California Form 3885 - Corporation Depreciation And Amortization - 2011 Page 2
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32011 Instructions for Form FTB 3885
Corporation Depreciation and Amortization
References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2009, and to the California Revenue and Taxation Code (R&TC).
General Information
California law does not conform to federal law for
The numerator of the fraction is the number of years
the following:
remaining in the useful life of the property. Therefore,
In general, for taxable years beginning on or after
• The enhanced IRC Section 179 expensing election
the numerator changes each year as the life of the
January 1, 2010, California law conforms to the
for assets placed in service in 2010 or 2011
property decreases. The denominator of the fraction
Internal Revenue Code (IRC) as of January 1, 2009.
taxable year.
is the sum of the digits representing the years of
However, there are continuing differences between
• The first-year depreciation deduction allowed
useful life. The denominator remains constant every
California and federal law. When California conforms
for new luxury autos or certain passenger
year.
to federal tax law changes, we do not always adopt
automobiles acquired and placed in service in
Other Consistent Methods. Other depreciation
all of the changes made at the federal level. For
2010.
methods may be used as long as the total
more information, go to ftb.ca.gov and search for
• The IRC Section 613A(d)(4) relating to the
accumulated depreciation at the end of any taxable
conformity. Additional information can be found
exclusion of certain refiners. See R&TC
year during the first 2/3 of the useful life of the
in FTB Pub. 1001, Supplemental Guidelines to
Section 24831.3 for more information.
property is not more than the amount that would
California Adjustments, the instructions for California
• The 50% bonus depreciation deduction [IRC
have resulted from using the declining balance
Schedule CA (540 or 540NR), and the Business
Section 168(k)] for assets acquired and placed
method.
Entity tax booklets.
in service during 2008 through 2010, and during
D Period of Depreciation
2011 for certain qualifying property.
The instructions provided with California tax forms
• The additional first-year depreciation of certain
are a summary of California tax law and are only
Under Cal. Code Regs., tit. 18, section 24349(l),
qualified property placed in service after
intended to aid taxpayers in preparing their state
California conforms to the federal useful lives of
October 3, 2008, and the election to claim
income tax returns. We include information that is
property.
additional research and minimum tax credits in
most useful to the greatest number of taxpayers
Use the following information as a guide to
lieu of claiming the bonus depreciation.
in the limited space available. It is not possible to
determine reasonable periods of useful life for
• The accelerated recovery period for depreciation
include all requirements of the California Revenue
purposes of calculating depreciation. Actual facts and
of smart meters and smart grid systems.
and Taxation Code (R&TC) in the tax booklets.
circumstances will determine useful life. However,
• The ten-year useful life for grapevines planted as
Taxpayers should not consider the tax booklets as
the figures listed below represent the normal periods
replacements for vines subject to Phylloxera or
authoritative law.
of useful life for the types of property listed as shown
Pierce’s disease. California law allows a useful life
A Purpose
in IRS Rev. Proc. 87-56.
of five years.
• Office furniture, fixtures, machines,
Use form FTB 3885, Corporation Depreciation and
• The federal special class life for gas station
and equipment . . . . . . . . . . . . . . . . . . . . . . 10 yrs.
Amortization, to calculate California depreciation and
convenience stores and similar structures.
This category includes furniture and fixtures (that
amortization deduction for corporations, including
• The depreciation under Modified Accelerated Cost
partnerships and limited liability companies (LLCs)
are not structural components of a building) and
Recovery System (MACRS) for corporations,
classified as corporations.
machines and equipment used in the preparation
except to the extent such depreciation is passed
of paper or data.
through from a partnership or LLC classified as a
S corporations must use Schedule B (100S),
partnership.
Examples include: desks; files; safes; typewriters,
S Corporation Depreciation and Amortization.
accounting, calculating, and data processing
C Depreciation Calculation
Depreciation is the annual deduction allowed to
machines; communications equipment; and
recover the cost or other basis of business or income
Methods
duplicating and copying equipment.
producing property with a determinable useful life of
• Computers and peripheral
Depreciation methods are defined in R&TC
more than one year. Generally, depreciation is used
equipment (printers, etc.). . . . . . . . . . . . . . . 6 yrs.
Sections 24349 through 24354. Depreciation
in connection with tangible property.
• Transportation equipment and
calculation methods, described in R&TC
Amortization is an amount deducted to recover the
automobiles (including taxis) . . . . . . . . . . . . 3 yrs.
Section 24349, are as follows:
cost of certain capital expenses over a fixed period.
• General-purpose trucks:
Straight-Line. The straight-line method divides the
Generally amortization is used for intangible assets.
Light (unloaded weight less than
cost or other basis of property, less its estimated
13,000 lbs.) . . . . . . . . . . . . . . . . . . . . . . . . . 4 yrs.
For amortizing the cost of certified pollution control
salvage value, into equal amounts over the estimated
Heavy (unloaded weight 13,000 lbs.
facilities, use form FTB 3580, Application and
useful life of the property. An asset may not be
or more) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 yrs.
Election to Amortize Certified Pollution Control
depreciated below a reasonable salvage value.
• Buildings
Facility.
Declining Balance. Under this method, depreciation
This category includes the structural shell of a
B Federal/State Differences
is greatest in the first year and smaller in each
building and all of its integral parts that service
succeeding year. The property must have a useful
Differences between federal and California laws affect
normal heating, plumbing, air conditioning,
life of at least three years. Salvage value is not taken
the calculation of depreciation and amortization. The
fire prevention and power requirements, and
into account in determining the basis of the property,
following lists are not intended to be all-inclusive of
equipment such as elevators and escalators.
but the property may not be depreciated below a
the federal and state conformities and differences.
Type of building:
reasonable salvage value.
For more information, refer to the R&TC.
Apartments. . . . . . . . . . . . . . . . . . . . . . . . . 40 yrs.
The amount of depreciation for each year is
California law conforms to federal law for the
Dwellings (including rental residences) . . . 45 yrs.
subtracted from the basis of the property and a
following:
Office buildings. . . . . . . . . . . . . . . . . . . . . . 45 yrs.
uniform rate of up to 200% of the straight-line rate is
• The federal grant tax treatment for specified
Warehouses . . . . . . . . . . . . . . . . . . . . . . . . 60 yrs.
applied to the remaining balance.
energy property.
E Depreciation Methods to Use
• The useful life of motor sports entertainment
For example, the annual depreciation allowances for
complex.
property with an original basis of $100,000 are:
Corporations may use the straight-line method
• The sport utility vehicles (SUVs) and minivans
for any depreciable property. Before using other
Declining
built on a truck chassis are included in the
methods, consider the kind of property, its useful
Remaining
balance
Depreciation
definition of trucks and vans when applying the
life, whether it is new or used, and the date it was
Year
basis
rate
allowance
6,000 pound gross weight limit. See federal Rev.
acquired. Use the following chart as a general guide
Proc. 2003-75 for more information.
First. . . . . . $100,000
20%
$20,000
to determine which method to use:
• The additional first-year depreciation, or the
Second . . .
80,000
20%
16,000
Maximum
election to expense the cost of the property as
Third . . . . .
64,000
20%
12,800
Property description
depreciation method
provided in IRC Section 179, with modification.
Fourth . . . .
51,200
20%
10,240
Real estate acquired 12/31/70 or earlier
• The federal Class Life Asset Depreciation Range
New (useful life 3 yrs. or more) . . . . . 200% Declining balance
(ADR) System provisions, which specifies a
Sum-of-the-Years-Digits Method. This method may
Used (useful life 3 yrs. or more) . . . . . 150% Declining balance
useful life for various types of property. However,
be used whenever the declining balance method is
Real estate acquired 1/1/71 or later
California law does not allow the corporation to
allowed. The depreciation deduction is figured by
Residential rental:
choose a depreciation period that varies from the
subtracting the salvage value from the cost of the
New. . . . . . . . . . . . . . . . . . . . . . . . . . 200% Declining balance
specified asset guideline system.
property and multiplying the result by a fraction.
Used (useful life 20 yrs. or more) . . . 125% Declining balance
Used (useful life less than 20 yrs.) . . Straight-line
FTB 3885 Instructions 2011 Page 1
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