Legislation passed by the Pennsylvania Senate decouples Pennsylvania’s income tax from federal bonus depreciation provisions in the Federal Tax Cuts and Jobs Act of 2017 (TCJA).
As introduced, the bill allowed the temporary 100% bonus depreciation allowed by the TCJA.
Property in Service After September 28, 2017
The amended legislation leaves in place Pennsylvania’s addback for IRC Sec. 168(k) bonus depreciation. However, the legislation allows a deduction for property placed in service after September 27, 2017, equal to federal depreciation determined under:
- IRC Sec. 167; and
- IRC Sec. 168, except IRC Sec. 168(k) does not apply.
The deduction is allowed until the total amount allowed under IRC Sec. 168(k) is claimed. In the year the property is sold or disposed of, an additional deduction will be allowed. The additional deduction will be equal to the amount of federal bonus depreciation that has not been recovered.
Property in Service Before September 28, 2017
For property placed in service before September 28, 2017, an additional deduction is allowed. The deduction can be taken in the tax year the property is:
- fully depreciated;
- disposed of; or
The amount of the deduction will be equal to the amount of federal bonus depreciation that has not been recovered.
S.B. 1056, as passed by the Pennsylvania Senate on April 24, 2018