New law maximizes benefits of federal tax law

© Shutterstock

Gov. Tom Wolf recently signed into law a bill that reverses the provisions of the Pennsylvania Department of Revenue Corporate Tax Bulletin 2017-02.

The Pennsylvania Department of Revenue Corporate Tax Bulletin 2017-02 announced that taxpayers who take advantage of the 100 percent bonus deduction for federal purposes allowed under the federal Tax Cuts and Jobs Act (TCJA) must add the bonus deduction to income when calculating the Pennsylvania corporate net income tax. The bulletin also said that the Department would not allow any depreciation deduction for property for which the owner claimed the 100 percent bonus deduction until the taxpayer disposes of the property.

The new law increases bonus depreciation from 50 to 100 percent for property purchased between Sept. 27, 2017, and Jan. 1, 2023, or Jan. 1, 2024, for a small category of property. After this end date, a 20 percent phase-down begins. The law also permits bonus depreciation for the purchase of used property in addition to new property.

“The new tax law has already begun to stimulate economic growth and development in many other states,” Rep. Frank Ryan (R-Lebanon), who authored the bill, said. “This increased economic activity is the very reason we were able to pass a budget this year with no tax hikes and putting extra revenues into our Rainy Day Fund. By taking this action now, we can maximize its positive effects for employment and wage increases for Pennsylvania.”