California Form 3804-CR: Claiming the Pass-Through Entity Credit

California Form FTB 3804-CR is the form an owner of a partnership, S corporation, or LLC uses to claim the Pass-Through Entity (PTE) Elective Tax Credit on a California personal, fiduciary, or trust return. You file it if your entity elected to pay California’s 9.3% PTE tax at the entity level and your California Schedule K-1 shows a credit allocated to you. The form has two short parts: you list each electing entity and your credit amount, then total it against any carryover before attaching it to your return.¹

What the Credit Represents

California’s PTE elective tax lets qualifying partnerships and S corporations pay state income tax at the entity level rather than passing all taxable income through to owners untaxed. The entity pays 9.3% on its qualified net income. Each owner then claims a matching credit on their personal California return so the same income isn’t taxed twice at the state level. Your credit equals 9.3% of your pro rata or distributive share, including guaranteed payments, of the qualified net income the entity subjected to the election.¹

The structure exists as a workaround for the $10,000 federal cap on state and local tax deductions. When the entity pays the tax directly, the payment is a business expense on the entity’s federal return, which sidesteps the SALT cap that would otherwise apply if the owner paid the same tax personally.

Who Files Form FTB 3804-CR

The owner files this form, not the entity. You file it if you are an individual, fiduciary, estate, or trust that is a partner, shareholder, or member of a qualified PTE that elected to pay the PTE elective tax for the year. The entity itself files a separate form, FTB 3804, to make the election and report the tax.¹

Publicly traded partnerships and entities that are part of a combined reporting group cannot make the election. If your entity falls into either category, there is no PTE credit to claim.

Confirm the Entity Made the Election and Paid the Tax

Your credit only exists if the entity actually made the election on a timely filed original return and remitted the tax. The entity’s election is made on Form FTB 3804, filed with its California return (Form 100S for S corporations, Form 565 for partnerships, or Form 568 for LLCs taxed as partnerships), and payment is remitted with Form FTB 3893. The election cannot be revoked for that tax year once made.²

Your credit amount should appear on your California Schedule K-1 (Form 100S, 565, or 568) on the “Other Credits” line, with an accompanying statement. If the entity didn’t complete Form 3804 and pay the elective tax, you cannot claim the credit even if a number appears on your K-1. Verify the payment before you file.

One more thing to check for 2026 and later. Starting with tax years beginning on or after January 1, 2026, the entity must make a required prepayment by June 15 of the election year. If the entity underpays or misses the prepayment, the election still stands, but each owner’s credit is reduced by 12.5% of that owner’s pro rata share of the unpaid amount. The reduction hits the owner, not the entity, so ask about the prepayment before relying on the full number.²

Completing Part I: The Credit From Each Entity

Part I is a table where you list every electing PTE that allocated a credit to you. On line 1, for each entity, enter three items:¹

Column (a): the name of the electing PTE that paid the tax.
Column (b): the entity’s identification number, which is its California corporation number, Secretary of State file number, or federal employer identification number.
Column (c): your credit amount, equal to 9.3% of the pro rata or distributive share and guaranteed payments reported on your California Schedule K-1. You may only claim a credit for tax the entity actually paid for the same tax year.

If you’re an owner in more than one electing PTE, list each entity on its own row. Use additional copies of the form if you run out of rows, and carry the combined total forward.

Completing Part II: Total, Carryover, and What You Actually Claim

Part II converts the Part I total into the number you write on your return.¹

Line 1 carries over the total credit from Part I.
Line 2 is any unused PTE credit carried forward from a prior year.
Line 3 is the sum of lines 1 and 2.
Line 4 is the credit you actually claim this year, which may be less than line 3 if your California tax liability isn’t large enough to absorb the full amount.

Enter the credit on your return using credit code 242. Attach the completed Form FTB 3804-CR to the back of Form 540 if you’re a California resident, Form 540NR if you’re a nonresident or part-year resident, or Form 541 if you’re filing for a trust or estate. When a trust splits the credit between itself and its beneficiaries, the trust and each beneficiary receiving a share must each file a separate Form FTB 3804-CR.

Nonrefundable Status and Five-Year Carryforward

The PTE elective tax credit is nonrefundable. It can reduce your California tax to zero but won’t generate a refund on its own. Any excess carries forward for up to five years until it’s used up.³

Track any unused amount so you can enter it on line 2 of a future Form FTB 3804-CR. If you have more credit than tax in a given year, the difference isn’t lost, but it also isn’t paid out to you as a refund.

This Is Not the Federal Research Credit

Form 3804-CR sometimes gets confused with the federal Research Credit under IRC Section 41 because the numbering looks similar. There is no federal IRS form numbered 3804-CR. If a partnership or S corporation passed a federal Research Credit through to you, you claim it on Form 3800 (General Business Credit) using the amount reported on your federal Schedule K-1, not on Form FTB 3804-CR. California’s Form FTB 3804-CR is only for the state PTE elective tax credit.

1
State of California Franchise Tax Board. 2025 Instructions for Form FTB 3804-CR Pass-Through Entity Elective Tax Credit
2
State of California Franchise Tax Board. 2025 Instructions for Form FTB 3804 Pass-Through Entity Elective Tax
3
California Legislative Information. California Revenue and Taxation Code RTC 17052.10