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For Tax years 2024, 2025, and 2026, nonrefundable business credits on Schedule P(540/540NR) are limited to $5,000,000. Any excess may be carried forward as a traditional nonrefundable credit, subject to the usual restrictions of nonrefundable credits.
Alternatively, a taxpayer may elect to carry forward the excess as a deferred refundable credit, spread equally over a 5 year period, starting 3 years from the year of election. Complete non-calculating Form 3870, Election for Refundable Credit, if electing to treat the excess as a deferred refundable credit. If filing electronically, Form 3870 is included in the electronic record.
Schedule P(540/540NR) calculations don’t automatically limit credits based on the $5,000,000 cap. If the excess is to be carried forward as a (traditional) nonrefundable credit, override the specific credit amount on Schedule P(540/540NR) in the column for Credit used this year to the proper capped amount. Sch P(540/540NR) will calculate the carryforward amount, which will appear on the Carryover Return Carryover Summary and which will proforma to the following year.
If the taxpayer has elected to have the excess amount carry forward as a deferred refundable credit, limit the amounts entered on the CACr, CACr-2, CACrCO, and CACrCO-2 screens to the amounts allowed under the $5,000,000 cap for nonrefundable business credits that appear on Schedule P(540/540NR). Then, use this screen to enter credit code, total excess amount deferred as refundable, and amounts to use in future years. These amounts will proforma to future years.

This article applies to:

  • Product: UltraTax CS
  • Return type: 1040 Individual
  • State: California
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