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New Tax Legislation – Impact on Depreciation in Pennsylvania

PA will disallow the 100% bonus depreciation with no mechanism to currently recover the depreciation for PA income tax purposes

On December 22, 2017, in response to the federal Tax Cuts and Jobs Act – which allows 100 % bonus Groebel.jpgdepreciation on certain assets, the PA Department of Revenue (“DOR”) issued Corporation Tax Bulletin 2017-02 regarding Disallowance and Recovery of 100 Percent Depreciation.  For the full PA DOR statement, click here.

PA will disallow the 100% bonus depreciation with no mechanism to currently recover the depreciation for PA income tax purposes.

This bulletin indicates that PA will require a 100% bonus depreciation deduction taken for federal income tax purposes to be added back to taxable income for PA income tax purposes.

Furthermore, the bulletin does not provide any additional mechanism for cost recovery with respect to the qualified property. Apparently, the taxpayer may take an additional deduction when the property is sold or otherwise disposed of to the extent the amount of depreciation claimed has not been fully recovered.

This current policy differs from similar policy issued in 2011.  It is important to note that this a complete reversal of previous DOR policy issued in 2011, which fully allowed the 100 % bonus depreciation under federal tax law at that time.

For more information, please contact Barry D. Groebel.