(a)
Except as provided in subdivisions (b) and (c) of this section, in the case of property of the type defined in Section 1250(c) of the Internal Revenue Code, subdivision (b) of Section 24349 shall not apply and the term “reasonable allowance” as used in subdivision (a) of Section 24349 shall include an allowance computed in accordance with regulations prescribed by the Franchise Tax Board, under any of the following methods:(1)
The straight line method,(2)
The declining balance method, using a rate not exceeding 150 percent of the rate which would have been used had the annual allowance been computed under the method described in paragraph (1), or(3)
Any other consistent method productive of an annual allowance which, when added to all allowances for the period commencing with the taxpayer’s use of the property and including the taxable year, does not, during the first two-thirds of the useful life of the property, exceed the total of such allowances which would have been used had such allowances been computed under the method described in paragraph (2). Nothing in this subdivision shall be construed to limit or reduce an allowance otherwise allowable under subdivision (a) of Section 24349 except where allowable solely by reason of paragraph (2), (3), or (4) of subdivision (b) of Section 24349.(b)
(1)Subdivision (a) of this section shall not apply, and subdivision (b) of Section 24349 shall apply in any taxable year, to a building or structure—(A)
Which is residential rental property located within the United States or any of its possessions, or located within a foreign country if a method of depreciation for such property comparable to the method provided in paragraph (2) or (3) of subdivision (b) of Section 24349 is provided by the laws of such country and(B)
The original use of which commences with the taxpayer. In the case of residential rental property located within a foreign country, the original use of which commences with the taxpayer, if the allowance for depreciation provided under the laws of such country for such property is greater than that provided under subdivision (a) of this section, but less than that provided under subdivision (b) of Section 24349, the allowance for depreciation under subdivision (b) of Section 24349 shall be limited to the amount provided under the laws of such country.(2)
For purposes of paragraph (1), a building or structure shall be considered to be residential rental property for any taxable year only if 80 percent or more of the gross rental income from such building or structure for such year is rental income from dwelling units (within the meaning of paragraph (3) of subdivision (c) of Section 24354.2. For purposes of the preceding sentence, if any portion of such building or structure is occupied by the taxpayer, the gross rental income from such building or structure shall include the rental value of the portion so occupied.(3)
Any change in the computation of the allowance for depreciation for any taxable year, permitted or required by reason of the application of paragraph (1), shall not be considered a change in a method of accounting.(c)
Subdivision (a) of this section shall not apply, and subdivision (b) of Section 24349 shall apply, in the case of property—(1)
The construction, reconstruction, or erection of which was begun before January 1, 1971, or(2)
For which a written contract entered into before January 1, 1971, with respect to any part of the construction, reconstruction, or erection or for the permanent financing thereof, was on January 1, 1971, and at all times thereafter, binding on the taxpayer.(d)
Except as provided in subdivision (e), in the case of property of the type defined in Section 1250(c) of the Internal Revenue Code acquired after December 31, 1970, the original use of which does not commence with the taxpayer, the allowance for depreciation under Sections 24349 to 24354.2, inclusive, shall be limited to an amount computed under—(1)
The straight line method, or(2)
Any other method determined by the Franchise Tax Board to result in a reasonable allowance under subdivision (a) of Section 24349, not including—(A)
Any declining balance method,(B)
The sum of the years-digits method, or(C)
Any other method allowable solely by reason of the application of paragraph (4) of subdivision (b) of Section 24349 or paragraph (3) of subdivision (a) of this section.(e)
In the case of property of the type defined in Section 1250(c) of the Internal Revenue Code which is residential rental property (as defined in paragraph (2) of subdivision (b)) acquired after December 31, 1970, having a useful life of 20 years or more, the original use of which does not commence with the taxpayer, the allowance for depreciation under Sections 24349 to 24354.2, inclusive, shall be limited to an amount computed under—(1)
The straight line method,(2)
The declining balance method, using a rate not exceeding 125 percent of the rate which would have been used had the annual allowance been computed under the method described in paragraph (1), or(3)
Any other method determined by the Franchise Tax Board to result in a reasonable allowance under subdivision (a) of Section 24349, not including—(A)
The sum of the years-digits method,(B)
Any declining balance method using a rate in excess of the rate permitted under paragraph (2), or(C)
Any other method allowable solely by reason of the application of paragraph (4) of subdivision (b) of Section 24349 or paragraph (3) of subdivision (a) of this section.(f)
(1)For purposes of subdivisions (b), (d), and (e), if property of the type defined in Section 1250(c) of the Internal Revenue Code which is not property described in subdivision (a) of Section 24349 when its original use commences, becomes property described in subdivision (a) of Section 24349 after December 31, 1970, such property shall not be treated as property the original use of which commences with the taxpayer.(2)
Subdivisions (d) and (e) shall not apply in the case of property of the type defined in Section 1250(c) of the Internal Revenue Code, acquired after December 31, 1970, pursuant to a written contract for the acquisition of such property or for the permanent financing thereof, which was, on December 31, 1970, and at all times thereafter, binding on the taxpayer.(g)
This section shall not apply to public utility property which means property used predominantly in the trade or business of the furnishing or sale of—(1)
Electrical energy, water, or sewage disposal services,(2)
Gas or steam through a local distribution system,(3)
Telephone services, or other communication services if furnished or sold by the Communications Satellite Corporation for purposes authorized by the Communications Satellite Act of 1962 (47 U.S.C. 701), or(4)
Transportation of gas or steam by pipeline, if the rates for such furnishing or sale, as the case may be, have been established or approved by a state or political subdivision thereof, by any agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any state or political subdivision thereof.
Source:
Section 24354.1, https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=RTC§ionNum=24354.1..