New York Response to Bonus Depreciation

CCH, 3/12/03

With respect to the computation of New York state, New York City, and Yonkers personal income taxes, the New York Department of Taxation and Finance has issued a memorandum explaining how certain provisions of the federal Job Creation and Worker Assistance Act of 2002 (P.L. 107-147) (JCWAA) may affect an individual's New York adjusted gross income.

For federal income tax purposes, the JCWAA provides special depreciation allowances for certain property under IRC Sec. 168(k) and for qualified New York Liberty Zone property. The JCWAA also extends the general net operating loss (NOL) carryback period from two to five years for certain NOLs arising in tax years ending in 2001 and 2002. Further, the JCWAA includes provisions regarding a limitation on using a nonaccrual experience method of accounting, an exclusion for foster care payments applicable to payments by qualified placement agencies, and an adjustment in determining federal adjusted gross income for certain expenses of elementary and secondary school teachers. Because the New York Tax Law does not require modifications for the above federal provisions in the computation of an individual's New York adjusted gross income, the memorandum notes that full-year resident individuals who are eligible to take advantage of these provisions of the JCWAA are also allowed the same benefit for New York state, New York City, and Yonkers personal income tax purposes. The memorandum also discusses the application of these provisions to nonresidents and part-year residents.

In addition, the JCWAA extends the federal work opportunity tax credit for two years and expands it to treat New York Liberty Zone business employees as members of a targeted group for purposes of IRC Sec. 51. Accordingly, New York Liberty Zone business employees may be considered targeted employees for purposes of the empire zone and zone equivalent area wage tax credits for tax years ending on or after January 1, 2001, provided that other requirements for targeted status are satisfied.

TSB-M-03(2)I, Technical Services Bureau, Taxpayer Services Division, New York Department of Taxation and Finance, March 4, 2003.

The New York Department of Taxation and Finance has issued a memorandum explaining how certain provisions of the federal Job Creation and Worker Assistance Act of 2002 (P.L. 107-147) (JCWAA) relate to the New York corporate franchise (income), bank franchise (income), and insurance franchise (income) taxes.

For federal income tax purposes, the JCWAA provides special depreciation allowances for certain property under IRC Sec. 168(k) and for qualified New York Liberty Zone property. The special depreciation allowances provided by the JCWAA are allowed in the computation of the entire net income base on New York corporate franchise (income), bank franchise (income), and insurance franchise (income) tax returns. The special depreciation allowances are also allowed in computing minimum taxable income for New York corporate franchise (income) tax purposes.
For federal income tax purposes, the JCWAA also extends the general net operating loss (NOL) carryback period from two to five years for certain NOLs arising in taxable years ending in 2001 and 2002. An election is also available to disregard the five-year carryback and use the carryback period as it existed prior to the JCWAA. A taxpayer taking advantage of the five-year carryback for federal purposes must also use a five-year carryback in computing the NOL deduction for New York corporate franchise (income) or insurance franchise (income) tax purposes. NOL carrybacks are not allowed under the bank franchise (income) tax law.

The JCWAA also provides for the temporary suspension of the 90% limit on NOLs in computing federal alternative minimum tax. However, when computing New York minimum taxable income for corporate franchise (income) tax purposes, the New York alternative NOL deduction is limited to 90% of minimum taxable income.

In addition, the JCWAA extends the federal work opportunity tax credit for two years and expands it to treat New York Liberty Zone business employees as members of a targeted group for purposes of IRC Sec. 51. Accordingly, with respect to the New York corporate franchise (income), bank franchise (income), and insurance franchise (income) taxes, New York Liberty Zone business employees may be considered targeted employees for purposes of the empire zone and zone equivalent area wage tax credits for taxable years ending on or after 2001, provided that other requirements for targeted status are satisfied.

TSB-M-02(2)C, Technical Services Bureau, Taxpayer Services Division,New York Department of Taxation and Finance, August 2, 2002.