsey Fire. If a qualified taxpayer included income for an amount received from these settlements in a prior taxable year, the taxpayer can file an amended tax return for that year. If the normal statute of limitations has expired, the taxpayer must file a claim by September 29, 2023.
For more information, see Schedule CA (540) instructions and business entity booklets or R&TC Section 17138.6 and 24309.1.
Fire Victims Trust Exclusion
For taxable years beginning before January 1, 2028, California law allows a qualified taxpayer an exclusion from gross income for any amount received from the Fire Victims Trust, established pursuant to the order of the United States Bankruptcy Court for the Northern District of California dated June 20, 2020, case number 19-30088, docket number 8053. If a qualified taxpayer included income for an amount received from the Fire Victims Trust in a prior taxable year, the taxpayer can file an amended tax return for that year. If the normal statute of limitations has expired, the taxpayer must file a claim by September 29, 2023.
For more information, see Schedule CA (540) instructions and business entity booklets or R&TC Section 17138.5 and 24309.3.
Turf Replacement Water Conservation Program
For taxable years beginning on or after January 1, 2022, and before January 1, 2027, California law allows an exclusion from gross income for any amount received as a rebate, voucher, or other financial incentive issued by a public water system, as defined, local government, or state agency for participation in a turf replacement water conservation program.
Please note that taxpayers claiming this gross income exclusion should file FTB 4197, Information on Tax Expenditure Items. For more information, see Schedule CA (540) instructions and business entity booklets or R&TC Section 17138.2 and 24308.9.
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