Bonus Depreciation Bill Passes Pennsylvania House

The Pennsylvania House passed a bill in response to the 100% bonus depreciation enacted by the federal Tax Cuts and Jobs Act. Pennsylvania would continue requiring an addback for federal bonus depreciation. Taxpayers could then take a state subtraction.

The state subtraction for property placed in service before September 28, 2017, would be equal to:

  • the product of taking 3/7 of the amount allowed under Internal Revenue Code (IRC) §167, not including amounts allowed under §168(k); and
  • an additional deduction equal to the amount allowed under §168(k) but that has not already been taken for state purposes.

The additional deduction could be taken in earliest tax year that the property is:

  • fully depreciated for Federal tax purposes; or
  • sold or otherwise disposed of by the taxpayer.

For property placed in service after September 28, 2017:

  • the subtraction would be equal to the amount allowed under Internal Revenue Code (IRC) §167 and §168, except §168(k) would not apply; and
  • an additional deduction equal to the amount allowed under §168(k) but that has not already been taken for state purposes.

The additional deduction could be taken when the property is sold or disposed of.

The legislation is intended to address Pennsylvania’s Corporation Tax Bulletin 2017-02 stating that taxpayers must addback 100% of the federal bonus depreciation deduction.

H.B. 2017 as passed in the Pennsylvania House on March 14, 2018

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