OK - Bonus Depreciation
Federal "Bonus" Depreciation
In March 2002, the Job Creation and Worker Assistance Act (“JCWAA”)(P.L. 107-147) was signed into law. The foundation of this new legislation was the allowance of “bonus” depreciation (IRC Sec. 168(k)). The new “bonus” depreciation provisions provide a special depreciation allowance for qualified properties placed in service after September 10, 2001 and before January 1, 2005. These provisions allow 30% of the asset's cost to be immediately deducted in the initial year the property is placed in service.
Qualified property which is eligible for “bonus” depreciation must have a recovery period of 20 years or less and can not be considered IRC Sec. 197 computer software.
In May 2003, the Jobs and Growth Tax Relief Reconciliation Act (“JGTRRA”)(P.L. 108-27) was enacted. This act modified the “bonus” depreciation provisions contained in the JCWAA by increasing the deduction from 30% to 50% of the assets cost for property acquired and placed into service after May 5, 2003, and before January 1,2005. This modified provision can be applied to all property, which qualifies for the 30% “bonus” depreciation deduction.
State conformity to the federal “bonus” depreciation provisions provided by the JCWAA and JGTRRA is a major concern for taxpayers, as many states have decoupled in whole or part from these federal tax acts.
Oklahoma Bonus Depreciation Addback
The 2002 Oklahoma Legislature passed SB 1415 requiring corporations filing income tax returns with the State to add back 80% of the 30% federal bonus depreciation received under the Federal Job Creation and Worker Assistance Act of 2002. Twenty-five percent of the amount added back can be reclaimed in each of the following four years.
For corporations, 80% of the 30% federal bonus depreciation must be added back on Form 512, Schedule A, Column B, line 10 or Schedule B, line 2 as an addition. In each of the following four taxable years after the initial add back of the bonus depreciation, the corporation may reclaim 25% of the bonus depreciation that was added back on Form 512, Schedule A, Column B, line 21 or Schedule B, line 6 as a deduction.
Please note, Limited Liability Companies (LLC's) are not corporations subject to the adjustment.