Bill Text: IA SSB1127 | 2023-2024 | 90th General Assembly | Introduced


Bill Title: A bill for an act relating to decoupling federal additional first-year depreciation for Iowa tax purposes, and including effective date and retroactive applicability provisions.(See SF 551.)

Spectrum: Committee Bill

Status: (Introduced) 2023-03-15 - Committee report approving bill, renumbered as SF 551. [SSB1127 Detail]

Download: Iowa-2023-SSB1127-Introduced.html
Senate Study Bill 1127 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON DAWSON) A BILL FOR An Act relating to decoupling federal additional first-year 1 depreciation for Iowa tax purposes, and including effective 2 date and retroactive applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1575XC (2) 90 jm/jh
S.F. _____ Section 1. Section 422.7, Code 2023, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 44. For qualified property placed in 3 service after December 31, 2022, a taxpayer may elect to 4 subtract the additional first-year depreciation allowance 5 authorized under section 168 of the Internal Revenue Code, in 6 the taxable year in which the property is placed in service, 7 subject to the following adjustments: 8 a. Add the total amount of depreciation taken on all 9 property for which the election under section 168(k) of the 10 Internal Revenue Code was made for the tax year. 11 b. Subtract an amount equal to the depreciation allowed on 12 such property under section 168(k) of the Internal Revenue Code 13 of 1986 as amended and in effect on December 31, 2022. 14 c. Any other adjustments to gains or losses to reflect the 15 adjustments made in paragraph “a” or “b” pursuant to rules 16 adopted by the director. 17 Sec. 2. Section 422.35, Code 2023, is amended by adding the 18 following new subsection: 19 NEW SUBSECTION . 15. For qualified property placed in 20 service after December 31, 2022, a taxpayer may elect to 21 subtract the additional first-year depreciation allowance 22 authorized under section 168 of the Internal Revenue Code, in 23 the taxable year in which the property is placed in service, 24 subject to the following adjustments: 25 a. Add the total amount of depreciation taken on all 26 property for which the election under section 168(k) of the 27 Internal Revenue Code was made for the tax year. 28 b. Subtract an amount equal to the depreciation allowed on 29 such property under section 168(k) of the Internal Revenue Code 30 of 1986 as amended and in effect on December 31, 2022. 31 c. Any other adjustments to gains or losses to reflect the 32 adjustments made in paragraph “a” or “b” pursuant to rules 33 adopted by the director. 34 Sec. 3. EFFECTIVE DATE. This Act, being deemed of immediate 35 -1- LSB 1575XC (2) 90 jm/jh 1/ 2
S.F. _____ importance, takes effect upon enactment. 1 Sec. 4. RETROACTIVE APPLICABILITY. This Act applies 2 retroactively to January 1, 2022, for tax years beginning on 3 or after that date. 4 EXPLANATION 5 The inclusion of this explanation does not constitute agreement with 6 the explanation’s substance by the members of the general assembly. 7 This bill relates to decoupling for Iowa tax purposes 8 with federal additional first-year depreciation changes 9 under section 168(k) of the Internal Revenue Code (bonus 10 depreciation). 11 BACKGROUND. The Tax Cut and Jobs Act of 2017 (TCJA), 12 in part, made substantial changes to bonus depreciation by 13 increasing the deduction amount from 50 percent of qualified 14 property to 100 percent of qualified property. Beginning 15 with property placed in service after December 31, 2022, the 16 federal bonus depreciation deduction amount begins to phase 17 down by 20 percent per year until property placed in service 18 after December 31, 2026, is no longer eligible for bonus 19 depreciation. 20 BILL CHANGES. Under current law, Iowa completely coupled 21 with federal tax law for tax years beginning on or after 22 January 1, 2020. The bill decouples Iowa for purposes of 23 federal bonus depreciation, and permits a taxpayer for Iowa 24 individual and corporate income tax purposes to continue to 25 utilize bonus depreciation by allowing a taxpayer to deduct 100 26 percent of qualified property placed in service after December 27 31, 2022. 28 By decoupling from federal bonus depreciation, the bill also 29 preserves any other changes made to federal bonus depreciation 30 under the TCJA for Iowa tax purposes including expanding the 31 types of property that are considered “qualified property”. 32 The bill takes effect upon enactment and applies 33 retroactively to tax years beginning on or after January 1, 34 2022. 35 -2- LSB 1575XC (2) 90 jm/jh 2/ 2
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