Tennessee Response to Bonus Depreciation

RIA, 7/17/02

In addition to increasing the general sales tax rate by 1% to a new state rate of 7%, as reported in State and Local Taxes Weekly, Vol. 13, No. 29, 7-15-2002, Tennessee, in passing the Tax Reform Act of 2002, requires the bonus depreciation allowed under the federal Job Creation and Worker Assistance Act of 2002 (P.L. 107-147) to be added to federal taxable income, increases the cigarette tax rate, the alcoholic beverage gallonage tax rate, and the beer barrelage tax rate, and clarifies the rate applicable to sales of telecommunication services. (L. 2002, S3110 (c. 856), eff. 7/15/2002.)

Bonus depreciation must be added back. Any depreciation permitted as a deduction in computing federal taxable income solely as a result of the Job Creation and Worker Assistance Act of 2002 (P.L. 107-147) must be added to federal taxable income. A major provision of this federal legislation allows businesses to claim 30% bonus depreciation for qualified capital investments for property placed in service after September 10, 2001.

CCH, 7/11/02

The revenue package signed into law by Tennessee Governor Don Sundquist on July 4, 2002, includes an amendment that decouples the corporate excise (income) tax from the accelerated depreciation deduction provision of the federal Job Creation and Worker Assistance Act of 2002 (P.L. 107-147). (Ch. 856 (S.B. 3110), Laws 2002, effective July 15, 2002.)