Federal bonus depreciation
House Bill 559 decouples Idaho from section 168(n), a provision allowing 100% expensing of certain qualified production property when several specific requirements are met. Idaho will remain decoupled from section 168(k) bonus depreciation. Recall that the OBBBA permanently reinstated 100% bonus depreciation under section 168(k) for certain qualified property acquired and placed in service after Jan. 19, 2025.
R&E expenditures
House Bill 559 includes several key modifications to the full expensing of domestic R&E expenditures under the OBBBA. For domestic R&E expenditures incurred after Dec. 31, 2021, and before Jan. 1, 2025, taxpayers must continue the expensing of such costs under the IRC as in effect immediately prior to the enactment of section 70302 of the OBBBA. As a result, Idaho does not allow the acceleration of amortized domestic R&E costs incurred in the 2022 through 2024 tax years under the federal transition rules. Rather, such costs must continue to be deducted over the remaining amortization period provided by the Tax Cuts and Jobs Act (P.L. 115-97, TCJA). However, House Bill 559 does not decouple from section 174A of the OBBBA as it relates to domestic R&E costs incurred on or after Jan. 1, 2025, which may be expensed in the year the costs are incurred.
Additionally, the bill specifies that amounts deducted or amortized under sections 174 or 174A that constitute qualified research expenses for purposes of the Idaho research activities credit are not eligible for that credit. Rather, Idaho defines qualified research expenses as those expenses defined in section 41 of the IRC, but only to the extent the qualified research is conducted in Idaho.
