Automatic Consent - Provided that California conforms to the underlying law and the requested change qualifies for automatic consent under the IRS’s rules, the FTB also will grant automatic consent to an accounting method or period change. No separate request need be made to the FTB, but a copy of the approved federal Form 3115 must be filed prior to or with the original California return on which the change is to be effective. The FTB will not send the taxpayer an acknowledgment letter for automatic and deemed consent items.

Nonautomatic Consent - In situations where (1) California doesn’t comply with the underlying law, (2) the taxpayer wants a change different from the federal change, or (3) the change is only for California purposes, FTB approval will be required. This is obtained by submitting a request using a completed federal Form 3115 (or Form 1128, Application to Adopt, Change, or Retain a Tax Year), at least 60 days before the return due date, including extensions. The form should be completed using California, not federal, tax information, other than the Federal Employer Identification Number. On the top of page 1, enter the California Corporation Number (CCN), if applicable. Unlike federal, California does not charge a user fee.

Taxpayers should attach their federal Form 3115 to their California return, as well as a California-specific pro forma Form 3115 showing adjustments to the impact of the accounting method change to reflect, for example, federal-to-state differences in depreciable basis, useful life, or applicable method of depreciation.

A cover letter should be attached to the front of the federal Form 3115 or Form 1128, clearly indicating that a "Change in Accounting Period" or a "Change in Accounting Method" is being requested. The name of the taxpayer requesting the change and the taxpayer's CCN must be included in the cover letter.

The form and cover letter can be mailed to the following address, or the documents can be faxed to (916) 8555557.

Franchise Tax Board Change in Accounting Periods andMethods Coordinator 

P.O. Box 1998 

Rancho Cordova, California 95812

The request will be denied if the return is filed before receiving FTB consent.

California Generally Conforms to TCJA Accounting Method Simplification - AB 91 (signed by the governor 6/27/2019) generally brings California into conformity with the accounting method simplifications made by the TCJA. The legislation is effective for tax years beginning on or after January 1, 2019. This is one year later than the Federal effective date of 2018 which creates a disparity for the 2018 tax year between federal and CA law.

Retroactive Elections - However, AB 91 also included a provision allowing taxpayers to make a retroactive election to have the new rules apply to tax year 2018. A taxpayer can retroactively adopt the new Federal small business accounting rules on either an original or amended paper-filed 2018 CA return by doing the following: