Rhode Island Response to Bonus Depreciation

BNA, 3/11/03

Rhode Island Adopted Rule Implements Law
Decoupling State From Federal NOLA rule explaining limitations on federal net operating loss provisions for purposes of the Rhode Island personal income tax was adopted Feb. 10 by the state's Division of Taxation.

The rule was originally adopted by the division as PIT 03-21, effective Jan. 16. It subsequently was adopted as PIT 03-22, effective Feb. 16, a spokesman for the division told BNA Feb. 21.

The rulemaking implemented legislation (H.B. 7732A) enacted in 2002 that decoupled state provisions from the federal bonus depreciation deduction and net operating loss carryback rules, the spokesman said.

The net operating loss deduction under Internal Revenue Code Section 172 is allowed under Rhode Island law, the rule explained, but with the following modifications: any NOLs deducted for federal purposes must be adjusted by Rhode Island General Laws Sections 44-30-12 and 44-30-32; the taxpayer may not deduct any NOLs sustained during a taxable year in which the taxpayer was not subject to tax in Rhode Island; and NOLs may not be carried back and may only be carried forward for the number of succeeding years allowable under I.R.C. Section 172. The rule applies to tax years beginning Jan. 1, 2003.

Text of the rule is available at http://www.rules.state.ri.us/rules/released/pdf/DOTAX/DOTAX_2429.pdf.

RIA, 6/24/02

The Rhode Island Budget Bill, which was passed over the Governor's veto on June 12, 2002, specifically provides that the 30% bonus depreciation and 5-year net operating loss carryback provisions of the federal Job Creation and Worker Assistance Act of 2002 (P.L. 107-147) are not adopted for Rhode Island corporate and personal income tax purposes.