Does a federal accounting method change automatically apply for California?

Why California is different

Federal practice has trained taxpayers to think of most method changes as routine. The Internal Revenue Service publishes an annually updated list of automatic changes, currently Rev. Proc. 2025-23, as modified by Rev. Proc. 2026-32 (Sept. 4, 2026) for research expenditure changes under sections 174 and 174A, issued under the Rev. Proc. 2015-13 procedures, and a taxpayer files Form 3115, implements the change, and computes the section 481(a) adjustment without ever receiving individualized permission. California does not apply the federal automatic change procedures of their own force; what it grants is automatic California consent to a California-only change that would be eligible for automatic consent by the Internal Revenue Service where California conforms to the applicable Internal Revenue Code section (Franchise Tax Board Notice 2024-01, Section II.A), alongside deemed consent for changes made federally. The consent requirement itself is statutory. For corporations, Rev. and Tax. Code section 24651(e) requires a taxpayer that changes its method of accounting to secure the consent of the Franchise Tax Board before computing income under the new method, except as otherwise expressly provided, and the State Board of Equalization sustained Franchise Tax Board adjustments where a taxpayer changed methods without requesting that consent (Appeal of First Federal Savings and Loan Assn. of San Diego, Cal. St. Bd. of Equal., Dec. 7, 1970; Appeal of Bay Area Drywall, Inc., Cal. St. Bd. of Equal., Sept. 1, 1966). For personal income tax, Rev. and Tax. Code section 17551(a) adopts Internal Revenue Code section 446(e), which carries the same consent requirement. Federal consent substitutes for the Franchise Tax Board's only through conformity: where California conforms to the federal provision at issue, a valid federal election or consent produces a deemed California election or consent under the conformity statutes (see Rev. and Tax. Code sections 17024.5(f) and 23051.5(f)). The current procedural expression of that position is Franchise Tax Board Notice 2024-01, which superseded Franchise Tax Board Notice 2020-04; the framework traces back through Franchise Tax Board Notice 2000-8, with subject-specific installments along the way, including Franchise Tax Board Notice 2017-03, which withdrew a 1996 notice and adopted the federal procedures for previously unclaimed depreciation and amortization while stating that the Franchise Tax Board does not provide automatic consent to those changes, which may be made only by a deemed California election or with the FTB's prior consent. Notice 2024-01 does not mention Notice 2017-03 or state that it is superseded, and the two notices are not reconciled: Notice 2017-03 denies automatic consent for those changes, while Notice 2024-01, Section II.A, would grant automatic California consent to a federally automatic change where California conforms. As a matter of practice judgment rather than Franchise Tax Board guidance, the conservative course for a California-only change in previously unclaimed depreciation or amortization is an advance request under Section II.B.

An older ruling qualifies the conformity headline from a different direction. In Franchise Tax Board Legal Ruling 95-6 (Nov. 3, 1995), California had not conformed to Internal Revenue Code section 475, yet mark-to-market accounting was a permissible method under California law, and the ruling concluded that the deemed consent set forth in section 475 was sufficient for the required Franchise Tax Board consent, making the federal change an automatic change for California unless the taxpayer elected out. The ruling remains on the Franchise Tax Board's legal rulings index with no withdrawal note, and Notice 2024-01, which frames deemed consent as conformity to the underlying law being applied, does not mention it. The two sources have not been reconciled, so in a particular case the deciding question can be whether California permits the new method, not only whether California adopted the federal provision that triggered the change.

The practical architecture under Franchise Tax Board Notice 2024-01 sorts method changes into three categories. The first is deemed California consent: where a taxpayer changes a method for federal purposes and California conforms to the underlying law, the change applies for California without any action by the taxpayer, whether the federal change was automatic or made with the Internal Revenue Service's advance consent. A copy of the approved federal election goes with the original California return; the taxpayer does not separately file Form 3115 with the Franchise Tax Board, and no acknowledgment arrives, because none is issued for deemed consent changes. The second is automatic California consent, which reaches a California-only change that would be eligible for automatic consent by the Internal Revenue Service where California conforms to the applicable Internal Revenue Code section. Nothing is filed in advance; a completed Form 3115, prepared with California information, goes with the timely filed original California return for the year of change, and again no acknowledgment letter is issued. The third is the advance request. It reaches a California-only change that would not be eligible for automatic consent by the Internal Revenue Service, a taxpayer that wants to adopt for California a new method resting on a provision California does not conform to, and a taxpayer that wants California treatment different from the federal treatment. It is not a standstill filing: where federal law requires a change under a provision California does not conform to, a California method that remains permissible under California law stays in place without any action, and no Franchise Tax Board consent or Form 3115 is needed to keep it (Notice 2024-01, Section I, Example 3). A federal change made with the Internal Revenue Service's advance consent carries into California without a separate request where California conforms to the underlying law. Advance requests go to the Franchise Tax Board itself, addressed to the Change in Accounting Periods and Methods Coordinator, using the federal forms adapted for California and identified with the taxpayer's California corporation number and a cover letter, and they must be filed at least sixty days prior to the taxpayer's original return due date for the year of change, including permissible extensions. The Franchise Tax Board's stated reason for the sixty-day period is to give it sufficient time to review the request and issue a determination letter (Notice 2024-01, Section II.B). A request is considered denied if the Franchise Tax Board does not provide a written response within sixty days of receipt, so silence is a denial rather than a pending application, and a return filed before required consent is obtained is grounds for denial by itself. One route sits outside this framework entirely: a method change imposed by the Internal Revenue Service on examination reaches California through federal change reporting under Rev. and Tax. Code section 18622(a), which requires the taxpayer to report each change or correction within six months after the date of each final federal determination, not through Notice 2024-01.

The conformity question is the whole analysis

Because deemed consent rides on conformity, every method change carries a threshold question that federal practice never asks: does California conform to the provision this change implements? California conforms to the Internal Revenue Code as of a fixed date, moved by SB 711 (Stats. 2025, ch. 231) from January 1, 2015 to January 1, 2025 for taxable years beginning on or after January 1, 2025, subject to a long list of specific decouplings. The date move reshuffles this analysis in both directions. Method changes implementing provisions California now conforms to, which previously required an advance request to the Coordinator or produced timing differences that spread across enough years to behave like permanent state adjustments, can newly qualify for deemed or automatic California consent going forward. One caution belongs here: deemed consent under Section I of Notice 2024-01 is keyed to a federal change made in the year of change, and the notice does not address whether a California-only catch-up to a method the taxpayer already adopted federally in an earlier year rides that deemed consent or is instead a California-only change under Section II, so that case calls for its own analysis rather than an assumption either way. And the standing decouplings still cut the other way: California does not conform, for example, to the federal research expenditure changes; for personal income tax purposes it applies section 174 as it read on January 1, 2015 (Rev. and Tax. Code section 17201.1(a)), for corporation tax purposes it provides that the Tax Cuts and Jobs Act amendments to section 174 for taxable years beginning on or after January 1, 2022 do not apply (Rev. and Tax. Code section 24365(d)), and neither adopts the section 174A expensing regime added by Public Law 119-21, so a federal method change implementing either the post-2021 amortization rules or the section 174A transition does not carry into California by deemed consent, and the California computation keeps its own treatment with the state adjustments that follow. The same discipline applies to any provision on the decoupling list; the federal Form 3115 attached to the California return documents the federal change, not California's agreement with it.

The section 481(a) adjustment needs the same two-system care. Where deemed consent applies and the methods align, the federal adjustment and its spread period generally carry into the California computation, but the amount can differ, because the cumulative difference between old and new methods is computed on California basis and California history, not federal. An adjustment built on years when California conformity diverged, different depreciation, different capitalization, a different conformity era, will not equal the federal number, and pasting the federal 481(a) amount into the California return is one of the recurring errors in this area. The related article on revenue recognition changes walks through that state-by-state arithmetic in more depth.

Practice notes

The failure pattern here is silence: the federal change is filed, the California return follows the new method, and nobody asked the conformity question or attached anything. Where California in fact conformed, the cure is usually the missing attachment; where it did not, the California return is on an unconsented method and the exposure runs as long as the statute stays open, because an unconsented method change is an adjustment the Franchise Tax Board can make without sympathy. The opposite error also appears: a standstill filing made out of caution, when no filing was needed, because a still-permissible California method stays in place without Franchise Tax Board consent or a Form 3115 when a nonconforming federal provision forced the federal change. The sixty-day advance clock for California-only changes that would not qualify for automatic federal consent, for adopting a new method under a nonconforming provision, and for requests for different California treatment is the other recurring miss, since it runs from the taxpayer's original return due date, including permissible extensions, which sets the deadline months before the extended return is prepared. Silence from the Franchise Tax Board does not extend it: a request is considered denied if the FTB does not provide a written response within sixty days of receipt (Notice 2024-01, Section II.B), so an unanswered request is a denial to be addressed, not an approval to be assumed. A California-only change is not by itself what triggers that clock: where the change would have been eligible for automatic federal consent and California conforms, the California-only change receives automatic California consent, with Form 3115 filed with the return and nothing in advance. A method change memo for any significant Form 3115 should therefore answer three California questions as a matter of routine: does California conform to the provision, and if not, does the existing California method remain permissible, in which case nothing is filed to keep it; was the change made federally or, if California-only, would it have been eligible for automatic consent by the Internal Revenue Service, which answers together decide whether deemed or automatic California consent applies or a filing to the Coordinator is required; and what does the California section 481(a) adjustment equal on California attributes. Finally, the conformity date change enacted in 2025 makes this a good moment to revisit method items that were handled under the old date; a change that needed special California handling in 2023 may be a deemed consent item in 2025, and the reverse is true for anything newly decoupled. G&G State Tax Group provides California conformity and accounting method change analysis alongside its state and local tax practice.