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| time and customer loyalty over time. Goodwill is usually built up as customers get to know the business as a result the business providing a great service. Goodwill of a business and customer loyalty comes with a good name, a good reputation and other factors that have to do with the way the business treats its customers. Goodwill is also the trust that customers place on the business and how the customers add a certain value to the manner in which the business conducts itself. Other intangibles are items that are on paper similar to goodwill. Intangibles are more virtual such as going concern value, workforce in place, patents and licenses to name a few. These don’t have any physicality to them but they are often very valuable. Intangible (section 197 intangibles) such as goodwill must be amortized over 180 months per federal rules. |
| These types of intangibles receive the same treatment for California tax purposes. However, there is one exception. For section 197 property acquired before January 1, 1994, basis must be amortized over the remaining federal amortization period. Calculate the adjustment on Form FTB 3885A and then transfer it to Schedule CA of Form 540 or Form 540NR. If you have to amortize certain intangibles such as goodwill, there is a tiny difference in the California allowed treatment of these dependent on when they were acquired. |
| Business property moves into California |
| When you move your business to California, you must adjust to the beautiful capricious weather and make certain other adjustments to your business such as your depreciation methods. However, if the method of depreciation used in the other state is a California acceptable method, there is nothing to worry about. You can just continue using it as if you never moved. Your depreciation may be different if you lived in a state other than California. All depreciation methods used must be acceptable to California. If you moved your business property to California, you must adjust your depreciation and the useful life of the property to acceptable California methods. If you were using an unacceptable depreciation method before your move into California, use the straight-line method to compute the basis in the property. |
| Enterprise Zone (EZ), or Local Agency Military Base Recovery Area (LAMBRA) business expense deduction |
| California offers tax incentives to empower certain economically challenged business communities. The LAMBRA program is a program which was developed to attract reinvestment and to create employment opportunities on certain former military bases in California which were closed. The tax benefits of the program are similar to the Enterprise Zone Program. The benefits include using up to 100% Net Operating Loss (NOL) carry-forward up to 15 years. Firms can earn state tax credits of $31,544 or more for each qualified employee who they hire up to $2 million per year. These are among the many California tax benefits for LAMBRA program members. The California enterprise zone or the Local Agency Military Base Recovery Area (LAMBRA) businesses may elect to immediately expense up to $40,000 of the cost of qualified business property. |
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For federal purposes, you can take a section 179 deduction for any assets that qualify for the section 179 deduction. Federal has no deduction or similar deduction for the enterprise zone or LAMBRA business. California has a section 179 deduction for qualified business property. However, the deduction is a different amount than that of federal. If you take a section 179 deduction for California tax purposes, you may not use that property to calculate either the Enterprise Zone (EZ) or the Local Agency Military Base Recovery Area (LAMBRA) business expense deduction. By the way, you can only take an EZ or LAMBRA business expense deduction on property purchased or placed in service on or before December 31, 2013. To calculate these business expense deductions use Form FTB 3805Z or Form FTB 3807. Once you calculate the business deductions on these forms, transfer the amounts over to Schedule CA of Form 540 or Form 540NR, line 12, line 17 or line 18, column B. If you have any depreciation deduction to make, use Form FTB 3885A and then transfer the amounts to Schedule CA of Form 540 or Form 540NR. In the form of tax breaks or incentives, California is able to fortify certain communities and their |
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| Revised: 07/09/15 |
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