|MARRIED SEPARATE FILERS: The
spouse to whom the income was paid must report that income. Modifications
to partnership and/or S Corporation income are allocated between spouses
in the same manner as that income was divided on line
IOWA DEPRECIATION ADJUSTMENT - 2005 LEGISLATIVE UPDATE
In a special session held in September 2004, the Iowa Legislature passed legislation to couple with the additional 50% first year-depreciation allowance (bonus depreciation) for assets acquired after May 5, 2003, but before January 1, 2005. In addition, this law also coupled with the increase in Section 179 expensing allowance from $25,000 to $100,000 for tax years beginning on or after January 1, 2003. For taxpayers who had filed a tax return for 2003 which reflected the disallowance of 50% bonus depreciation or the disallowance of increased Section 179 expensing, this legislation required that amended returns for 2003 were required to reflect this change.
House File 102, enacted by the Iowa Legislature and effective on February 24 , 2005, allows additional options for the taxpayer to reflect this change regarding bonus depreciation and increased Section 179 expensing. There are now three options available for taxpayers to take advantage of this change, but only one option can be chosen. These options, which are available only for those taxpayers who are eligible to make an adjustment on the 2003 Iowa return for bonus depreciation and Section 179 expensing, are as follows
1) Amend the 2003 Iowa return to reflect the increased depreciation and Section 179 expensing amounts. For a calendar 2003 return, taxpayers have until April 30, 2007, to file an amended return to claim these additional deductions. Form IA4562A, Iowa Depreciation Adjustment Schedule, should be completed and attached to the amended return, unless the requirements in the final paragraph below are met.
2) Reflect the change in depreciation and Section 179 expensing relating to the 2003 return on the 2004 Iowa return. Form IA4562A should be completed to reflect the change for the 2003 year, (unless the requirements in the final paragraph below are met), and should be attached to the 2004 Iowa return. This "catch-up" adjustment can be reflected on the appropriate line referenced on Form IA4562A. If a taxpayer filed their 2004 Iowa return prior to February 24, 2005, and did not reflect the "catch-up" adjustment, taxpayer can still choose this option and make this "catch-up" adjustment on their 2005 Iowa return.
3) Continue to decouple with the 50% bonus depreciation and increased Section 179 expensing. There would be no need to file an amended return for 2003 or make the "catch-up" adjustment on the 2004 Iowa return. The taxpayer would continue to use the depreciation method used on the 2003 Iowa return for assets acquired in 2003. If any assets acquired in 2003 were subsequently sold prior to being fully depreciated, the gain or loss would be adjusted for Iowa purposes to reflect the different basis in these assets for Iowa tax purposes.
In addition, taxpayer can choose option 3 and continue to decouple with the 50% bonus depreciation provision for the 2004 tax year and continue to decouple with the increased Section 179 expensing for the 2004 and 2005 tax year.
Iowa continues to decouple with the 30% bonus depreciation provision for assets acquired after September 10, 2001, but before May 6, 2003. Form IA4562A still needs to be filed for assets acquired during this time frame to account for the difference between federal and Iowa depreciation.
Finally, if the only depreciation adjustment that was reported for Iowa tax purposes relates solely to the 2003 tax return for 50% bonus depreciation and increased Section 179 expensing, then a revised form IA4562A would not have to be completed. The depreciation change can be reflected on the appropriate line on Iowa forms 1040, 1065, 1120, 1120A, 1120S or 1120F that is referenced on the IA4562A form, and a notation of "HF102" can be referenced on the appropriate line.