Form 1100: California Nonresident Proration and Form 540NR

FTB Publication 1100 is the California Franchise Tax Board’s reference guide for calculating state income tax when you are a nonresident, a part-year resident, or someone who changed residency during the tax year. It is not a form you fill out and file. It is the document that explains the proration method California uses to tax people who lived in the state for only part of the year or earned California-source income while living elsewhere, and you read it alongside the Form 540NR instructions when you prepare your return.

Who Needs to Use It

Publication 1100 is written for three groups: full-year nonresidents who earned California-source income, people who moved into California during the year, and people who moved out. All three file Form 540NR, the Nonresident or Part-Year Resident Income Tax Return, instead of the standard Form 540.¹

Each group is taxed differently from a full-year resident. A nonresident owes California tax only on income from California sources. A part-year resident owes tax on all worldwide income earned during the months they lived in California, plus any California-source income earned during the months they lived elsewhere.² If you aren’t sure which category describes you, the FTB publishes a separate guide, Publication 1031, that walks through the residency factors.³

The Proration Formula at the Center of the Publication

The main thing Publication 1100 does is explain how California computes your tax. It does not just apply the ordinary brackets to your California income. Instead, it figures the rate you would have paid as a full-year resident on all your worldwide income, then charges you that rate on the California portion only. The formula:⁴

Prorated tax = California taxable income × (tax on total taxable income ÷ total taxable income)

California taxable income is your California adjusted gross income minus your prorated deductions. Total taxable income is everything you earned worldwide, calculated as if you had been a California resident all year. Tax on total taxable income is the California tax that would apply to that full amount.⁴

The effect is that California pushes you into the bracket your worldwide income justifies and then only taxes the California slice. Earn $300,000 total with $50,000 from California, and you pay tax on the $50,000 at the rate someone earning $300,000 would pay. Your itemized or standard deductions get prorated the same way, using the ratio of your California AGI to your total AGI.⁴

What Counts as California-Source Income

The formula only works if you correctly identify which income California can tax. Different income types follow different sourcing rules, and this is where filers most often go wrong.

Wages

California sources wages to the place where the work is physically performed, not where the employer is located. If you fly into California for meetings, the compensation earned on those workdays is California-source income. The FTB suggests computing it by dividing your California workdays by your total workdays, then multiplying by your total compensation.²

Independent Contractor Income

Independent contractors follow a different rule. California sources their income to where the customer receives the benefit of the service. A web developer living in Texas who builds a site for a California company may owe California tax on that income, even without setting foot in the state.²

Real Estate

Rent from California real estate is always California-source income regardless of where you live. The same goes for gains from selling California real property. If you moved out years ago and later sell a California rental, you will still get a California tax bill.²

Pass-Through Entities

Your share of income from a California partnership, S corporation, or trust is taxable in California to the extent the underlying income was derived from California sources. Publication 1100 addresses how nonresidents should handle these distributive shares.⁴

Situations That Catch Former Residents Off Guard

A large part of Publication 1100 deals with income that was earned, deferred, or set in motion while you lived in California but is paid or recognized after you leave. These are the situations that surprise people most.

Stock options. California taxes nonresident stock option income on a source basis. The portion of the option’s value attributable to services you performed in California is taxable here regardless of where you live when you exercise.
Installment sales. Payments received by a nonresident from an installment sale of California real property remain California-source income. Gains from intangible property, by contrast, are generally sourced to your state of residence at the time of the sale.
Like-kind exchanges. If you exchanged California real property for out-of-state property under IRC Section 1031, the deferred gain is sourced to California when it is eventually recognized. You may also need to file FTB Form 3840.
Capital loss carryovers. If you leave California with carryover losses, you must restate them as though you had been a nonresident in all prior years. Only the California-source portion carries forward on your 540NR.
Net operating losses. Similar restating rules apply to NOL carryovers for nonresidents and part-year residents.
Alternative minimum tax. California imposes its own AMT on nonresidents and part-year residents using a parallel proration method.

Each has its own section in Publication 1100 with worked computations.⁴

Form 540NR and Schedule CA

The return itself is Form 540NR, filed in place of the standard 540.⁵ With it you complete Schedule CA (540NR), the worksheet where you adjust your federal income and deductions for California differences, note your residency dates, and separate California-source income from income earned elsewhere.⁶ This is where the Publication 1100 proration gets applied line by line.

Withholding You May See on California Payments

California requires withholding on certain payments to nonresidents under Revenue and Taxation Code Section 18662. If you are a nonresident independent contractor performing services in California, or you receive California rents or royalties, the payer is generally required to withhold 7 percent of the gross payment. Nonresident partners and S corporation shareholders receiving California-source distributions face the same requirement. The withholding is reported on Forms 592 and 592-B, and you claim it as a credit on your 540NR.⁷

Credit for Taxes Paid to Another State

If your home state also taxes the California-source income on your 540NR, you may be looking for relief from double taxation. California’s credit on Schedule S is available to nonresidents only if you are a resident of Arizona, Guam, Oregon, or Virginia. Nonresidents from every other state cannot claim this credit on their California return and must instead claim a credit on their home-state return for the California tax paid.⁸

Part-year residents use a split approach. For the months they lived in California they follow the resident credit rules, and for the nonresident months they follow the nonresident rules above.⁸

Where to Get It

Publication 1100 is posted on the Franchise Tax Board’s website under forms and publications. There is nothing to submit. You read it alongside the Form 540NR instructions and use its formulas to compute your tax. If you also need to confirm your residency status before applying any of it, Publication 1031 is the companion reference.⁴

1
Franchise Tax Board. 2025 540NR Booklet
2
Franchise Tax Board. Part-Year Resident and Nonresident
3
Franchise Tax Board. FTB Publication 1031 – Guidelines for Determining Resident Status
4
Franchise Tax Board. FTB Publication 1100 – Taxation of Nonresidents and Individuals Who Change Residency
5
Franchise Tax Board. What Form You Should File
6
Franchise Tax Board. 2025 Instructions for Schedule CA (540NR) California Adjustments
7
Franchise Tax Board. FTB Publication 1017 – Resident and Nonresident Withholding Guidelines
8
Franchise Tax Board. 2025 Instructions for Schedule S Other State Tax Credit