This bill amends the current law regarding business profits tax expense deductions by increasing the cap on expense deductions for businesses. Specifically, it introduces a phased-in increase to the deduction limit, starting with $1,000,000 for property placed in service on or after January 1, 2027, and subsequently increasing to $1,500,000 in 2029, $2,000,000 in 2031, and finally $2,500,000 in 2033. The existing cap of $500,000 for property placed in service on or after January 1, 2018, remains in place, but the new language clarifies the incremental increases for future years. The bill aims to provide businesses with greater flexibility in managing their expenses and investments.

The fiscal impact of this legislation is expected to result in an indeterminable decrease in revenue for the General Fund and Education Trust Fund starting in FY 2027. The Department of Revenue Administration has indicated that while the bill allows for increased deductions, it may also lead to a timing issue regarding the depreciation claims of qualifying assets. The Department has not identified any additional administrative costs associated with implementing this bill, suggesting that it can be absorbed within the existing budget. Overall, the bill seeks to enhance the business environment by allowing for larger expense deductions over time.

Statutes affected:
Introduced: 77-A:3-a
As Amended by the Senate: 77-A:3-a
As Amended by the Senate (2nd): 77-A:3-a
HB1597 text: 77-A:3-a