Form 3885L (2023): California Depreciation and Amortization for LLCs

Form 3885L is the California Franchise Tax Board schedule that limited liability companies use to calculate depreciation and amortization for state income tax purposes. Because California doesn’t always conform to federal depreciation rules, LLCs can’t simply copy the numbers from their federal return. This form walks you through the adjustments needed so the deduction claimed on your California return matches state law rather than IRS rules.

The “L” in the form number refers to LLCs specifically. If your business is organized as a partnership rather than an LLC, you’d instead use Form 3885P, which serves the same purpose but is built for partnership filers. Corporations have their own version of this schedule as well. Picking the right variant matters because each one ties into a different California tax return and set of instructions.

Who Needs to File This Form

Any LLC that owns depreciable business property or amortizable intangible assets and files a California return generally needs Form 3885L. This includes single-member LLCs that are disregarded for federal purposes but still owe California’s annual tax and LLC fee, as well as multi-member LLCs taxed as partnerships. If your LLC purchased equipment, vehicles, real property improvements, or intangible assets like patents or goodwill during 2023, you’ll likely have entries to report here.

The form isn’t filed on its own. It’s an attachment to California Form 568, Limited Liability Company Return of Income. The totals calculated on 3885L flow through to your main return and affect your California taxable income.

Why California Depreciation Differs From Federal

California decoupled from certain federal depreciation provisions years ago, including some bonus depreciation rules and specific Section 179 limits. That means an LLC might depreciate the same asset faster on its federal return than it can on its California return, or vice versa depending on the asset type and placed-in-service date. Form 3885L exists specifically to reconcile these differences. You’ll list each asset, its cost basis, the depreciation method allowed under California law, and the resulting deduction for the current year.

The form also covers amortization of intangible assets, so if your LLC is writing off startup costs, organizational expenses, or certain leasehold improvements, those entries belong on this schedule too.

When and How to Use It

You complete Form 3885L when preparing your annual California LLC return for the 2023 tax year. The information required includes a description of each asset, the date it was placed in service, its cost or other basis, the depreciation method and recovery period used for California purposes, and the depreciation deduction claimed for the current year. If you disposed of any assets during the year, you’ll also need to account for that in your calculations, since it can affect both current depreciation and any gain or loss reported elsewhere on your return.

The PDF version of this form is fillable directly on your computer, so you can type in your figures rather than printing a blank copy and filling it out by hand. Once completed, keep a copy with your business records along with your filed Form 568, since the FTB may request supporting documentation for depreciation claims in an audit.

Businesses juggling multiple state filings sometimes run into similar depreciation reconciliation issues outside California too. If your LLC also has operations or credits in New York, forms like Form IT-640 or Form IT-641 deal with separate state-specific credit calculations that follow a similar logic of adjusting federal figures for state rules.

Getting the depreciation schedule right matters beyond just this year’s return. Since depreciation reduces an asset’s basis over time, errors on Form 3885L can carry forward and cause discrepancies in future tax years or when the asset is eventually sold. Double-checking recovery periods and methods against current FTB guidance before submitting your return is worth the extra time.