In recent guidance issued by the Pennsylvania Department of Revenue in response to the passage of the Tax Cuts and Jobs Act, the Department indicates that the 100 percent depreciation deduction will not be available for property placed in service after September 27, 2017.  This marks a stark departure from the previous policies of the Department.

Accordingly, while federal income tax law provides for a 100 percent depreciation or expensing deduction to be available for assets placed in service after September 27, 2017, no such deduction will be available for Pennsylvania corporate net income (CNI) tax purposes.  The cost recovery for the property will only be available upon sale or disposition of the asset in question for CNI tax.  This represents a change in policy for the Department which did allow for 100 percent bonus depreciation provided for in 2010 and 2011.

Taxpayers will have to track federal and state basis carefully and make sure to claim the appropriate deduction for federal income tax versus CNI tax.  Proper record keeping will also ensure that the appropriate basis adjustment is made from federal basis in the year of sale or disposition to account for the state’s decoupling from federal law.