United States

Wisconsin promulgates bonus depreciation basis adjustment guidance

TAX ALERT  | 

Effective for tax years beginning after Dec. 31, 2013, Wisconsin requires taxpayers to adjust the Wisconsin basis of depreciated or amortized assets to account for federal-to-state basis differences stemming from federal bonus depreciation. Pursuant to a frequently asked questions guide provided on the Wisconsin Department of Revenue’s website, the department has issued additional guidance regarding this requirement.

As discussed in the FAQ, starting with the first tax year beginning after Dec. 31, 2013, and for each of the four subsequent tax years, a taxpayer is required to add or subtract 20 percent of the difference between its combined federal adjusted basis and its combined Wisconsin adjusted basis of all depreciated or amortized assets. If the federal adjusted basis is less than the Wisconsin adjusted basis, the taxpayer must subtract 20 percent of the difference in each year. If the federal adjusted basis is more than the Wisconsin adjusted basis, the taxpayer must add 20 percent of the difference in each year.

Any subtraction modification related to this item cannot create a Wisconsin net operating loss. If the federal tax return showed income but this Wisconsin adjustment would result in a loss, the Wisconsin income shown on the return would be zero and the remaining subtraction would be lost. Please also note that there are various rules relating to specific transactions, including disposition of assets prior to the five-year adjustment period, sale of certain businesses, etc.

Taxpayers that have filed Wisconsin returns showing adjustments related to federal bonus depreciation should review their federal-to-state basis differences and determine the impact of this adjustment requirement.

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