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Prison Inmate Labor Credit
Form 3507

TAXABLE YEAR 2021 CALIFORNIA FORM Prison Inmate Labor Credit Attach to your California tax return. The employer must keep the approved joint venture agreement for audit purposes. 3507 □ SSN or ITIN □ CA Corporation no. □ FEIN Name(s) as shown on your California tax return California Secretary of State file number 1 Total qualifying wages. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 00 2 Multiply line 1 by 10% (.10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 00 3 Pass-through Prison Inmate Labor Credit(s) from Schedule K-1 (100S, 541, 565, or 568). See instructions . 3 00 4 Carryover from 2020. See instructions under General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 00 5 Total available Prison Inmate Labor Credit. Add line 2, line 3, and line 4. See instructions . . . . . . . . . . . . . . . . 5 00 6 Carryover of the disallowed credit amount to future years. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . 6 00 General Information C Limitations 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 business credits for taxpayers. The total of all business credits including the carryover of any business credit for the taxable year may not reduce the “net tax”, for personal income tax filers, or the “tax”, for corporate filers, by more than $5,000,000. For taxpayers included in a combined report, the limitation is applied at the group level. The business credits disallowed due to the limitation may be carried over. The carryover period for disallowed credits is extended by the number of taxable years the credit was not allowed. This limitation does not apply to all credits, get Schedule P (100, 100W, 540, 540NR, or 541), Alternative Minimum Tax and Credit Limitations, and Form 100S, S Corporation Tax Booklet for more information. Normally there is no provision for carryover of any unused Prison Inmate Labor Credit to succeeding taxable years, and in no event can taxpayers carry this credit back and apply it against a prior year’s tax. However, for taxable years 2020 through 2022, taxpayers are allowed to carryover the amount of credit disallowed due to the $5,000,000 business credit limitation. S corporations may claim only 1/3 of the credit against the 1.5% entity‑level tax (3.5% for financial S corporations). The remaining 2/3 must be disregarded and may not be used as a carryover. S corporations can pass through 100% of the credit to their ­shareholders. If a taxpayer owns an interest in a disregarded business entity [a single member limited liability company (SMLLC) not recognized by C ­ alifornia, and for tax purposes is treated as a sole proprietorship owned by an individual or a branch owned by a corporation], the ­usable credit amount received from the disregarded entity is limited to the ­difference between the taxpayer’s regular tax figured with the income of the ­disregarded entity, and the taxpayer’s regular tax figured without the income of the disregarded entity. For more information on SMLLCs, get Form 568, Limited Liability Company Tax Booklet. This credit cannot reduce the regular tax below the minimum franchise tax (corporations and S corporations), the annual tax (limited partnerships, limited liability partnerships, and LLCs classified as a partnership), the alternative minimum tax (corporations, exempt organizations, individuals, and fiduciaries), the built-in gains tax (S corporations), or the excess net passive income tax (S corporations). This credit cannot reduce regular tax below the tentative minimum tax (TMT). Get Schedule P (100, 100W, 540, 540NR, or 541) for more information. This credit is not refundable. A Purpose Use form FTB 3507, Prison Inmate Labor Credit, to figure a credit for wages paid to prison inmates under an approved joint venture with the California Department of Corrections. Also, use this form to claim pass-through prison inmate labor credits you received from S corporations, estates, trusts, partnerships, or limited liability ­companies (LLCs) ­classified as partnerships. S corporations, estates, trusts, partnerships, and LLCs classified as partnerships should complete form FTB 3507 to figure the amount of credit to pass through to shareholders, beneficiaries, partners, or ­members. Attach this form to Form 100S, California S Corporation Franchise or Income Tax Return; Form 541, California Fiduciary Income Tax Return; Form 565, Partnership Return of Income; or Form 568, Limited Liability Company Return of Income. Show the pass-through credit for each shareholder, ­beneficiary, partner, or member on Schedule K-1 (100S, 541, 565, or 568), Share of Income, Deductions, Credits, etc. B Qualifications California allows a credit equal to 10% of the wages paid to each ­prisoner who is employed under an approved joint venture with the California Department of Corrections. The credit amount is based on wages paid to each qualifying employee during the taxable year for the duration of the contract agreement. The credit applies only to wages paid pursuant to a contract agreement, between the director of corrections and the joint venture ­employer, ­executed on or before the day the individual begins work for the ­employer. For Privacy Notice, get FTB 1131 EN-SP. D Assignment of Credits Assigned Credits to Affiliated Corporations – Credit earned by members of a combined reporting group may be assigned to an affiliated corporation that is an eligible member of the same combined reporting group. A credit assigned may only be claimed by the affiliated corporation against its tax liability. For more information, get form FTB 3544, Assignment of Credit, or go to ftb.ca.gov and search for credit assignment. Specific Line Instructions Line 1 – Enter the total amount of qualifying wages paid or incurred under the provisions of the approved joint venture. Line 3 – If you received more than one pass-through credit from S corporations, estates, trusts, partnerships, or LLCs classified as partnerships, add the amounts and enter the total. Attach a schedule showing the names and identification numbers of the entities from which the credits were passed through to you. 7261214 FTB 3507  2021 Line 5 – The amount of this credit that you can claim on your tax return may be limited. Refer to the credit instructions in your tax booklet for more information. The instructions also explain how to claim this credit on your tax return. Use credit code 162 when you claim this credit. See General Information. Line 6 – For taxable years 2020 through 2022 you are allowed to carryover the amount of credit that was disallowed due to the $5,000,000 limitation. The carryover period for a disallowed credit is extended by the number of taxable years the credit was not allowed. For more information see the applicable Schedule P. Franchise Tax Board Privacy Notice on Collection Our privacy notice can be found in annual tax booklets or online. Go to ftb.ca.gov/privacy to learn about our privacy policy statement, or go to ftb.ca.gov/forms and search for 1131 to locate FTB 1131 EN-SP, Franchise Tax Board Privacy Notice on Collection. To request this notice by mail, call 800.338.0505 and enter form code 948 when instructed. Page 2  FTB 3507 Instructions  2021
Extracted from PDF file 2021-california-form-3507.pdf, last modified November 2021

More about the California Form 3507 Corporate Income Tax Tax Credit

We last updated the Prison Inmate Labor Credit in March 2022, and the latest form we have available is for tax year 2021. This means that we don't yet have the updated form for the current tax year. Please check this page regularly, as we will post the updated form as soon as it is released by the California Franchise Tax Board. You can print other California tax forms here.

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Other California Corporate Income Tax Forms:

TaxFormFinder has an additional 174 California income tax forms that you may need, plus all federal income tax forms.

Form Code Form Name
Form 100-ES Corporation Estimated Tax
3805-Z Booklet Enterprise Zone Business Booklet
Form 541-ES Form Estimated Tax for Fiduciaries
Form 100 Booklet Corporation Tax Booklet - Form 100 Forms & Instructions
Form 3500 Exemption Application

Download all CA tax forms View all 175 California Income Tax Forms

Form Sources:

California usually releases forms for the current tax year between January and April. We last updated California Form 3507 from the Franchise Tax Board in March 2022.

Show Sources >

Form 3507 is a California Corporate Income Tax form. States often have dozens of even hundreds of various tax credits, which, unlike deductions, provide a dollar-for-dollar reduction of tax liability. Some common tax credits apply to many taxpayers, while others only apply to extremely specific situations. In most cases, you will have to provide evidence to show that you are eligible for the tax credit, and calculate the amount of the credit to which you are entitled.

About the Corporate Income Tax

The IRS and most states require corporations to file an income tax return, with the exact filing requirements depending on the type of company.

Sole proprietorships or disregarded entities like LLCs are filed on Schedule C (or the state equivalent) of the owner's personal income tax return, flow-through entities like S Corporations or Partnerships are generally required to file an informational return equivilent to the IRS Form 1120S or Form 1065, and full corporations must file the equivalent of federal Form 1120 (and, unlike flow-through corporations, are often subject to a corporate tax liability).

Additional forms are available for a wide variety of specific entities and transactions including fiduciaries, nonprofits, and companies involved in other specific types of business.

Historical Past-Year Versions of California Form 3507

We have a total of eleven past-year versions of Form 3507 in the TaxFormFinder archives, including for the previous tax year. Download past year versions of this tax form as PDFs here:

2020 Form 3507

2020 Form 3507 Prison Inmate Labor Credit

2019 Form 3507

2019 Form 3507 Prison Inmate Labor Credit

2018 Form 3507

2018 Form 3507 - Prison Inmate Labor Credit

2017 Form 3507

2017 Form 3507 - Prison Inmate Labor Credit

2016 Form 3507

2016 Form 3507 - Prison Inmate Labor Credit

Prison Inmate Labor Credit 2015 Form 3507

2015 Form 3507 -- Prison Inmate Labor Credit

Prison Inmate Labor Credit 2014 Form 3507

2014 Form 3507 -- Prison Inmate Labor Credit

Prison Inmate Labor Credit (Fill-in) 2013 Form 3507

2013 Form 3507 -- Prison Inmate Labor Credit

2012 Form 3507

2012 Form 3507

2011 California Form 3507 2011 Form 3507

2011 Form 3507 -- Prison Inmate Labor Credit

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