IDAPA 35.01.01.125 — ADJUSTMENTS TO TAXABLE INCOME -- BONUS DEPRECIATION ON PROPERTY

ACQUIRED AFTER SEPTEMBER 10, 2001, AND BEFORE DECEMBER 31, 2007, OR AFTER
DECEMBER 31, 2009 (RULE 125).
Section 63-3022O, Idaho Code
01.
In General. Section 63-3022O, Idaho Code, requires that when computing Idaho taxable income,
the amount of the adjusted basis of depreciable property, depreciation, and gains and losses from the sale, exchange,
or other disposition of depreciable property acquired after September 10, 2001, and before December 31, 2007, or
acquired after December 31, 2009, must be computed without regard to bonus depreciation allowed by Section
168(k), Internal Revenue Code. To meet this requirement, a taxpayer must be consistent in making the Idaho
adjustments required for all the taxable years in which federal bonus depreciation is claimed. The adjustments
required by this rule do not apply to property acquired after 2007 and before 2010.
(4-6-23)
02.
Depreciation.
(4-6-23)
a.
If a taxpayer makes the Idaho addition in the first taxable year bonus depreciation was claimed for
federal income tax purposes, in the subsequent taxable years the taxpayer is entitled to the Idaho subtractions for the
additional depreciation computed for Idaho income tax purposes that exceeds the amount of depreciation claimed for
IDAHO ADMINISTRATIVE CODE
IDAPA 35.01.01
Idaho State Tax Commission
Income Tax Administrative Rules
Section 128
Page 21
federal income tax purposes.
(4-6-23)
b.
If a taxpayer fails to make the Idaho addition in the first taxable year bonus depreciation was
claimed for federal income tax purposes, the taxpayer is not entitled to claim the Idaho subtractions for additional
depreciation in subsequent taxable years. In such instances, claiming an Idaho subtraction for additional depreciation
when the first year Idaho addition was not claimed constitutes computing depreciation with regard to Section 168(k),
Internal Revenue Code, which is specifically prohibited in Section 63-3022O(1), Idaho Code. For example, the Idaho
addition is required for a taxable year when the bonus depreciation is claimed even though the taxpayer may be
limited in claiming a passive loss from a pass-through entity in which the bonus depreciation arose. If the bonus
depreciation is not added back in that taxable year, the Idaho subtractions are not allowed in the subsequent taxable
years.
(4-6-23)
c.
The Idaho adjustments are required in all taxable years in which the taxpayer has an Idaho filing
requirement or is a member of a combined group of corporations in which at least one member has an Idaho filing
requirement. If the taxpayer is not required to file an Idaho income tax return for one (1) or more years in which
depreciation may be claimed, the taxpayer may claim the Idaho adjustment in the taxable years in which an Idaho
return is filed if all such taxable years are treated consistently.
(4-6-23)
d.
Example. A corporation transacted business in California and Oregon during taxable year 2003. In
2004, the taxpayer began transacting business in Idaho and was required to file an Idaho corporation income tax
return for that year. On the federal return filed for 2003, the taxpayer claimed bonus depreciation for assets placed in
service that year. Because the taxpayer was not required to file an Idaho corporation income tax return for 2003, there
was no Idaho bonus depreciation addition required of the taxpayer. In 2004, the second year of deprecation for the
assets placed in service in 2003, the taxpayer was required for Idaho income tax purposes to compute depreciation on
the assets as if bonus depreciation had not been claimed. The difference in the amount of Idaho depreciation and the
depreciation claimed for federal income tax purposes for 2004 would be allowed to the taxpayer as an Idaho
subtraction since the taxpayer was required to file an Idaho corporation income tax return for that year. Assuming the
taxpayer files an Idaho corporation income tax return for the remaining years when depreciation on the assets is
allowed, the taxpayer will be allowed the Idaho subtraction in those years for the difference in the Idaho and federal
depreciation amounts. If the corporation transacted business in Idaho during 2003 only, the return filed for that year
should reflect the Idaho addition for the difference in the amount of Idaho depreciation and the depreciation claimed
for federal income tax purposes, even though the subtractions will not apply in subsequent years.
(4-6-23)