Does California Conform to Federal Bonus Depreciation in 2025?

California does not conform to the federal restoration of 100% bonus depreciation under the One Big Beautiful Bill Act. The state conforms to the Internal Revenue Code as of January 1, 2015, per California Revenue and Taxation Code Section 17024.5(a)(1), and that date has not moved in over a decade. When OBBBA restored full first-year bonus depreciation under IRC 168(k) in July 2025, California's fixed conformity date meant the change had no effect at the state level. Practitioners preparing 2025 returns for California-resident clients must compute separate federal and state depreciation schedules for any asset eligible for bonus depreciation.

Why the Conformity Date Matters

California's January 1, 2015 conformity date means the state's tax code operates on a version of the IRC that predates three major federal tax overhauls. The Tax Cuts and Jobs Act of 2017, the SECURE Act of 2019, and OBBBA in 2025 all modified provisions that affect business returns. California adopted none of these changes automatically.

This is the defining feature of static conformity. Unlike rolling conformity states such as New York, where federal changes apply the moment the President signs a bill, California's legislature must affirmatively update the conformity date for any federal change to take effect at the state level. The legislature has not done so since 2015, despite multiple proposals to update it.

The practical result is that any federal provision enacted or amended after January 1, 2015 requires practitioners to check whether California follows, modifies, or ignores it. The California Franchise Tax Board publishes a conformity guide that covers each major federal provision and California's treatment. Tax Orator indexes this FTB conformity publication alongside California's other state guidance, so you can pull the state's own position instead of guessing.

What California Does with Depreciation

For bonus depreciation specifically, California's position is straightforward: the state does not allow bonus depreciation under IRC 168(k) at all. This is not a new position created by OBBBA. California has never conformed to federal bonus depreciation. The state decoupled from bonus depreciation provisions before its conformity date was even set at 2015.

Under California law, taxpayers must use the Modified Accelerated Cost Recovery System (MACRS) without the bonus depreciation component. The regular MACRS depreciation percentages apply based on the asset's recovery period and placed-in-service date, but the first-year 100% write-off that IRC 168(k) allows federally is not available on the California return.

California does allow Section 179 expensing, but with its own limitations. The state's Section 179 deduction limit is $25,000, with a phase-out beginning at $200,000 in qualifying property, per Revenue and Taxation Code Section 17201. Compare that to the federal Section 179 limit of $1,250,000 (as adjusted for inflation under IRC 179(b)(1)). The gap between the federal and state Section 179 limits creates another line item that requires a separate state calculation. A client who fully utilizes the federal Section 179 deduction will need an addition adjustment on the California return for the amount exceeding the state's $25,000 cap, plus a depreciation schedule for the disallowed portion spread over the asset's remaining recovery period.

The Two-Schedule Problem on a 2025 Return

Here is what the math looks like on a typical 2025 business return. A California S corporation purchases $500,000 in qualified equipment and places it in service during the tax year.

Federal return: Under OBBBA's restoration of IRC 168(k), the full $500,000 is deductible as 100% first-year bonus depreciation. Total federal depreciation deduction: $500,000.

California return: No bonus depreciation allowed. If the taxpayer elects Section 179, the California deduction is capped at $25,000 (assuming the $200,000 phase-out threshold is exceeded, which it is at $500,000). The remaining $475,000 must be depreciated over the asset's MACRS recovery period using standard tables. For 5-year property, first-year MACRS depreciation at the 200% declining balance rate is 20%, or $95,000. Total California depreciation deduction in year one: $25,000 (Section 179) + $95,000 (MACRS on the remaining $475,000) = $120,000.

The difference between the federal deduction ($500,000) and the California deduction ($120,000) is $380,000. That difference generates a California addition adjustment on the state return, and it creates a deferred deduction that the practitioner must track across future tax years as the remaining MACRS depreciation catches up.

This is one asset on one return. A client with multiple asset acquisitions across several categories needs a full parallel depreciation schedule for California. The tracking extends for 5 to 39 years depending on asset class.

Section 199A: A Different Kind of Non-Conformity

OBBBA also made the Section 199A qualified business income deduction permanent, removing its scheduled sunset on December 31, 2025. For practitioners in rolling conformity states like New York, this change flows through automatically.

California's treatment of Section 199A is simpler than its depreciation rules, but for an unexpected reason: California never adopted Section 199A at all. The QBI deduction was enacted as part of TCJA in 2017, after California's January 1, 2015 conformity date. Making it permanent under OBBBA changes nothing for California because the state never recognized the deduction in the first place.

There is no California QBI deduction. There is no California addition or subtraction adjustment related to QBI. The federal deduction simply does not exist on the state return. This is actually simpler for practitioners than the depreciation situation, because there is nothing to calculate or track. The line is blank.

What Practitioners Should Watch For

California's conformity date could change. The legislature periodically considers updating it, and when it does, the effective date and scope of any update matter enormously. An update that moves the conformity date to, say, January 1, 2025 would still not pick up OBBBA (signed July 4, 2025). An update to January 1, 2026 would pick up OBBBA but might also carry in other provisions the legislature did not intend to adopt.

Until the date moves, practitioners should:

1. Maintain parallel depreciation schedules for every California-filing client with depreciable assets.
2. Track the California Section 179 limitation separately from the federal limit.
3. Exclude the Section 199A deduction entirely on California returns.
4. Check the FTB conformity guide each filing season for any selective adoptions or rejections that might affect individual provisions.

For CPA firms handling multi-state clients, California returns consistently require more state-level adjustment work than returns in conforming states. A client operating in both California and Texas presents two entirely different conformity problems: California's static IRC conformity for income tax, and Texas's margin-based franchise tax that doesn't follow the IRC framework at all.

Tax Orator tracks California's FTB conformity publications, Revenue and Taxation Code sections, and related guidance across more than 24,000 documents covering all 50 states. The Discovery plan gives you 10 queries to test with your own California conformity questions, or the Solo Practitioner plan at $79 per month handles the steady volume of a multi-state practice.