Pennsylvania Code › Title 61 - REVENUE › Part I - Department of Revenue › Subpart B - General Fund Revenues › Article VI - Corporation Taxes › Chapter 153 - CORPORATE NET INCOME TAX › TAX BASE › Section 153.14 - Other adjustments

Current through Register Vol. 54, No. 28, July 13, 2024
The following items will be allowed as special
						  deductions in determining Commonwealth taxable income if supported by a
						  detailed schedule:
(1)
Special
						deduction for western hemisphere trade corporations.
A deduction will
						be allowed in the amount of the deduction permitted under sections 921 and 922
						of the IRC (26 U.S.C.A.
						§§
													921 and
						922).
(2)
Contribution adjustments to State
						taxable income.
A taxpayer filing with the Federal government as a
						member of a consolidated group may be entitled, on a separate company reporting
						basis, to a larger contribution deduction in arriving at Commonwealth taxable
						income. Because consolidated reporting is not permitted for Commonwealth
						purposes, the taxpayer may reflect on a separate company reporting basis the
						contribution deduction to which it would have been entitled had it filed a
						separate return with the Federal government.
(3)
Special deduction for section
						1250 of the IRC (26 U.S.C.A.
						§
														1250) property depreciated on an
						accelerated depreciation basis when the accelerated depreciation falls below
						straight line depreciation.
This adjustment may be taken in accordance
						with the following:
(i) A taxpayer
						depreciating section 1250 of the IRC (26 U.S.C.A. §
														1250) property
						on an accelerated depreciation basis is permitted a special deduction to
						taxable income to be apportioned when the accelerated depreciation falls below
						straight line depreciation. The amount of the deduction for a tax year is
						limited to the amount of depreciation below straight line. The aggregate
						adjustment to taxable income to be apportioned for amounts below straight line
						may not exceed the aggregate of the amount added to taxable income to be
						apportioned in previous tax years.
Example:
Taxpayer, a calendar year
						  company, purchases a plant, which is a section 1250 of the IRC property, on
						  January 1, 1976, having a depreciable value of $900,000 and a 20-year useful
						  life. Taxpayer depreciates the property on a double-declining (accelerated)
						  basis. Straight-line depreciation would be $45,000 per year. Taxpayer's
						  depreciation on its Federal return for 1984 would be $43,047. Taxpayer's 1984
						  taxable income to be apportioned on its Commonwealth report would be adjusted
						  by permitting a deduction for the amount of depreciation below straight-line or
						  $1,953 ($45,000 minus $43,047).
(ii) A taxpayer depreciating section 1250 of
						the IRC property on an accelerated depreciation basis is permitted a special
						deduction to taxable income to be apportioned when a section 1250 of the IRC
						property is sold. The Department will permit the taxpayer a special deduction
						for accelerated depreciation previously included in income to be apportioned in
						prior years.
Example:
Taxpayer purchases a building
						  in 1971 and elects to depreciate the building on an accelerated depreciation
						  basis. The following amounts were included as tax preference items for the
						  years listed:
Year
Tax Preference Amount
1971
$10,000
1972
7,500
1973
5,000
1974
2,500
_____
______
Total
$25,000
The building was sold on January 1, 1975. Each of the
						  years listed in this example produced taxable income and the tax preference
						  amounts listed in this example were included in income to be apportioned. The
						  Department will permit the taxpayer a special deduction of $25,000.
(iii) The special deductions
						described in subparagraphs (i) and (ii) will not be permitted for a tax year
						when the taxpayer did not have income to be apportioned.