Form 3885 - California Corporation Depreciation And Amortization - 2015 Page 2
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32015 Instructions for Form FTB 3885
Corporation Depreciation and Amortization
References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2015, and to the California Revenue and Taxation Code (R&TC).
General Information
• The first-year depreciation deduction allowed
Other Consistent Methods. Other depreciation
for new luxury autos or certain passenger
methods may be used as long as the total
In general, for taxable years beginning on or after
automobiles acquired and placed in service in
accumulated depreciation at the end of any taxable
January 1, 2015, California law conforms to the
2010 through 2015.
year during the first 2/3 of the useful life of the
Internal Revenue Code (IRC) as of January 1, 2015.
• IRC Section 613A(d)(4) relating to the exclusion
property is not more than the amount that would
However, there are continuing differences between
of certain refiners. See R&TC Section 24831.3 for
have resulted from using the declining balance
California and federal law. When California conforms
more information.
method.
to federal tax law changes, we do not always adopt
• IRC Section 168(k) relating to the 50% bonus
D Period of Depreciation
all of the changes made at the federal level. For
depreciation deduction for certain assets.
more information, go to ftb.ca.gov and search for
Under Cal. Code Regs., tit. 18, section 24349(l),
• The additional first-year depreciation of certain
conformity. Additional information can be found
California conforms to the federal useful lives of
qualified property placed in service after
in FTB Pub. 1001, Supplemental Guidelines to
property.
October 3, 2008, and the election to claim
California Adjustments, the instructions for California
additional research and minimum tax credits in
Use the following information as a guide to
Schedule CA (540 or 540NR), and the Business
lieu of claiming the bonus depreciation.
determine reasonable periods of useful life for
Entity tax booklets.
• The accelerated recovery period for depreciation
purposes of calculating depreciation. Actual facts and
of smart meters and smart grid systems.
The instructions provided with California tax forms
circumstances will determine useful life. However,
• The ten-year useful life for grapevines planted as
are a summary of California tax law and are only
the figures listed below represent the normal periods
replacements for vines subject to Phylloxera or
intended to aid taxpayers in preparing their state
of useful life for the types of property listed as shown
Pierce’s disease. California law allows a useful life
income tax returns. We include information that is
in IRS Rev. Proc. 87-56.
of five years.
most useful to the greatest number of taxpayers
• Office furniture, fixtures, machines,
• The federal special class life for gas station
in the limited space available. It is not possible to
and equipment . . . . . . . . . . . . . . . . . . . . . . 10 yrs.
convenience stores and similar structures.
include all requirements of the California Revenue
This category includes furniture and fixtures (that
• The depreciation under Modified Accelerated Cost
and Taxation Code (R&TC) in the tax booklets.
are not structural components of a building) and
Recovery System (MACRS) for corporations,
Taxpayers should not consider the tax booklets as
machines and equipment used in the preparation
except to the extent such depreciation is passed
authoritative law.
of paper or data.
through from a partnership or LLC classified as a
A Purpose
Examples include: desks; files; safes; typewriters;
partnership.
accounting, calculating, and data processing
Use form FTB 3885, Corporation Depreciation and
C Depreciation Calculation
machines; communications equipment; and
Amortization, to calculate California depreciation and
Methods
duplicating and copying equipment.
amortization deduction for corporations, including
• Computers and peripheral
partnerships and limited liability companies (LLCs)
Depreciation methods are defined in R&TC
equipment (printers, etc.). . . . . . . . . . . . . . . 6 yrs.
classified as corporations.
Sections 24349 through 24354. Depreciation
• Transportation equipment and
calculation methods, described in R&TC
S corporations must use Schedule B (100S),
automobiles (including taxis) . . . . . . . . . . . . 3 yrs.
S Corporation Depreciation and Amortization.
Section 24349, are as follows:
• General-purpose trucks:
Depreciation is the annual deduction allowed to
Straight-Line. The straight-line method divides the
Light (unloaded weight less than
cost or other basis of property, less its estimated
recover the cost or other basis of business or income
13,000 lbs.) . . . . . . . . . . . . . . . . . . . . . . . . . 4 yrs.
producing property with a determinable useful life of
salvage value, into equal amounts over the estimated
Heavy (unloaded weight 13,000 lbs.
more than one year. Generally, depreciation is used
useful life of the property. An asset may not be
or more) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 yrs.
depreciated below a reasonable salvage value.
in connection with tangible property.
• Buildings
Declining Balance. Under this method, depreciation
Amortization is an amount deducted to recover the
This category includes the structural shell of a
cost of certain capital expenses over a fixed period.
is greatest in the first year and smaller in each
building and all of its integral parts that service
Generally amortization is used for intangible assets.
succeeding year. The property must have a useful
normal heating, plumbing, air conditioning,
life of at least three years. Salvage value is not taken
fire prevention and power requirements, and
For amortizing the cost of certified pollution control
into account in determining the basis of the property,
equipment such as elevators and escalators.
facilities, use form FTB 3580, Application and
but the property may not be depreciated below a
Election to Amortize Certified Pollution Control
Type of building:
reasonable salvage value.
Facility.
Apartments. . . . . . . . . . . . . . . . . . . . . . . . . 40 yrs.
The amount of depreciation for each year is
Dwellings (including rental residences) . . . 45 yrs.
B Federal/State Differences
subtracted from the basis of the property and a
Office buildings. . . . . . . . . . . . . . . . . . . . . . 45 yrs.
Differences between federal and California laws affect
uniform rate of up to 200% of the straight-line rate is
Warehouses . . . . . . . . . . . . . . . . . . . . . . . . 60 yrs.
the calculation of depreciation and amortization. The
applied to the remaining balance.
E Depreciation Methods to Use
following lists are not intended to be all-inclusive of
For example, the annual depreciation allowances for
the federal and state conformities and differences.
Corporations may use the straight-line method
property with an original basis of $100,000 are:
For more information, refer to the R&TC.
for any depreciable property. Before using other
Declining
methods, consider the kind of property, its useful
California law conforms to federal law for the
Remaining
balance
Depreciation
life, whether it is new or used, and the date it was
following:
Year
basis
rate
allowance
acquired. Use the following chart as a general guide
• The sport utility vehicles (SUVs) and minivans
to determine which method to use:
built on a truck chassis are included in the
First. . . . . . $100,000
20%
$20,000
definition of trucks and vans when applying the
Second . . .
80,000
20%
16,000
Maximum
6,000 pound gross weight limit. See IRS Rev.
Property description
depreciation method
Third . . . . .
64,000
20%
12,800
Proc. 2003-75 for more information.
Real estate acquired 12/31/70 or earlier
Fourth . . . .
51,200
20%
10,240
• The additional first-year depreciation, or the
New (useful life 3 yrs. or more) . . . . . 200% Declining balance
election to expense the cost of the property as
Used (useful life 3 yrs. or more) . . . . . 150% Declining balance
Sum-of-the-Years-Digits Method. This method may
provided in IRC Section 179, with modification.
be used whenever the declining balance method is
Real estate acquired 1/1/71 or later
• The federal Class Life Asset Depreciation Range
allowed. The depreciation deduction is figured by
Residential rental:
(ADR) System provisions, which specifies a
New. . . . . . . . . . . . . . . . . . . . . . . . . . 200% Declining balance
subtracting the salvage value from the cost of the
useful life for various types of property. However,
Used (useful life 20 yrs. or more) . . . 125% Declining balance
property and multiplying the result by a fraction.
California law does not allow the corporation to
Used (useful life less than 20 yrs.) . . Straight-line
The numerator of the fraction is the number of years
Commercial and industrial:
choose a depreciation period that varies from the
remaining in the useful life of the property. Therefore,
New (useful life 3 yrs. or more) . . . . 150% Declining balance
specified asset guideline system.
the numerator changes each year as the life of the
Used . . . . . . . . . . . . . . . . . . . . . . . . . Straight-line
property decreases. The denominator of the fraction
California law does not conform to federal law for
Personal property
is the sum of the digits representing the years of
the following:
New (useful life 3 yrs. or more) . . . . . 200% Declining balance
useful life. The denominator remains constant every
Used (useful life 3 yrs. or more) . . . . . 150% Declining balance
• The enhanced IRC Section 179 expensing
year.
election.
See “Other Consistent Methods” information on this
page.
FTB 3885 Instructions 2015 Page 1
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