The Philadelphia Department of Revenue announced on Wednesday it would follow the Commonwealth of Pennsylvania on the issue of 100% bonus depreciation.

The announcement concerns firms hoping to take advantage of federal Internal Revenue Code, (IRC) Section 168(k), and tax professionals who want to know the City’s policy on this issue.

The Tax Cuts and Jobs Act of 2017 modified the federal tax code to allow businesses to immediately deduct assets—such as equipment—placed in service between September 28, 2017 and December 31, 2022.

After that change became law late last year, the Pennsylvania Department of Revenue (DOR) issued Corporation Tax Bulletin 2017-02. The bulletin disallowed all depreciation on assets subject to 100% bonus depreciation as outlined by the federal government.

Tax professionals want to know if Philadelphia will adhere to the Commonwealth’s position—the answer is yes.

The original Commonwealth legislation that decoupled Pennsylvania from the federal provisions of bonus depreciation was Act 89 of 2002.  Section 31.1 of Act 89 legislatively linked the calculation of the net income base of Philadelphia’s Business Income & Receipts Tax (BIRT) to a 3/7 net income add-back adjustment methodology that was required in computing taxable net income for purposes of the Pennsylvania Corporate Net Income Tax.

Until further notice, Philadelphia will adhere to Pennsylvania’s Corporation Tax Bulletin 2017-02 for the purposes of calculating BIRT and Net Profits Tax (NPT) liability. As a result, the City requires the amount of a 100% deduction under the federal IRC 168(k) to be added back to taxable income.