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S.F. No. 3431 - Carryover of unused section 179 and bonus depreciation subtractions (as proposed to be amended by the A-1 amendment)
 
Author: Senator Gary H. Dahms
 
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
 
Date: March 11, 2020



 

Under current law, for individual income taxpayers, excess or “unused” bonus depreciation and section 179 subtractions may not be carried forward to reduce taxable income in future years. This bill allows those excess amounts to be carried forward for up to ten years and also allows any unused bonus deprecation and section 179 subtractions for tax years 2017 to 2019 to be applied to 2020 returns. Effective beginning in tax year 2020.

Section 1. Composite income tax returns. Adds a cross reference to the subtraction created in section 4 to filing requirements for nonresidents and part-year residents.

Section 2. Bonus depreciation. Strikes language in the current law subtraction for delayed bonus depreciation. The language is restated in section 6 as part of the new combined subtraction for bonus depreciation and section 179 expensing.

Section 3. Section 179 expensing. Strikes language in the current law subtraction for section 179 expensing. The language is restated in section 6 as part of the new combined subtraction for bonus depreciation and section 179 expensing.

Section 4. Carryover bonus depreciation and section 179 expensing allowance. Authorizes a subtraction for individual income taxpayers for the carryover subtraction defined in section 6, subd. 3. There is no corresponding subtraction for corporate taxpayers because they may claim unused subtractions as part of their net operating loss (NOL) deduction under current law.

Section 5. Schedules of rates for individuals, estates, and trusts. Adds a cross reference to the subtraction created in section 4 for purposes of calculating income tax for nonresidents and part-year residents.

Section 6. Section 179 expensing and section 168 bonus depreciation subtraction.

Subds. 1 and 2. Current year section 179 expensing allowance; current year bonus depreciation allowance. Reinstate the stricken language from sections 2 and 3 used to calculate the section 179 and bonus depreciation subtractions.

Subd. 3. Carryover bonus depreciation and section 179 expensing allowance. Allows a carryover for subtractions that exceed a taxpayer’s net income in the current taxable year. The entire carryover must be first used in the earliest possible taxable year, then to allowable succeeding years. The carryover may be used for up to ten years. Also allows the carryover rules established in this subdivision to apply to unused subtractions in tax years 2017 to 2019, which may first be claimed as a carryover in tax year 2020.

Section 7. Definitions. Adds a cross reference to the subtraction created in section 4 to the AMT calculation.    

 
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