FTB Publication 1067: Guidelines for Filing a Group Form 540NR

Publication 1067 is a guidance document issued by the California Franchise Tax Board that walks tax preparers and business entities through the rules for filing a Group Nonresident Return, known as Group Form 540NR. It isn’t a standalone tax form you submit on its own — it’s the instruction manual that explains how partnerships, S corporations, and certain LLCs can file a single combined nonresident return on behalf of multiple qualifying nonresident owners, instead of each individual filing a separate California return.

The publication lays out eligibility requirements, elects-in procedures, tax computation methods, and the specific attachments the FTB expects to see with a group filing. It also addresses how estimated tax payments work for the group, what happens when a participant’s situation changes mid-year, and how to handle members who don’t qualify to be included.

Who Needs This Publication

This guidance is aimed primarily at pass-through entities — partnerships, LLCs taxed as partnerships, and S corporations — that have nonresident partners, members, or shareholders earning California-source income. Rather than requiring dozens or hundreds of individual nonresidents to each file their own Form 540NR, the entity can elect to file a single group return covering all eligible participants.

Tax professionals who prepare returns for entities with out-of-state owners are the main audience. If you handle multi-state partnerships or S corporations with California activity, understanding the group filing election can save considerable time and reduce the administrative burden on individual nonresident owners who might otherwise need to file their own state returns.

When Group Form 540NR Applies

Not every nonresident owner qualifies for inclusion in a group return. Publication 1067 spells out the criteria — generally, the nonresident must have no other California-source income beyond what flows through the electing entity, and must consent to being included in the group filing. The publication details the consent requirements and the deadlines entities must meet to make a valid election for the tax year.

It also covers what happens if a nonresident’s circumstances change — for example, if they acquire other California income sources during the year that would disqualify them from group treatment. Preparers need to catch these situations before finalizing the group return, since including an ineligible participant can create complications down the line.

Tax Computation and Rates

One of the more technical sections of Publication 1067 explains how the group tax rate is determined and applied. Since the return combines multiple taxpayers’ income into a single filing, the FTB uses specific rules to calculate the appropriate tax rate rather than simply applying a flat percentage. The publication includes worksheets and examples to illustrate how this computation works in practice, which is especially useful for preparers handling this type of filing for the first time.

This kind of state-specific computation guidance is similar in spirit to other niche state tax situations, like how New York handles separate tax on lump-sum distributions through its own dedicated form and instructions.

How to Get and Use This Document

Publication 1067 is available directly from the California Franchise Tax Board’s website as a downloadable PDF, and the version referenced here corresponds to the 2025 filing year guidance, though the FTB updates it annually to reflect current law and rate changes. It has fillable AcroForm fields, so preparers can use it interactively when working through the calculations rather than printing blank worksheets.

Because this publication supports a specific group filing mechanism, it’s often used alongside other California-specific compliance documents. Entities dealing with more complex ownership or transaction structures — say, a partnership that also had a like-kind exchange during the year — may need to cross-reference other FTB guidance, such as the instructions tied to California Form 3840 for reporting like-kind exchanges, to make sure all reporting obligations are covered correctly.

Preparers who work across multiple states will also recognize the general pattern here — group or composite return options exist in various states to simplify filing for nonresident owners, similar in concept to how New York structures certain credits and add-backs through forms like Form IT-228. Reading Publication 1067 carefully before attempting a group filing helps avoid the most common errors: missing consent forms, miscalculated group tax rates, and including nonresidents who don’t actually meet the eligibility criteria.