Per California's Franchise Tax Board, the following are some of the most important tax law changes to the 2010 Individual Income Tax Returns.

1.Net Operating Loss
For taxable years beginning in 2010 and 2011, California suspended the net operating loss (NOL) carryover deduction. Taxpayers may continue to compute and carryover NOLs during the suspension period. However, taxpayers with modified adjusted gross income of less than $300,000 or with disaster loss carryovers are not affected by the NOL suspension rules.

Also, California modified the NOL carryback provision. For more information, see form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations — Individuals, Estates, and Trusts.

2.Mortgage Forgiveness Debt Relief Extended
California law conforms, with modifications, to federal mortgage forgiveness debt relief for discharges occurring on or after January 1, 2009. Federal law limits the amount of qualified principal residence indebtedness to $2,000,000 ($1,000,000 for married filing separate).

California law limits the amount of qualified principal residence indebtedness to $800,000 ($400,000 for married/RDP filing separate) and debt relief to $500,000 ($250,000 for married/RDP filing separate).

3.Hokie Spirit Memorial Fund Exclusion
California law conforms to federal law to exclude from income any amount received from the Hokie Spirit Memorial Fund for the events at Virginia Polytechnic Institute and State University on April 16, 2007.

4. Income Exclusion of Federal Energy Grants
California law conforms to federal law to exclude from income any federal energy grants provided in lieu of federal energy credits.

5.Charitable Contributions for 2010 Haiti Earthquake Disaster
California law conforms to federal law which allows a 2009 charitable contribution deduction for cash contributions made after January 11, 2010, and before March 1, 2010, for the relief of victims in areas affected by the earthquake in Haiti on January 12, 2010.

6.Tax Computation for Certain Children with Investment Income
For taxable years beginning on or after January 1, 2010, California conforms to the provision age of children to 18 and under or a student under age 24 for elections made by parents reporting their child’s interest and dividends.

7. Income Exclusion for In-Home Supportive Services (IHSS) Supplementary Payments
For taxable years beginning on or after January 1, 2010, California law allows an exclusion from gross income for IHSS supplementary payments received by IHSS providers.

8. New Home/First-Time Buyer Credit
To claim the New Home/First‑Time Buyer Credit of 2010 you must have received a Certificate of Allocation from the FTB. The credits were available if you purchased a qualified principal residence on or after May 1, 2010, and on or before December 31, 2010. Additionally, the New Home Credit is available if you purchase a qualified principal residence on or after January 1, 2011, and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010. For more information, go to ftb.ca.gov and search for home credit or get FTB Pub. 3549, New Home/First-Time Buyer Credit.

9. Backup Withholding
Beginning on or after January 1, 2010, with certain limited exceptions, payers that are required to withhold and remit backup withholding to the IRS are also required to withhold and remit to the FTB. The California backup withholding rate is 7% of the payment. For California purposes, dividends, interests, and any financial institutions release of loan funds made in the normal course of business are exempt from backup withholding.

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