Weekly Round-Up: Iowa, Virginia Take Opposite Positions on Conformity to Federal Bonus Depreciation


Iowa and Virginia both recently updated their state tax codes to include references to the version of the Internal Revenue Code that includes amendments made under the American Taxpayer Relief Act of 2012 (ATRA). But the two states took divergent paths in conforming to federal bonus depreciation provisions.  

Iowa Gov. Terry Branstad (R) signed legislation that will update the state's tax code to incorporate changes made to the Internal Revenue Code during the past year, including the American Taxpayer Relief Act of 2012, Mark Wolski writes in this week's issue of the Weekly State Tax Report.

The bill was introduced at the request of the Iowa Department of Revenue and does not couple with the federal code's bonus depreciation provision. DOR spokeswoman Victoria L. Daniels said the state has chosen not to couple with the federal code's depreciation provision for some time. She said the state initially chose not to because of an expected loss in revenues. Since that time, she said, the Legislature has continued to not couple with the provision.

Meanwhile, Virginia enacted legislation to update its corporate and individual income tax provisions to conform with the Internal Revenue Code as in effect on Jan. 2, which includes amendments by the American Taxpayer Relief Act of 2012, Bloomberg BNA State Tax Law Editor Erin McManus writes in this week's issue of the WSTR.

The Virginia Department of Taxation issued Tax Bulletin 13-3 to provide guidance on the legislation including a list of federal provisions with which Virginia will continue to not conform to. Included in this list is bonus depreciation under I.R.C. § 168(k).                                                                                     

The American Taxpayer Relief Act of 2012 (ATRA), which President Obama signed into law Jan. 2 leaves intact most of the business tax breaks such as bonus depreciation that first took effect under President Bush.

ATRA extends for one additional year the current I.R.C. § 168(k) 50 percent bonus depreciation provision that applied to qualified property acquired in 2008 through 2012. As a result, instead of sunsetting in 2013, bonus 50 percent depreciation will apply to property acquired and placed in service before Jan. 1, 2014. For certain aircraft and longer production period property, the "placed in service" deadline is extended to Jan. 1, 2015.

For a complete look at the developments in Iowa and Virginia, check out this week's issue of the Weekly State Tax Report. For a complete look at the impact of ATRA on bonus depreciation, enhanced expensing and credits, check out the article by Bloomberg BNA State Tax Assistant Manager Steven Roll and State Tax editors Melissa Fernley, and Kathleen Caggiano.

In other developments…

A New Congressional Push to Let States Collect Tax Online Sales , by Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution.

Why Tax Revision is an Inexact Science, by Josh Goodman, Staff Writer for Stateline, the daily news service of the Pew Charitable Trusts.

Kentucky's Long-Standing Intangible Property Tax Method Goes Puff, according to Sutherland SALT.

Compiled by Priya D. Nair
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