Pa Does Not Allow Prior Year Passive Losses, So Can I Add Back Depreciation to Basis?

State Conformity with Federal Bonus Depreciation Rules

Our Bloomberg Tax & Accounting resources provide insight on how each state conforms to the federal treatment of bonus depreciation.

What qualifies for bonus depreciation?

Bonus depreciation allows taxpayers to deduct a specified percentage (30, 50, or 100%) of depreciation in the year the qualifying property is placed in service. Qualified property is defined as property that meets three requirements:

It is MACRS property with a recovery period of 20 years or less (including qualified improvement property ), depreciable computer software, water utility property, qualified film production, qualified television production, qualified live theatrical production, or an IRC §743(b) basis adjustment in qualified property.

Either its original use begins with the taxpayer, or it was not used by the taxpayer or a predecessor in the five years before the taxpayer's current placed-in-service year and it meets certain other used property acquisition requirements.

It is placed in service before 2027 (or before 2028 for certain longer production period property that is acquired before 2027, or acquired pursuant to a written binding contract that became binding before 2027).

Calculating state depreciation has long been a source of frustration and stress for tax accountants. Learn three ways you can navigate the tangled web of state conformity.

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State conformity with federal bonus depreciation rules lookup tool

State conformity with bonus depreciation rules

Bonus Depreciation (after 2007 and before 2020)

Current Year Computation of Taxable Income § 168(k)

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Corporate Income Tax Navigator, at Alabama 5.3.2.1

I.R.C. § 168(k): Alabama Conformity

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Corporate Income Tax Navigator, at Alaska 5.3.2.1

I.R.C. § 168(k): Alaska Conformity

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Corporate Income Tax Navigator, at Arizona 5.3.2.1

I.R.C. § 168(k): Arizona Conformity

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Corporate Income Tax Navigator, at Arkansas 5.3.2.1

I.R.C. § 168(k): Arkansas Conformity

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Corporate Income Tax Navigator, at California 5.3.2.1

I.R.C. § 168(k): California Conformity

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Corporate Income Tax Navigator, at Colorado 5.3.2.1

I.R.C. § 168(k): Colorado Conformity

State

Connecticut

Conformity Status

Does not conform

Description

Corporate: Connecticut does not conform to the federal treatment of bonus depreciation, because Connecticut has passed legislation decoupling from I.R.C. § 168(k). Taxpayers are required to add back any bonus depreciation deduction taken at the federal level in computing Connecticut net income, but 25% of the amount added back in the prior year may be subtracted in each of the four succeeding years. Connecticut has decoupled from I.R.C. § 168(k), and therefore does not conform to the amendments to I.R.C. § 168(k) made by the 2017 tax act. Conn. Gen. Stat. § 12-217(b)(1),as amended by2018 Conn. S.B. 11,effective May 31, 2018;Connecticut Office of the Commissioner Guidance OCG-5 (June 14, 2018);Connecticut Special Notice SN 2018(9.1) (March 1, 2019) (provides conformity information for Connecticut state income tax purposes);CITN CT 5.3.1.2.

Editors' Note: The 2017 tax act (Pub. L. No. 115-97) expands the definition of qualified property and allows full expensing for property placed in service after Sept. 27, 2017, and reduces the percentage that may be expensed after Dec. 31, 2022 underI.R.C. § 168(k). The CARES Act (Pub. L. No. 116-136) includes a technical correction to treat qualified improvement property as 15-year property eligible for 100% bonus depreciation.I.R.C. § 168(k).

Connecticut Conformity Resources

REPORT

Survey of State Tax Departments

ARTICLE

Three Ways to Detangle State Conformity

TOPIC

Property Depreciation Methods: MACRS

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Corporate Income Tax Navigator, at Connecticut 5.3.2.1

I.R.C. § 168(k): Connecticut Conformity

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Corporate Income Tax Navigator, at Delaware 5.3.2.1

I.R.C. § 168(k): Delaware Conformity

State

Florida

Conformity Status

Does not conform

Description

Corporate: Florida does not conform to the federal treatment of bonus depreciation. Amounts deducted as bonus depreciation underI.R.C. § 168(k) for assets placed in service after Dec. 31, 2007, but before Jan. 1, 2027, must be added back; however, a state deduction is permitted over the next seven years for one-seventh of the amounts that were added back.Fla. Stat. § 220.13(1)(e)(1);Florida Tax Information Publication 20C01-01 (Sept. 24, 2020);Florida Tax Information Publication 19C01-02 (July 31, 2019);CITN FL 5.3.1.2.

Editors' Note: The 2017 tax act (Pub. L. No. 115-97) expands the definition of qualified property and allows full expensing for property placed in service after Sept. 27, 2017, and reduces the percentage that may be expensed after Dec. 31, 2022 underI.R.C. § 168(k). The CARES Act (Pub. L. No. 116-136) includes a technical correction to treat qualified improvement property as 15-year property eligible for 100% bonus depreciation.I.R.C. § 168(k).

Florida Conformity Resources

REPORT

Survey of State Tax Departments

ARTICLE

Three Ways to Detangle State Conformity

TOPIC

Property Depreciation Methods: MACRS

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Subscriber-only resources

Corporate Income Tax Navigator, at Florida 5.3.2.1

I.R.C. § 168(k): Florida Conformity

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Corporate Income Tax Navigator, at Georgia 5.3.2.1

I.R.C. § 168(k): Georgia Conformity

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Subscriber-only resources

Corporate Income Tax Navigator, at Hawaii 5.3.2.1

I.R.C. § 168(k): Hawaii Conformity

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Corporate Income Tax Navigator, at Idaho 5.3.2.1

I.R.C. § 168(k): Idaho Conformity

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Corporate Income Tax Navigator, at Illinois 5.3.2.1

I.R.C. § 168(k): Illinois Conformity

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Corporate Income Tax Navigator, at Indiana 5.3.2.1

I.R.C. § 168(k): Indiana Conformity

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Corporate Income Tax Navigator, at Iowa 5.3.2.1

I.R.C. § 168(k): Iowa Conformity

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Corporate Income Tax Navigator, at Kansas 5.3.2.1

I.R.C. § 168(k): Kansas Conformity

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Corporate Income Tax Navigator, at Kentucky 5.3.2.1

I.R.C. § 168(k): Kentucky Conformity

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Corporate Income Tax Navigator, at Louisiana 5.3.2.1

I.R.C. § 168(k): Louisiana Conformity

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Corporate Income Tax Navigator, at Maine 5.3.2.1

I.R.C. § 168(k): Maine Conformity

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Corporate Income Tax Navigator, at Maryland 5.3.2.1

I.R.C. § 168(k): Maryland Conformity

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Corporate Income Tax Navigator at Massachusetts 5.3.2.1

I.R.C. § 168(k): Massachusetts Conformity

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Corporate Income Tax Navigator, at Michigan 5.3.2.1

I.R.C. § 168(k): Michigan Conformity

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Corporate Income Tax Navigator, at Minnesota 5.3.2.1

I.R.C. § 168(k): Minnesota Conformity

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Corporate Income Tax Navigator, at Mississippi 5.3.2.1

I.R.C. § 168(k): Mississippi Conformity

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Corporate Income Tax Navigator, at Missouri 5.3.2.1

I.R.C. § 168(k): Missouri Conformity

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Corporate Income Tax Navigator, at Montana 5.3.2.1

I.R.C. § 168(k): Montana Conformity

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Corporate Income Tax Navigator, at Nebraska 5.3.1.2.

I.R.C. § 168(k): Nebraska Conformity

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Use Bloomberg Tax to easily compare state conformity to federal regulations with links to analysis by leading state tax practitioners.

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Corporate Income Tax Navigator, at New Hampshire 5.3.1.2.

I.R.C. § 168(k): New Hampshire Conformity

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Corporate Income Tax Navigator, at New Jersey 5.3.1.2.

I.R.C. § 168(k): New Jersey Conformity

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Corporate Income Tax Navigator, at New Mexico 5.3.1.2.

I.R.C. § 168(k): New Mexico Conformity

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Corporate Income Tax Navigator, at New York 5.3.1.2.

I.R.C. § 168(k): New York Conformity

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Corporate Income Tax Navigator, at New York City 5.3.1.2.

I.R.C. § 168(k): New York City Conformity

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Corporate Income Tax Navigator, at North Carolina 5.3.1.2.

I.R.C. § 168(k): North Carolina Conformity

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Corporate Income Tax Navigator, at North Dakota 5.3.1.2.

I.R.C. § 168(k): North Dakota Conformity

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Corporate Income Tax Navigator, at Ohio 5.3.1.2.

I.R.C. § 168(k): Ohio Conformity

State

Oklahoma

Conformity Status

Partial conformity

Description

Corporate: Oklahoma conforms to the federal treatment of bonus depreciation. However, for assets placed in service after Dec. 31, 2007 and before Jan. 1, 2010, Oklahoma requires an addition modification to the federal taxable income for any bonus depreciation taken at the federal level.Okla. Stat. Ann. tit. 68, § 2353(3);Okla. Stat. Ann. tit. 68, § 2353(10);Okla. Stat. Ann. tit. 68, § 2358.6;CITN OK 5.3.1.

Editors' Note: The 2017 tax act (Pub. L. No. 115-97) expands the definition of qualified property and allows full expensing for property placed in service after Sept. 27, 2017, and reduces the percentage that may be expensed after Dec. 31, 2022 underI.R.C. § 168(k). The CARES Act (Pub. L. No. 116-136) includes a technical correction to treat qualified improvement property as 15-year property eligible for 100% bonus depreciation.I.R.C. § 168(k).

Oklahoma Conformity Resources

REPORT

Survey of State Tax Departments

ARTICLE

Three Ways to Detangle State Conformity

TOPIC

Property Depreciation Methods: MACRS

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Subscriber-only resources

Corporate Income Tax Navigator, at Oklahoma 5.3.1.2.

I.R.C. § 168(k): Oklahoma Conformity

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Corporate Income Tax Navigator, at Oregon 5.3.1.2.

I.R.C. § 168(k): Oregon Conformity

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Corporate Income Tax Navigator, at Pennsylvania 5.3.1.2.

I.R.C. § 168(k): Pennsylvania Conformity

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Corporate Income Tax Navigator, at Rhode Island 5.3.1.2.

I.R.C. § 168(k): Rhode Island Conformity

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Corporate Income Tax Navigator, at South Carolina 5.3.1.2.

I.R.C. § 168(k): South Carolina Conformity

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Use Bloomberg Tax to easily compare state conformity to federal regulations with links to analysis by leading state tax practitioners.

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Corporate Income Tax Navigator, at Tennessee 5.3.1.2.

I.R.C. § 168(k): Tennessee Conformity

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Corporate Income Tax Navigator, at Texas 5.3.1.2.

I.R.C. § 168(k): Texas Conformity

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Corporate Income Tax Navigator, at Utah 5.3.1.2.

I.R.C. § 168(k): Utah Conformity

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Corporate Income Tax Navigator, at Vermont 5.3.1.2.

I.R.C. § 168(k): Vermont Conformity

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Corporate Income Tax Navigator, at Virginia 5.3.1.2.

I.R.C. § 168(k): Virginia Conformity

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Use Bloomberg Tax to easily compare state conformity to federal regulations with links to analysis by leading state tax practitioners.

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Subscriber-only resources

Corporate Income Tax Navigator, at West Virginia 5.3.1.2.

I.R.C. § 168(k): West Virginia Conformity

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Corporate Income Tax Navigator, at Wisconsin 5.3.1.2.

I.R.C. § 168(k): Wisconsin Conformity

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Your guide through the state depreciation maze

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State conformity resources

ARTICLE

Pennsylvania's Complicated History with Bonus Depreciation

In the case of depreciation, it is often not as simple as determining whether the state follows IRC Section 168(k) bonus depreciation. Pennsylvania is one of the clear examples of a state taking advantage of this flexibility and the resulting headache for corporate taxpayers.

ARTICLE

California Requires Corporations to Follow Federal ADR System Provisions

Corporate taxpayers doing business in California often share the sentiment that tax compliance and planning in the state can be as cumbersome and complex as federal efforts. Tax depreciation is one such area where California state rules differ significantly from the federal rules.

ARTICLE

Depreciation Challenges for "Flip-Flop" Conformity States

Keeping up with tax law at the state level has always been challenging for corporate taxpayers, especially because states do not consistently conform to the Internal Revenue Code (IRC). States that have gone back and forth between conforming and not conforming with federal bonus depreciation ("flip-flop" states) present added complexity for taxpayers because of differing treatment across years.

ARTICLE

Tax Reform Muddies the Water on Bonus Depreciation

The Treasury and Internal Revenue Service (IRS), on Sept. 13, 2019, released final regulations under Internal Revenue Code section 168(k) regarding the new 100% bonus depreciation that allows businesses to fully expense qualified assets when placed in service. The final regulations provide anticipated clarity for the proposed regulations that were issued in August 2018.

WEBINAR

Asset Management Strategy Post-Tax Reform

The Tax Cuts & Jobs Act of 2017 (TCJA) was intended to spur economic growth in the U.S. in several ways, including expansion of immediate expensing for asset purchases. However, taking bonus depreciation may not always be the best option for businesses. Depending on the nature of your business, your profit/loss position, and your capitalization procedures, the optimum strategy for minimizing tax may vary. Join Bloomberg Tax & Accounting to learn about various asset management strategies and how they may apply to your company.

ARTICLE

Three Ways to Detangle State Conformity

Calculating state depreciation has long been a source of frustration and stress, with tax accountants going cross-eyed staring at complicated spreadsheets while under the looming threat of audits or fines. Learn three ways to detangle state conformity.

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Pa Does Not Allow Prior Year Passive Losses, So Can I Add Back Depreciation to Basis?

Source: https://pro.bloombergtax.com/state-conformity-with-federal-depreciation-rules/

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