Arizona Response to Bonus Depreciation

CCH, 6/10/02:

For Arizona corporate income tax and personal income tax purposes, Internal Revenue Code (IRC) conformity provisions are updated to reflect that, for taxable years beginning in 2002, Arizona generally adopts the IRC of 1986 as amended and in effect on March 9, 2002, including those provisions that became effective during 2001 with the specific adoption of all federal retroactive dates, but excluding any change to the IRC enacted after March 9, 2002.

Provisions of the federal Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) and the federal Job Creation and Worker Assistance Act of 2002 (P.L. 107-147) (JCWAA) that are retroactively effective during taxable years 2001 and 2000, are specifically adopted, except for the JCWAA provisions allowing a 30% bonus depreciation deduction from the cost of qualified property acquired after September 10, 2001, and before September 11, 2004. An Arizona taxpayer that took the special bonus depreciation for federal income tax purposes must add back the amount taken for Arizona income tax purposes. However, a subtraction in the amount of three-sevenths of the amount of depreciation is allowed in computing Arizona adjusted gross income.

A subtraction is also allowed for the amount of depreciation that would have been allowed without regard to the bonus depreciation to the extent that the amount has not already reduced Arizona taxable  income in the current or prior taxable years if an asset that has had bonus depreciation applied is sold or disposed of during the taxable year. (H.B. 2712, Laws 2002, effective retroactively to January 1, 2000, except as noted above.)