Arizona Administrative Code › Title 15 - REVENUE › Chapter 2 - DEPARTMENT OF REVENUE - INCOME AND WITHHOLDING TAX SECTION › Subchapter D - CORPORATIONS › Article 3 - SUBTRACTIONS FROM ARIZONA GROSS INCOME › Section R15-2D-306 - Amortization of Property Used for Atmospheric and Water Pollution Control

Current through Register Vol. 30, No. 28, July 12, 2024
A. A taxpayer may
				  elect to amortize, over a 60-month period, the adjusted basis of any device,
				  machinery, or equipment that is certified by the Arizona Department of
				  Environmental Quality as property that collects and controls atmospheric and
				  water pollutants and contaminants at their source. The amortization
				  subtractions allowed for the 60-month period are in lieu of the federal
				  depreciation and amortization related to the pollution control property. The
				  related federal depreciation and amortization deducted in computing federal
				  taxable income is an addition to income under A.R.S. §
										43-1121.
				  The adjusted basis for purposes of amortization is the basis for determining
				  depreciation under Internal Revenue Code § 167 on the date the pollution
				  control property is placed in service. The adjusted basis does not include land
				  or buildings.
B. A taxpayer that
				  elects to amortize pollution control property shall include a statement in the
				  original or amended return for the taxable year of election. The taxpayer shall
				  identify in the statement each piece of property subject to the election, the
				  month the property is placed in service, the adjusted basis of the property,
				  and the date of certification by the Arizona Department of Environmental
				  Quality.
C. The amortization period
				  is 60 consecutive months beginning with the month the property is placed in
				  service. If the property is disposed of or retired from service before the end
				  of the 60-month period, the amortization period ends with the month of
				  disposition or retirement. The monthly amortization allowable is computed by
				  dividing the adjusted basis of the property at the beginning of the
				  amortization period by 60. The total amortization subtraction for a particular
				  taxable year is the sum of the amortization for each month of the amortization
				  period that falls within the taxable year.
D. A taxpayer may elect to discontinue the
				  amortization election before the end of the 60-month amortization period.
1. A taxpayer shall include a statement in
				  the original or amended return for the taxable year that the election to
				  discontinue amortization is effective. The taxpayer shall identify in the
				  statement each piece of property for which the election to discontinue
				  amortization applies and the last month of amortization.
2. Generally, a taxpayer is not required to
				  make the addition to income referred to in subsection (A) for the months
				  following the election to discontinue amortization. However, an addition to
				  income is required for the federal depreciation or amortization that exceeds
				  the adjusted basis not previously recovered through depreciation or
				  amortization. For example, a taxpayer elects to discontinue amortization after
				  48 months. If the property had an adjusted basis of $100,000 at the beginning
				  of the amortization period, the adjusted basis remaining to be recovered is
				  $20,000 ($100,000 minus the previous amortization of $80,000). If federal
				  depreciation for the property is $10,000 per year for 10 years, an addition to
				  income of $10,000 per year is required beginning with the third taxable year
				  following the election to discontinue amortization.