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IOWA BONUS DEPRECIATION CATCH-UP CLEARS HOUSE

January 26, 2005

The Iowa House yesterday passed HF 102 (formerly HF 23). The bill is an effort to clean up the depreciation and Section 179 mess left at the end of last year's special session.

The new bill would permit taxpayers to claim on 2004 returns the extra 2003 bonus depreciation and Section 179 deduction allowed in the Legislature's September 2004 special session. It would also allow taxpayers to simply continue to use the depreciation rules that were in effect before the special session.

The 2004 special session allowed Iowa taxpayers to claim bonus depreciation for assets eligible for federal 50% bonus depreciation. It also increased the Iowa maximum Section 179 deduction to $100,000 (from $25,000) to match the federal maximum. These changes were effective for 2003 returns, but were not passed until after most 2003 returns had been filed. The Department of Revenue then announced that the only way to use the deduction would be to file amended returns.

A Senate version of the bill (SSB 1061) was referred today to the Senate Ways and Means Committee.

WHAT WILL THE GOVERNOR DO?

The bill passed the house 99-0. No opposition has yet been noted, but the Governor's office has not committed to sign the bill. An aide to the Governor's office said, "Before the Governor can take a position, we like to see the bill in final form. The Senate has been known to frequently change and amend House Files."

Given the 99-0 margin in the house, it seems that the bill is an unlikely veto target.

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