30% Bonus Depreciation Information
Federal Income Tax Treatment
Generally, the property that qualifies must be acquired after September 10, 2001, and before September 11, 2004. Original use of the property must begin with the taxpayer on or after September 11, 2001 and the property must be placed in service generally before January 1, 2005. The basis of the property and the depreciation allowances in the year of purchase and in later years are to be adjusted to reflect this additional first-year depreciation deduction.
OKLAHOMA PROVISION - The Oklahoma Legislature passed SB 1415 requiring a portion of the bonus depreciation to be added back and then reclaimed in a later year for Oklahoma income tax purposes. See the instructions that follow.
Instructions for Oklahoma Add-Back of Bonus Depreciation
Due to passage of SB 1415 by the 2002 Oklahoma Legislature, corporations and fiduciaries filing income tax returns with the state of Oklahoma will have to add back 80% of any special bonus depreciation received under provisions of the federal Job Creation and Worker Assistance Act of 2002. Any amount added back can be reclaimed in a later year. Twenty-five percent may be subtracted in the first taxable year beginning after the bonus depreciation was added back and twenty-five percent in each of the next three taxable years.
Tax years affected. The add-back of the additional 30% federal depreciation deduction is for property placed in service after September 10, 2001, and before September 11, 2004. Any tax years including or between these dates may be affected.
Taxpayers who have not yet claimed the bonus depreciation. In all filings, claim both the bonus depreciation and include the required add-back. Attach a note of explanation and your calculation of the add-back. Also attach a copy of the portion of the federal return where the special deduction was claimed.
Taxpayers who have claimed the bonus depreciation. Oklahoma taxpayers who filed either an original return or an amended return using the new federal provisions must file amended returns with Oklahoma in order to add back a portion of the bonus depreciation pursuant to SB 1415. Amended returns filed by June 30, 2003 will not be subject to the penalties or interest on the additional tax due as a result of the add back.
Corporations. Eighty percent of bonus depreciation claimed on a federal income tax return must be entered on Oklahoma Form 512. A corporation filing Form 512, Schedule A, shall enter 80% of the bonus depreciation in Column B on line 10 "Other income". The amount of bonus depreciation added back for Oklahoma purposes shall be reclaimed in later taxable years in the following manner. Of the total amount of bonus depreciation, 25% shall be added back in the first taxable year beginning or deemed to begin the year after the bonus depreciation was added back and 25% in each of the next three following taxable years. Enter the 25% on Form 512, Schedule A, Column B, line 21 "depreciation". A corporation filing Form 512, Schedule B, shall enter 80% of the bonus depreciation on line 2 as an addition. The increased income shall then be apportioned to Oklahoma to determine the amount to be included in Oklahoma taxable income. The apportioned amount of bonus depreciation added to Oklahoma taxable income shall be reclaimed in later taxable years in the following manner. Of the apportioned amount of bonus depreciation added to Oklahoma taxable income, 25% may be subtracted in the first taxable year beginning or deemed to begin the year after the bonus depreciation was added back and 25% in each of the next three following taxable years. Enter the 25% on Form 512, Schedule B, line 6 as a deduction. If the original Oklahoma Form 512 has already been filed, report the increase on the appropriate schedule of the Amended Oklahoma Corporation Income Tax Return, Form 512X.
In all filings, please attach a note of explanation and your calculation of the add-back. Also attach a copy of the portion of the federal return where the special deduction was claimed.
Fiduciary. Eighty percent of bonus depreciation claimed on a federal income tax return must be entered on Oklahoma Form 513 or Form 513NR. A resident fiduciary filing Form 513, shall enter 80% of the bonus depreciation in Column B on line 10 "Other income". The amount of bonus depreciation added back for Oklahoma purposes shall be reclaimed in later taxable years in the following manner. Of the total amount of bonus depreciation, 25% shall be added back in the first taxable year beginning or deemed to begin the year after the bonus depreciation was added back and 25% in each of the next three following taxable years. Enter the 25% on Form 513, Column B, line 17 "Other deductions". A nonresident fiduciary filing Form 513NR, shall enter 80% of the total bonus depreciation in the Federal Amount column on line 8 "Other income" and enter the bonus depreciation applicable to Oklahoma in the Oklahoma Amount column on line 8 "Other income". The amount of bonus depreciation added back for Oklahoma purposes shall be reclaimed in later taxable years in the following manner. Of the total amount of bonus depreciation included in income in each column, 25% shall be added back in the first taxable year beginning or deemed to begin the year after the bonus depreciation was added back and 25 percent in each of the next three following taxable years. Enter the 25% on Form 513NR, in the applicable Federal Amount and/or Oklahoma Amount columns on line 16 "Income distribution deduction". If the original Oklahoma Form 513 or Form 513NR has already been filed, report the increase on an Amended Oklahoma Fiduciary Income Tax Return, Form 513 or Form 513NR.
In all filings, please attach a note of explanation and your calculation of the add-back. Also attach a copy of the portion of the federal return where the special deduction was claimed.
Common Questions..
Question 1:
Is a corporation electing Subchapter S treatment, filing form 512-S, subject to the bonus depreciation adjustment found under 68 § 2358.6?
Response:
No. Subchapter S corporations do not need to make the adjustment under 2358.6.
Question 2:
Is an LLC who elects corporate tax treatment, filing form 512, subject to the bonus depreciation adjustment found under 68 § 2358.6?
Response:
No. LLC's (Limited Liability Companies) are not corporations subject to the adjustment under 2358.6.
Question 3:
An LLC elects to be treated as a partnership, filing form 514. The LLC takes the bonus depreciation on their federal return. A fiduciary is a member of the LLC. Is the fiduciary subject to the bonus depreciation adjustment found under 68 § 2358.6 on the income flowing from the LLC?
Response:
No. The LLC places the asset in service and claims the bonus depreciation. The fiduciary has no depreciation to add back
