TaxAct now supports California Form 3804 – Pass-Through Entity Elective Tax Calculation in the California 1065 and 1120S modules. We also support the form for single-member LLC (SMLLC) returns that are part of the California 1040 module.

Partners, members, and shareholders (owners) can consent to be included on Form 3804 by checking the calculation checkbox on their applicable California Schedule K-1 (or directly on Form 568 for SMLLCs).

To be included on Form 3804, the owner must consent, must have total CA Schedule K-1 net income that is greater than $0, and the owner must be an Individual, Estate/Trust, or a Disregarded Entity. Once all conditions are met, the owner’s pro rata or distributive share (plus guaranteed payments) of qualified net income is reported on Form 3804. Their respective elective tax credit amount is then calculated by taking their share of qualified net income multiplied by 9.3%. The owner will then report this credit amount on their respective individual or fiduciary tax return.

The owner’s share of qualified net income is calculated under the following methods:

California Form 565 and 568

• Schedule K-1, lines 1 through 11c (income and loss items) minus lines 12 through 13e (deduction items) as reported in column (c) (total amounts using California law)

California Form 100S

• Schedule K-1, lines 1 through 10b (income and loss items) minus lines 11 through 12e (deduction items) as reported in column (c) (total amounts using California law)

California Form 568 (for SMLLC returns that are part of CA 1040 module)

• Schedule IW, line 17 (total California income)