Present law provides that doing business in this state by a person or taxpayer, or exercising the corporate franchise, is declared to be a taxable privilege. Such excise tax is an accrued tax and is imposed for the exercise of the specified privilege during the period that coincides with the tax year covered by the return required. Additionally, for a corporation or another taxpayer treated as a corporation for federal tax purposes, including a limited liability company or a taxpayer required to file a federal income tax return on a federal form 1120 (except for a corporation electing S corporation or a unitary business), "net earnings" or "net loss" is defined as federal taxable income or loss before the operating loss deduction and special deductions. For assets purchased on or after January 1, 2023, present law provides, for the purposes of computing "net earnings" or "net loss," the Internal Revenue Code of 1986 must be applied as it exists and applies under the Tax Cuts and Jobs Act of 2017, which outlines rules for depreciation. This bill requires this provision to be effective for any purchase made after January 1, 2023 and prior to January 1, 2026. For assets purchased on or after January 1, 2026, this bill provides that for the purposes of computing "net earnings" or "net loss," a taxpayer may annually elect to deduct as an expense 40% of the cost of the depreciable assets in the tax year in which the assets are purchased. Additionally, if the federal government increases the bonus depreciation percentage applicable to assets to a percentage above 40% under the Internal Revenue Code of 1986, then this bill authorizes a taxpayer to deduct as an expense the percentage implemented by the federal government, and the Internal Revenue Code of 1986 must be applied as it exists and applies under the Tax Cuts and Jobs Act of 2017.

Statutes affected:
Introduced: 67-4-2006(a)(12), 67-4-2006