California Form Ftb 3885 - Corporation Depreciation And Amortization - 2012 Page 2
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32012 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
• The first-year depreciation deduction allowed
remaining in the useful life of the property. Therefore,
for new luxury autos or certain passenger
the numerator changes each year as the life of the
In general, for taxable years beginning on or after
automobiles acquired and placed in service in
property decreases. The denominator of the fraction
January 1, 2010, California law conforms to the
2010 through 2012.
is the sum of the digits representing the years of
Internal Revenue Code (IRC) as of January 1, 2009.
• The IRC Section 613A(d)(4) relating to the
useful life. The denominator remains constant every
However, there are continuing differences between
exclusion of certain refiners. See R&TC
year.
California and federal law. When California conforms
Section 24831.3 for more information.
Other Consistent Methods. Other depreciation
to federal tax law changes, we do not always adopt
• The IRC Section 168(k) relating to the 50% bonus
methods may be used as long as the total
all of the changes made at the federal level. For
depreciation deduction for assets acquired in tax
accumulated depreciation at the end of any taxable
more information, go to ftb.ca.gov and search for
years 2008 through 2012 and placed in service
year during the first 2/3 of the useful life of the
conformity. Additional information can be found
before 2013 (or before 2014 for certain qualifying
property is not more than the amount that would
in FTB Pub. 1001, Supplemental Guidelines to
property). For property acquired and placed in
have resulted from using the declining balance
California Adjustments, the instructions for California
service after September 8, 2010, and before 2012
method.
Schedule CA (540 or 540NR), and the Business
(before 2013 in the case of certain qualifying
Entity tax booklets.
D Period of Depreciation
property), the bonus depreciation deduction is
100%.
The instructions provided with California tax forms
Under Cal. Code Regs., tit. 18, section 24349(l),
• The additional first-year depreciation of certain
are a summary of California tax law and are only
California conforms to the federal useful lives of
qualified property placed in service after
intended to aid taxpayers in preparing their state
property.
October 3, 2008, and the election to claim
income tax returns. We include information that is
Use the following information as a guide to
additional research and minimum tax credits in
most useful to the greatest number of taxpayers
determine reasonable periods of useful life for
lieu of claiming the bonus depreciation.
in the limited space available. It is not possible to
purposes of calculating depreciation. Actual facts and
• The accelerated recovery period for depreciation
include all requirements of the California Revenue
circumstances will determine useful life. However,
of smart meters and smart grid systems.
and Taxation Code (R&TC) in the tax booklets.
the figures listed below represent the normal periods
• The ten-year useful life for grapevines planted as
Taxpayers should not consider the tax booklets as
of useful life for the types of property listed as shown
replacements for vines subject to Phylloxera or
authoritative law.
in IRS Rev. Proc. 87-56.
Pierce’s disease. California law allows a useful life
A Purpose
• Office furniture, fixtures, machines,
of five years.
and equipment . . . . . . . . . . . . . . . . . . . . . . 10 yrs.
Use form FTB 3885, Corporation Depreciation and
• The federal special class life for gas station
Amortization, to calculate California depreciation and
This category includes furniture and fixtures (that
convenience stores and similar structures.
are not structural components of a building) and
amortization deduction for corporations, including
• The depreciation under Modified Accelerated Cost
partnerships and limited liability companies (LLCs)
machines and equipment used in the preparation
Recovery System (MACRS) for corporations,
classified as corporations.
of paper or data.
except to the extent such depreciation is passed
through from a partnership or LLC classified as a
S corporations must use Schedule B (100S),
Examples include: desks; files; safes; typewriters,
partnership.
accounting, calculating, and data processing
S Corporation Depreciation and Amortization.
machines; communications equipment; and
C Depreciation Calculation
Depreciation is the annual deduction allowed to
duplicating and copying equipment.
recover the cost or other basis of business or income
Methods
• Computers and peripheral
producing property with a determinable useful life of
equipment (printers, etc.). . . . . . . . . . . . . . . 6 yrs.
Depreciation methods are defined in R&TC
more than one year. Generally, depreciation is used
• Transportation equipment and
Sections 24349 through 24354. Depreciation
in connection with tangible property.
automobiles (including taxis) . . . . . . . . . . . . 3 yrs.
calculation methods, described in R&TC
Amortization is an amount deducted to recover the
• General-purpose trucks:
Section 24349, are as follows:
cost of certain capital expenses over a fixed period.
Light (unloaded weight less than
Straight-Line. The straight-line method divides the
Generally amortization is used for intangible assets.
13,000 lbs.) . . . . . . . . . . . . . . . . . . . . . . . . . 4 yrs.
cost or other basis of property, less its estimated
Heavy (unloaded weight 13,000 lbs.
For amortizing the cost of certified pollution control
salvage value, into equal amounts over the estimated
or more) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 yrs.
facilities, use form FTB 3580, Application and
useful life of the property. An asset may not be
• Buildings
Election to Amortize Certified Pollution Control
depreciated below a reasonable salvage value.
Facility.
This category includes the structural shell of a
Declining Balance. Under this method, depreciation
building and all of its integral parts that service
B Federal/State Differences
is greatest in the first year and smaller in each
normal heating, plumbing, air conditioning,
succeeding year. The property must have a useful
Differences between federal and California laws affect
fire prevention and power requirements, and
life of at least three years. Salvage value is not taken
the calculation of depreciation and amortization. The
equipment such as elevators and escalators.
into account in determining the basis of the property,
following lists are not intended to be all-inclusive of
Type of building:
but the property may not be depreciated below a
the federal and state conformities and differences.
Apartments. . . . . . . . . . . . . . . . . . . . . . . . . 40 yrs.
reasonable salvage value.
For more information, refer to the R&TC.
Dwellings (including rental residences) . . . 45 yrs.
The amount of depreciation for each year is
California law conforms to federal law for the
Office buildings. . . . . . . . . . . . . . . . . . . . . . 45 yrs.
subtracted from the basis of the property and a
following:
Warehouses . . . . . . . . . . . . . . . . . . . . . . . . 60 yrs.
uniform rate of up to 200% of the straight-line rate is
• The sport utility vehicles (SUVs) and minivans
E Depreciation Methods to Use
applied to the remaining balance.
built on a truck chassis are included in the
definition of trucks and vans when applying the
For example, the annual depreciation allowances for
Corporations may use the straight-line method
6,000 pound gross weight limit. See federal Rev.
property with an original basis of $100,000 are:
for any depreciable property. Before using other
Proc. 2003-75 for more information.
methods, consider the kind of property, its useful
Declining
• The additional first-year depreciation, or the
life, whether it is new or used, and the date it was
Remaining
balance
Depreciation
election to expense the cost of the property as
acquired. Use the following chart as a general guide
Year
basis
rate
allowance
provided in IRC Section 179, with modification.
to determine which method to use:
• The federal Class Life Asset Depreciation Range
First. . . . . . $100,000
20%
$20,000
Maximum
(ADR) System provisions, which specifies a
Second . . .
80,000
20%
16,000
Property description
depreciation method
useful life for various types of property. However,
Third . . . . .
64,000
20%
12,800
Real estate acquired 12/31/70 or earlier
California law does not allow the corporation to
New (useful life 3 yrs. or more) . . . . . 200% Declining balance
Fourth . . . .
51,200
20%
10,240
choose a depreciation period that varies from the
Used (useful life 3 yrs. or more) . . . . . 150% Declining balance
specified asset guideline system.
Sum-of-the-Years-Digits Method. This method may
Real estate acquired 1/1/71 or later
California law does not conform to federal law for
be used whenever the declining balance method is
Residential rental:
the following:
allowed. The depreciation deduction is figured by
New. . . . . . . . . . . . . . . . . . . . . . . . . . 200% Declining balance
• The enhanced IRC Section 179 expensing election
subtracting the salvage value from the cost of the
Used (useful life 20 yrs. or more) . . . 125% Declining balance
for assets placed in service in 2010 through 2012
property and multiplying the result by a fraction.
Used (useful life less than 20 yrs.) . . Straight-line
taxable year.
The numerator of the fraction is the number of years
FTB 3885 Instructions 2012 Page 1
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