MN 70301 Bonus Addback – Line 2b Not Populating (State Depreciation Basis = $0)

[fxf]

After the 2/13 update, Federal reviews clean. Minnesota return fails review due to an issue on the "Adjustments to Federal Taxable Income (FTI) Smart Worksheet."

Details:

• Line 2a (Sec. 70301 bonus addback) is correct and equals exactly 60% of federal bonus depreciation (from Federal Form 4562).

• Line 2b ("Amount of allowable depreciation for assets on 2a") shows 0 and triggers an error stating the amount must be less than zero.

• The field cannot be edited.

On the State Depreciation Worksheet:

• Asset is listed.

• Placed-in-service date is correct.

• Addback amount is correct.

• However, State Cost/Basis = 0 and State Depreciation Amount = 0.

It appears the MN addback is calculated, but no state depreciation basis or 5-year recovery is being generated, which leaves Line 2b at zero.

Is this a known issue? Is there a way to re-trigger state asset generation without overriding worksheets?

Thanks.

[DaveF1006]

Try this. First delete your state return from your program. After deletion, close your program and then open it up again to clear out all the old data. Now:

1. Go to Federal > Wages & Income (or Business/Rental section where the asset lives). 
2. Find the asset in the Asset Summary list.
3. Click Edit on the asset.
4. Navigate through the interview until you reach the screen: "Was this asset used 100% for business?"
5. Change the business use percentage to something else (e.g., 99%) and click Continue.
6. Immediately go back and change it back to the correct 100% (or your original percentage).
7. Finish the Federal section and then re-enter the Minnesota state return.

This updates the asset’s status in the Federal database, which usually prompts the State module to recognize new data and refresh its calculations for the M1MB worksheets.

If the update doesn't work, the State Depreciation Worksheet itself may be corrupted and refusing to accept new data.

1. Switch to Forms Mode (top right).
2. In the left-hand list of Minnesota forms, find the State Depreciation Worksheet and the M1MB (Business Income Additions/Subtractions).
3. Select each and click Delete Form ‌.
4. Important: Also look for a form called "Asset Entry" or "Depreciation Reports" within the Minnesota section and delete those specific to the state.
5. Return to Step-by-Step and run through the Minnesota "Business/Asset" interview again. The software will be prompted to regenerate those forms from your Federal 4562 data.

[fxf]

I’m filing a Minnesota partnership return (Form M3), not an individual return, so I do not have M1MB in my forms list.

Line 2a of the "Adjustments to Federal Taxable Income (FTI) Smart Worksheet" is correctly pulling 60% of my federal bonus depreciation (Sec. 70301 addback).

However, Line 2b ("Amount of allowable depreciation for assets on 2a") remains zero and triggers a review error requiring a negative number.

I do have a "Bonus Depreciation Adjustments" form that pulls 100% of federal 4562 line 14 and calculates the 60% Sec. 70301 addback correctly.

However, the required 1/5 recovery of that addback is not being generated on Line 2b of the FTI worksheet.

Is TurboTax currently generating the 5-year amortization schedule for Sec. 70301 addbacks in Minnesota partnership (M3) returns? Or will it?

[fxf]

Is anyone else experiencing this? On the Federal Taxable Income (FTI) Smart Worksheet, the validation rule for Line 2b ("Allowable depreciation for assets on Line 2a") requires the value to be less than 0 (a negative number/subtraction). However, TurboTax is populating this field with $0 and has locked the cell. Because it is not a negative number, I cannot pass the final error check to e-file.

I think the root cause of this is  that the State Depreciation Worksheet is not calculating the 20% "allowable" depreciation for the OBBBA-specific portion of the basis, or the link between the State Asset Entry Worksheet and the FTI Smart Worksheet is broken.

The error only clears if I perform a manual Override on the "Adjustments to FTI" Smart Worksheet, Line 2b (or the source Line H) to a negative value (e.g., -1). But then I'm prevented from e-filing, and I am not confident that the proper state depreciation will be taken in subsequent years. So this workaround seems rather sub-optimal...

[fxf · Accepted solution]

I think I've root caused this issue. 

I have new 15 year Qualified Improvement Property this year. It is eligible for a 100% federal bonus depreciation under OBBBA, but Minnesota doesn't recognize this. So the treatment is very complex. 

The new Minnesota State Depreciation Worksheet is designed to handle this, I believe, but it does not pull any "state" values onto the sheet. My asset is listed on this worksheet, and I had to override the "State Cost or Other Basis", which is supposed to be 60% of the "Federal Cost or Other Basis". Then I had to calculate my own "State Depreciation Expense". 

It seems like Turbotax has all the information needed to do these calculations -- back in the Federal section, there is all sorts of state information listed on the Asset worksheet, but nothing I changed there caused the information to populate onto the "State Depreciation Worksheet". 

The big question is -- how will this be treated in future years? Will I have to manually manage the state depreciation myself from now until 2040? Will I be alive in 2040? Will any of us? STAY TUNED!