House File 102 - Introduced HOUSE FILE BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HF 23) Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to state income taxes by authorizing individuals, 2 corporations, and financial institutions to elect to take the 3 additional first=year depreciation allowance and to allow the 4 additional first=year depreciation allowance and the increased 5 expensing allowance which were deductible for a tax year for 6 which a tax return was filed prior to a certain date to be 7 deducted on the return filed for the subsequent tax year and 8 including an effective date provision and a retroactive 9 applicability date provision. 10 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 11 TLSB 1394HV 81 12 mg/sh/8 PAG LIN 1 1 Section 1. Section 422.7, subsection 39, paragraph b, Code 1 2 2005, is amended to read as follows: 1 3 b.TheA taxpayer may elect to apply the additional first= 1 4 year depreciation allowance authorized in section 168(k)(4) of 1 5 the Internal Revenue Code, as enacted by Pub. L. No. 108=27, 1 6shall applyin computing net income for state tax purposes, 1 7 for qualified property acquired after May 5, 2003, and before 1 8 January 1, 2005. If the taxpayer elects to take the 1 9 additional first=year depreciation allowance authorized in 1 10 section 168(k)(4) of the Internal Revenue Code for state tax 1 11 purposes, the deduction may be taken on amended state tax 1 12 returns, if necessary. If the taxpayer does not elect to take 1 13 the additional first=year depreciation allowance authorized in 1 14 section 168(k)(4) of the Internal Revenue Code for state tax 1 15 purposes, the following adjustment shall be made: 1 16 (1) Add the total amount of depreciation taken on all 1 17 property for which the election under section 168(k)(4) of the 1 18 Internal Revenue Code was made for the tax year. 1 19 (2) Subtract an amount equal to depreciation allowed on 1 20 such property for the tax year using the modified accelerated 1 21 cost recovery system depreciation method applicable under 1 22 section 168 of the Internal Revenue Code without regard to 1 23 section 168(k)(4). 1 24 (3) Any other adjustments to gains or losses to reflect 1 25 the adjustments made in subparagraphs (1) and (2) pursuant to 1 26 rules adopted by the director. 1 27 Sec. 2. Section 422.35, subsection 19, paragraph b, Code 1 28 2005, is amended to read as follows: 1 29 b.TheA taxpayer may elect to apply the additional first= 1 30 year depreciation allowance authorized in section 168(k)(4) of 1 31 the Internal Revenue Code, as enacted by Pub. L. No. 108=27, 1 32shall applyin computing net income for state tax purposes, 1 33 for qualified property acquired after May 5, 2003, and before 1 34 January 1, 2005. If the taxpayer elects to take the 1 35 additional first=year depreciation allowance authorized in 2 1 section 168(k)(4) of the Internal Revenue Code for state tax 2 2 purposes, the deduction may be taken on amended state tax 2 3 returns, if necessary. If the taxpayer does not elect to take 2 4 the additional first=year depreciation allowance authorized in 2 5 section 168(k)(4) of the Internal Revenue Code for state tax 2 6 purposes, the following adjustment shall be made: 2 7 (1) Add the total amount of depreciation taken on all 2 8 property for which the election under section 168(k)(4) of the 2 9 Internal Revenue Code was made for the tax year. 2 10 (2) Subtract an amount equal to depreciation allowed on 2 11 such property for the tax year using the modified accelerated 2 12 cost recovery system depreciation method applicable under 2 13 section 168 of the Internal Revenue Code without regard to 2 14 section 168(k)(4). 2 15 (3) Any other adjustments to gains or losses to reflect 2 16 the adjustments made in subparagraphs (1) and (2) pursuant to 2 17 rules adopted by the director. 2 18 Sec. 3. SPECIAL FILING PROVISIONS. Adjustments to federal 2 19 adjusted gross income for individuals and federal taxable 2 20 income for corporations made on previous tax returns filed 2 21 prior to the effective date of this section of this Act may be 2 22 required. These adjustments relate to the disallowance of 2 23 both the additional fifty percent first=year depreciation 2 24 allowance authorized in section 168(k) of the Internal Revenue 2 25 Code for assets acquired after May 5, 2003, and before January 2 26 1, 2005, and the increase in the expensing allowance 2 27 authorized in section 179(b) of the Internal Revenue Code for 2 28 tax periods beginning on or after January 1, 2003. In lieu of 2 29 filing an amended tax return, taxpayers may make these 2 30 adjustments, pursuant to rules adopted by the director of 2 31 revenue, on the next return filed subsequent to the effective 2 32 date of this section of this Act. 2 33 Sec. 4. EFFECTIVE AND RETROACTIVE APPLICABILITY DATES. 2 34 This Act, being deemed of immediate importance, takes effect 2 35 upon enactment. Sections 1 and 2 of this Act apply 3 1 retroactively to tax years ending after May 5, 2003. 3 2 EXPLANATION 3 3 This bill allows a taxpayer to elect to take the additional 3 4 first=year (bonus) depreciation allowance in computing the 3 5 individual, corporate, and franchise taxes and specifies the 3 6 adjustments to be made in determining net or taxable income if 3 7 such election is not made. This provision is retroactive to 3 8 tax years ending after May 5, 2003. 3 9 The bill allows a taxpayer that was eligible, under the 3 10 individual or corporate income tax, for the additional first= 3 11 year (bonus) depreciation allowance or the increased expensing 3 12 allowance for a tax year for which an income tax return for 3 13 that tax year was filed prior to the effective date of the 3 14 provision of the bill, to elect, in lieu of filing an amended 3 15 return, to take the bonus depreciation allowance or increased 3 16 expensing allowance in the taxpayer's subsequent tax year. 3 17 The amount of the deduction and any other adjustment as a 3 18 result of this deduction is to be computed pursuant to rules 3 19 adopted by the director of revenue. 3 20 The bill takes effect upon enactment. 3 21 LSB 1394HV 81 3 22 mg:rj/sh/8