Tax News

CCH (cch.taxgroup.com) reports:

  The Florida Department of Revenue (DOR) has issued guidance and examples regarding new legislation that changes the way in which Florida decouples from federal bonus depreciation and the IRC §179 expense election for corporate income tax purposes. As previously reported (TAXDAY, 2009/03/19, S.5), Ch. 2009-018 (S.B. 1112), Laws 2009 requires corporate taxpayers to add back federal bonus depreciation and IRC §179 asset expenses exceeding $128,000 for assets placed in service during the 2008 calendar year. Corresponding subtractions are provided for seven tax years, starting with tax years beginning after 2007, equal to one-seventh of the amount required to be added back. The amount of the subtractions claimed over a seven-year period equals, but cannot exceed, the amounts required to be added back. The applicable depreciation conventions, methods, and recovery periods are the same as they are for federal corporate income tax purposes. Corporate taxpayers should attach a schedule to their Florida corporate income tax returns showing the amounts of the additions and subtractions. The schedule should specify the type and amount of the original addition(s) and show all subsequent subtractions by tax year.

  Corporate taxpayers that filed a Florida corporate income tax return based on the old law must file an Amended Florida Corporate Income/Franchise and Emergency Excise Tax Return (Form F-1120X). The DOR will compromise any penalties and interest for taxpayers that initially filed returns based on the old law and subsequently file amended returns based on the new law.

  If a corporation acquires or merges with another corporation, the acquiring corporation may claim the subtractions in the same manner and to the same extent as the original corporation. Also, if a corporate taxpayer has a net operating loss in a tax year in which it is entitled to claim a subtraction, it is allowed to increase its net operating loss by the amount of the subtraction. However, if a corporate taxpayer ceases to do business, it may not transfer or otherwise utilize a subtraction.

  There is no separate Florida basis adjustment required for assets for which the adjustments were made, because the effect of the addition is recovered through the subtractions. Therefore, even though the underlying asset may have been sold, fully depreciated, or otherwise disposed of, corporate taxpayers may continue to claim the subtractions over the seven-year period.

  Although Florida requires an addback of IRC §179 expenses in excess of $128,000, it follows the increased federal $800,000 phase-out limitation. Therefore, if a taxpayer is allowed to carry over a disallowed IRC §179 deduction on its federal return, Florida will not require that carryover subtraction to be added back.

Tax Information Publication, No. 09C01-01 , Florida Department of Revenue, March 17, 2009, ¶205-311

  Other References:

  Explanations at ¶10-670

  Explanations at ¶10-900