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California only allows a depreciation deduction if the tertiary injectant qualifies as property used in a trade or business or is held for the production of income. If you have deducted tertiary injectant amounts on your federal tax return which do not qualify for the California allowable deductions, enter the amounts on Schedule CA of Form 540 or Form 540NR, line 12, column C. You should attach any schedules used in the calculations of the tertiary injectants placed in service during the tax year. You should also complete the California depreciation form FTB 3885A to take any of the California allowed deductions. |
| Reduced recovery periods for fruit bearing grapevines replaced in a California vineyard on or after January 1, 1992, as a result of phylloxera infestation on or after January 1, 1997, as a result of Pierce’s disease |
| Phylloxera and Pierce’s disease infestation of grape crops rapidly destroyed many grape farmers’ businesses. Pierce’s disease and phylloxera infestations are the nightmares which preoccupy grape farmer’s minds. These diseases can cause the grape farmers to go bankrupt in a short period of time. When Phylloxera disease first was discovered, it ruined many European families and nearly destroyed every wine producing grape vine in the world. In an attempt to find a cure, the Phylloxera disease spread to the United States and destroyed many grape vines in Napa California. Pierce’s disease seems to be spread or transmitted by the Phylloxera microscopic louse and other larve types of insects. Federal tax law has allowed for accelerated recovery periods for grapevines replaced in California vineyards on or after January 1, 1992 as a result of the phylloxera infestation on or after January 1, 1997 and as a result of Pierce’s disease. Federal law requires a 10-year recovery period for fruit bearing vines for purposes of accelerated cost recovery and a 20-year recovery period for an alternative depreciation system. However, California only allows 5 years for accelerated depreciation cost recovery and 10-year recovery periods for alternative depreciation systems. For phylloxera infestation prepare a schedule for depreciation computations of grapevines placed in service on or after January 1, 1992 and also for grapevines placed in service on or after January 1, 1997 for Pierce’s disease. Then, fill out Form FTB 3885A and attach both Form 3885A and the schedules showing your calculations to your California tax return. Many grape farms are in northern California’s Napa county. It behooves California to offer tax incentives to ameliorate the farmer’s situation for a faster recovery. A disaster in the grape industry can drastically devastate the California economy. |
| Income forecast method of depreciation |
| If you have clients who are in the entertainment industry, you need to know how to depreciate certain intangibles such as films and sound recordings which are customary in the entertainment industry. If you are taking depreciation deductions for certain intangibles such as films, videos, sound recordings, copyrights, books or patents, you can choose the income forecast method of depreciation. The other option is to use the straight line depreciation method. The entertainment industry products usually generate most of their income in the first years of its inception and for that reason using the forecast method of depreciation is more advantageous that using the straight line depreciation option. If you have assets which are placed in service after August 5, 1997, federal only allows the income forecast method of depreciation on films, video tapes, sound recordings, copyrights, books, patents and certain other specified similar property. California did not conform to this requirement only for assets placed in service after December 31, 1997. If you have any depreciation for California property which is placed in service before December 31, 1997 and which deviate from the federal, use form FTB 3885A to figure the depreciation adjustment to enter on Schedule CA of Form 540 or Form 540NR. You only need to worry about using the income forecast method of depreciation for certain depreciable intangibles that are common in the media and the entertainment industry. The income forecast method of depreciation is more advantageous over the straight line method of depreciation due to the nature of entertainment products being depreciated. If you have tax clients in the entertainment business, make sure you allow them the most advantageous depreciation method to use and most of the time it will be the income forecast method of depreciation. |
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| Revised: 07/09/15 |
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