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Iowa to link to federal depreciation rules for 2011, Sec. 179 for 2010?

February 15, 2011

The Iowa Senate Ways and Means Committee yesterday approved this year's "code conformity" bill to link Iowa's income tax rules to the federal tax rules. The bill, SF 209,

The bill appears to adopt federal bonus depreciation and the $500,000 Sec. 179 limits. The bonus depreciation is effective for 2011, but not retroactively. The legislative language appears to make the Sec. 179 coupling retroactive to 2010. If the coupling is not retroactive, the Iowa Sec. 179 limit for 2010 is $134,000. The legislative explanation reads (my emphasis):

The division also decouples, for Iowa tax purposes, from the increased expensing allowance under section 179 of the Internal Revenue Code enacted by Congress as part of the American Recovery and Reinvestment Act of 2009 and makes a number of conforming changes. The changes take effect for tax years beginning on or after January 1, 2009, and before January 1, 2010.

I have emailed legislators for clarification and will post an update as soon as I hear back, as it means a lot for returns in process right now.

The bill couples retroactively for some minor breaks. For example, the bill would allow an Iowa deduction for sales taxes if that deduction is elected on the federal return. The bill also would conform Iowa the federal rules for excluding dependent health insurance.

The bill still has a way to go before it is enacted. If you have any Iowa items on your 2010 return that are on the 2009 list of federal-Iowa differences, you may want to sit on your Iowa return until conformity legislation is enacted; otherwise you may have to amend, or you may end up getting a payment notice from Iowa.

Other coverage: Sioux City Journal

Iowa Department of Revenue on 2010 conformity.

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