Tax professionals want to know if Philadelphia will adhere to the Commonwealth’s new position on bonus depreciation—the answer is yes.
By law, the City of Philadelphia must follow the Commonwealth of Pennsylvania for treatment of bonus depreciation. Pennsylvania is decoupled from the federal treatment, and thus so is Philadelphia.
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.
Pennsylvania Act 72-2018 became law in June 2018, and requires taxpayers to add back any federal bonus depreciation taken. Pennsylvania taxpayers are permitted to take normal depreciation as determined in IRC §167.
As a result, the City of Philadelphia requires the amount of a 100% deduction under the federal IRC 168(k) to be added back to their federal taxable income. However, the City allows taxpayers to take normal depreciation.