Q&A with the Pennsylvania Department of Revenue

Is it allowable to use a separate method of depreciation for PA than is used for federal purposes? Please explain.

Sep 30, 2013
Q:

Since Pennsylvania’s income reporting is stand alone, GAAP based and not tied to federal tax law and recognition of depreciation expense is not always consistent with the IRS, is it allowable to use a separate method of depreciation for PA than is used for federal purposes? (i.e.: can you choose to depreciate an asset using the straight line method for PA purposes and use MACRS for federal purposes as long as proper records are maintained?)  If so, could you please explain Informational Notice PIT 2012-05 that requires following federal reporting in certain cases?

A:

Section 7303(a.2) states if the depreciable basis for federal and PA is the same, the taxpayer is allowed to follow the federal depreciation method. If the basis is different, straight line depreciation must be used. You are not required to follow federal depreciation. Section 7303(a.3) adopts all of IRC Section 179 in effect in 2003 which means we must follow all the rules of IRC Section 179 including the limit of $25,000 for married taxpayers.
 

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These documents provide a summary of the answers provided by the Department of Revenue to the PICPA Committee on State Taxation at its annual question and answer session. These documents are classified as revenue information issued for informational purposes only for the convenience of PICPA members. Pursuant to 61 Pa. Code Section 3.4, these documents should not be relied upon for any purpose or used in tax appeals. Taxpayers requiring a binding opinion on their specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.