Utah Response to Bonus Depreciation

BNA, 5/28/02:

Utah State Conforms to Bonus Depreciation In Federal Economic Incentive Package
DENVER--Utah will not decouple from a provision in the federal economic incentive package (Pub. L. No. 107-147) that establishes a depreciation bonus for certain capital investments, even though the state is under budgetary pressure to do so, a legislative tax analyst told BNA May 24.

The Revenue and Taxation Interim Committee of the Utah Legislature, which met in special session May 22, killed a proposal that would have delinked the state from the depreciation provision, Bryant Howe, analyst with the state Office of Legislative Research and General Counsel, said.

The provision was included in the federal economic stimulus package signed by President Bush in March. It established a 30 percent depreciation bonus for qualified capital investments by business, which would affect property placed in service after Sept. 10, 2001, and remain in effect for 36 months.

It allows businesses to take the tax benefits of depreciation earlier, lowering federal tax liability and therefore reducing state income tax revenues.

The problem is that Utah and other states are facing substantial budget crunches now (see related report in this section  ), and are pressed to provide the tax break earlier rather than later, Howe told BNA. "In other years this federal change would hardly have registered as a blip," he said. "It's going to hit us now when revenues are so tight."