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Senate of Pennsylvania
Session of 2017 - 2018 Regular Session


Posted: January 23, 2018 09:25 AM
From: Senator Michele Brooks
To: All Senate members
Subject: Legislation to Allow Long-Standing Deductions for Depreciation in Determining Taxable Income
The recently enacted Federal Tax Cuts and Jobs Act makes major changes to federal individual and corporate income taxes. In the near future, I plan to introduce legislation regarding the corporate net income tax that will allow C-corporations doing business in Pennsylvania to spur economic growth and business investment by following the federal change that allows for temporary 100% expensing for certain business assets.

One of the most significant changes in the Federal Tax Cuts and Jobs Act is that corporations will be able to deduct 100% of the cost of their new and used capital investments (e.g. plant and equipment) immediately, for the next five years. The federal “100% bonus depreciation” rule applies through 2022 and then will be phased down over the succeeding five years.

In response to the new federal bonus depreciation rules, the Pennsylvania Department of Revenue issued Corporation Tax Bulletin 2017-02. The bulletin interprets certain sections of Pennsylvania tax law as requiring the amount of a 100% deduction under federal rules to be added back to Pennsylvania taxable income and provides no additional mechanism for cost recovery with respect to the qualified property until it is either sold or disposed of in some other manner. The bulletin not only “decouples” Pennsylvania from the federal rules, but it denies businesses the ability to claim depreciation deductions indefinitely. Determining net income by expensing assets through the use of depreciation is a basic, long-standing tax accounting principle. By disallowing this important deduction indefinitely, Pennsylvania would be unique among states and would create a business climate that discourages investment and spawns economic contraction rather than opportunity and expansion.

Please join me in cosponsoring this important legislation, which will treat corporations doing business in Pennsylvania fairly by allowing them to expense business assets using depreciation methods similar to those contained in the new federal law.

If Corporation Tax Bulletin 2017-02 is not reversed, Pennsylvania will perhaps become the only state in the nation that does not allow timely deductions for depreciation in determining a corporation’s taxable income.

Introduced as SB1056