Under the Tax Cuts and Jobs Act of 2017 (“Federal Tax Reform”), Internal Revenue Code (“IRC”) section 168(k) provides 100% immediate expensing for qualified property placed into service after September 27, 2017 and before January 1, 2023. Pennsylvania, like many states, currently decouples from IRC section 168(k). In most states, decoupling from the immediate expensing provisions in IRC section 168(k) will merely result in a timing difference as most states allow some alternate form of state-level depreciation. However, the Pennsylvania Department of Revenue (“Department”), in a departure from its prior interpretation of Pennsylvania law, recently announced its view that taxpayers are not entitled to a state-level depreciation deduction for property that is fully expensed under IRC section 168(k). A bill has recently been proposed to legislatively reverse the Department’s interpretation and allow a state-level depreciation deduction for property that is fully expensed under IRC section 168(k).
On December 15, 2017, the conferees working on reconciling the differences between the House and Senate versions of the Tax Cuts and Jobs Act (“Tax Bill”) released legislative text and a Joint Explanatory Statement. It is expected that the Tax Bill will be passed and signed into law by President Trump. The Tax Bill contains numerous provisions impacting the personal income tax, the estate tax, the taxation of pass through entities, and the corporate income tax. This blog focuses on the U.S. state and local corporate income tax implications of the most significant aspects of the corporate income tax provisions of the Tax Bill.