The Department of Revenue today announced it has adopted a business-friendly interpretation of tax law that will benefit as many as 117,000 corporate taxpayers.
By conforming to recently enacted federal tax benefits with regard to 100 percent bonus depreciation, corporate taxpayers in the state will benefit from lower tax burdens this year, allowing for greater capital investment and encouraging further economic growth.
The federal Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 provides for greater corporate tax depreciation benefits in the last quarter of 2010 and all of calendar year 2011.
Prior to the federal law’s enactment, businesses were required to depreciate – or deduct the cost of, from taxable income for federal tax purposes – qualified business expenses over the course of a number of years. The new law allows businesses to depreciate 100 percent of the expense up front.
State tax law is ambiguous in relation to federal tax law on this point, allowing for different interpretations of how 100 percent bonus depreciation would be treated. In this case, the Department of Revenue determined it will allow 100 percent bonus depreciation for the last quarter of 2010 through 2011 on qualified business expenses.
This policy will not directly affect state revenues in the long run, as lower tax collections in immediate years due to 100 percent bonus depreciation will be balanced or offset by higher collections in later years.
The new policy can be found in PA Corporate Tax Bulletin 2011-01.
