HF 2366 (LSB 5331YH (1) 84)

HOUSE FILE 2366

BY  LUKAN

A BILL FOR

An Act relating to state income taxes by authorizing taxpayers to elect to take an additional first-year depreciation allowance for purposes of the individual and corporate income tax and franchise tax, and including effective date and retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.5, subsection 2, paragraph b, subparagraph (1), Code Supplement 2011, is amended to read as follows:
   (1)  Add items of tax preference included in federal alternative minimum taxable income under section 57, except subsections (a)(1), (a)(2), and (a)(5), of the Internal Revenue Code, make the adjustments included in federal alternative minimum taxable income under section 56, except subsections (a)(4), (b)(1)(C)(iii), and (d), of the Internal Revenue Code, and add losses as required by section 58 of the Internal Revenue Code. To the extent that any preference or adjustment is determined by an individual’s federal adjusted gross income, the individual’s federal adjusted gross income is computed in accordance with section 422.7, subsections 39, 39A, 39B,
 
39C, and 53. In the case of an estate or trust, the items of tax preference, adjustments, and losses shall be apportioned between the estate or trust and the beneficiaries in accordance with rules prescribed by the director.
    Sec. 2.  Section 422.7, subsection 39A, unnumbered paragraph 1, Code Supplement 2011, is amended to read as follows:
   The
 
In the case of qualified property placed in service before January 1, 2012, the additional first-year depreciation allowance authorized in section 168(k) of the Internal Revenue Code, as enacted by Pub. L. No. 110-185, § 103, Pub. L. No. 111-5, § 1201, Pub. L. No. 111-240, § 2022, and Pub. L. No. 111-312, § 401, does not apply in computing net income for state tax purposes. If the taxpayer has taken the additional first-year depreciation allowance for purposes of computing federal adjusted gross income, then the taxpayer shall make the following adjustments to federal adjusted gross income when computing net income for state tax purposes:
    Sec. 3.  Section 422.7, Code Supplement 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  39C.
  a.  Notwithstanding any provision of law to the contrary, a taxpayer may elect to apply the additional first-year depreciation allowance authorized in section 168(k), excluding subparagraph (5), of the Internal Revenue Code, as amended by Pub. L. No. 111-312, § 401, excluding paragraph (b), for qualified property placed in service on or after January 1, 2012. The additional depreciation allowance shall be allowed for qualified property placed in service any time on or after January 1, 2012, and that otherwise meets the requirements of section 168(k) of the Internal Revenue Code, regardless of any acquisition or placed-in-service date restriction to the contrary in that section. If the taxpayer elects to take the additional first-year depreciation allowance authorized in section 168(k) of the Internal Revenue Code for state tax purposes, the deduction may be taken on amended state tax returns, if necessary. If the taxpayer does not elect to take the additional first-year depreciation allowance authorized in section 168(k) of the Internal Revenue Code for state tax purposes, the following adjustment shall be made:
   (1)  Add the total amount of depreciation taken under section 168(k) of the Internal Revenue Code for the tax year.
   (2)  Subtract the amount of depreciation allowable under the modified accelerated cost recovery system described in section 168 of the Internal Revenue Code and calculated without regard to section 168(k).
   (3)  Any other adjustments to gains or losses necessary to reflect the adjustments made in subparagraphs (1) or (2). The director shall adopt rules for the administration of this paragraph.
   b.  For purposes of this subsection, “Internal Revenue Code” means the Internal Revenue Code in effect on January 1, 2012.
    Sec. 4.  Section 422.9, subsection 2, paragraph h, Code Supplement 2011, is amended to read as follows:
   h.  For purposes of calculating the deductions in this subsection that are authorized under the Internal Revenue Code, and to the extent that any of such deductions is determined by an individual’s federal adjusted gross income, the individual’s federal adjusted gross income is computed in accordance with section 422.7, subsections 39, 39A, 39B,
 
39C, and 53.
    Sec. 5.  Section 422.35, subsection 19A, unnumbered paragraph 1, Code Supplement 2011, is amended to read as follows:
   The
 
In the case of qualified property placed in service before January 1, 2012, the additional first-year depreciation allowance authorized in section 168(k) of the Internal Revenue Code, as enacted by Pub. L. No. 110-185, § 103, Pub. L. No. 111-5, § 1201, Pub. L. No. 111-240, § 2022, and Pub. L. No. 111-312, § 401, does not apply in computing net income for state tax purposes. If the taxpayer has taken the additional first-year depreciation allowance for purposes of computing federal taxable income, then the taxpayer shall make the following adjustments to federal taxable income when computing net income for state tax purposes:
    Sec. 6.  Section 422.35, Code Supplement 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  19C.
  a.  Notwithstanding any provision of law to the contrary, a taxpayer may elect to apply the additional first-year depreciation allowance authorized in section 168(k), excluding subparagraph (5), of the Internal Revenue Code, as amended by Pub. L. No. 111-312, § 401, excluding paragraph (b), for qualified property placed in service on or after January 1, 2012. The additional depreciation allowance shall be allowed for qualified property placed in service any time on or after January 1, 2012, and that otherwise meets the requirements of section 168(k) of the Internal Revenue Code, regardless of any acquisition or placed-in-service date restriction to the contrary in that section. If the taxpayer elects to take the additional first-year depreciation allowance authorized in section 168(k) of the Internal Revenue Code for state tax purposes, the deduction may be taken on amended state tax returns, if necessary. If the taxpayer does not elect to take the additional first-year depreciation allowance authorized in section 168(k) of the Internal Revenue Code for state tax purposes, the following adjustment shall be made:
   (1)  Add the total amount of depreciation taken under section 168(k) of the Internal Revenue Code for the tax year.
   (2)  Subtract the amount of depreciation allowable under the modified accelerated cost recovery system described in section 168 of the Internal Revenue Code and calculated without regard to section 168(k).
   (3)  Any other adjustments to gains or losses necessary to reflect the adjustments made in subparagraphs (1) or (2). The director shall adopt rules for the administration of this paragraph.
   b.  For purposes of this subsection, “Internal Revenue Code” means the Internal Revenue Code in effect on January 1, 2012.
    Sec. 7.  EFFECTIVE UPON ENACTMENT.  This Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 8.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2012, for tax years beginning on or after that date.
EXPLANATION
   This bill allows a taxpayer to elect to take an additional first-year depreciation allowance in computing the individual, corporate, and franchise taxes and specifies the adjustments to be made in determining net income if such election is not made. The additional first-year depreciation allowance is permanent and available for any qualified property placed in service by the taxpayer on or after January 1, 2012, and that otherwise meets the requirements of section 168(k) of the Internal Revenue Code as it is presently enacted, regardless of any acquisition or placed-in-service date restriction to the contrary in that section. The additional allowance is equal to 50 percent of the adjusted basis of the qualified property.
   The bill also makes conforming amendments to Code sections 422.5 and 422.9 to include the additional first-year depreciation allowance in the computation of federal adjusted gross income for purposes of calculating alternative minimum taxable income and certain deductions for the state individual income tax. 
   The bill takes effect upon enactment and applies retroactively to January 1, 2012, for tax years beginning on or after that date.