Corporate Close-Up: New Tool Yields Quick Answers to IRC Conformity Questions


The starting point for computing taxable income in most states begins with federal taxable income. But the extent to which the states conform to the Internal Revenue Code varies widely. Some states, such as Alabama, embrace the I.R.C. by conforming on a rolling basis and requiring legislation to decouple from any new amendments. Other states are more selective. For example, Arkansas generally adheres to the I.R.C., but  varies its conformity date for each individual section of its code.

Other states fall somewhere in the middle, like Georgia, which has a static I.R.C. conformity date and requires legislation to adopt any I.R.C. amendments enacted after the conformity date.

Determining which states follow which version of the I.R.C. is already fraught with complexity. However, states also vary on their conformity to specific I.R.C. provisions, even though they might otherwise “conform” to the rest of the Code. For example, while Maryland generally complies with the current version of the I.R.C., it decouples from I.R.C. provisions for the Asset Expense Election.

 To help subscribers  navigate this complex area, Bloomberg BNA has launched the I.R.C. Conformity Chart Builder. Check out a sample below:

Topic

Maryland

General

Maryland conforms to the current version of the I.R.C. unless otherwise specified. Note, amendments to the I.R.C. which the Maryland Comptroller determines to impact state income tax revenue by $5,000,000 or more are not automatically adopted and Maryland will differ from the I.R.C. Otherwise, Maryland conforms to the I.R.C. on a rolling basis, and requires legislation to decouple from new amendments. Maryland's corporate income tax is imposed on an amount of income that is determined by making various subtractions and additions to federal income after the deduction of net operating loss carryovers and special deductions. Md. Code Ann. Tax-Gen. § 10-107; Md. Code Ann. Tax-Gen. § 10-108; Md. Code Ann. Tax-Gen. § 10-304. Md. Code Ann. Tax-Gen. § 10-204(c)(2); Md. Code Ann. Tax-Gen. § 10-207(c) to (c-1); Md. Code Ann. Tax-Gen. § 10-305(d)(2); Md. Code Ann. Tax-Gen. § 10-307(f); Md. Regs. Code §03.04.03.05; Md. Comp. of the Treas., Maryland Administrative Release No. 13 (Sept. 2011). CITN MD 5.1; CITN MD 5.2.1; CITN MD 5.3.6.1; CITN MD 5.4.6.1

§ 179. Election to Expense Certain Depreciable Business Assets

No, (corporate) Maryland does not conform to the federal treatment of the asset expense election. Maryland has special rules for enhanced expensing provisions. Md. Code Ann. Tax-Gen. § 10-210.1(b)(3); Md. Code Ann. Tax-Gen. § 10-310; Md. Comp. of the Treas., Maryland Administrative Release No. 38 (Sept. 2010). CITN MD 5.2.2; CITN MD 5.3.2. CITN MD 5.4.2. No, (individual), Maryland limits the aggregate costs to be treated as Section 179 expense to $25,000, subject to the phase-out threshold of $200,000. Md. Code Ann. Tax-Gen. § 10-210.1(b)(3); Md. Comp. of the Treas., Maryland Administrative Release No. 38 (Sept. 2011). IITN MD 3.4.3.2.

 

For more information about this and other state tax issues, sign up for a free trial of the Bloomberg BNA Premier State Tax Library.

By Melissa Fernley

Follow me on Twitter: @mafernley

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