Why Some States without Income Tax Have Conformity Issue on Section 179 and Bonus Depreciation

[ndc24075]

I've been researching tax incentives like Section 179 and bonus depreciation, and I've noticed that some states without income tax such as Texas may have their own regulations for these deductions. I'm curious to understand why these states would choose not to conform to or set a limit to Section 179 or bonus depreciation, despite their widespread use and popularity. I don't understand why the state's conformity decision would impact the tax revenue they receive. Can anyone provide any insight or information on this topic? Thank you in advance.

[ThomasM125]

I'm sure about Texas, but states like Florida and Tennesse while not taxing individual earnings, do tax corporate earnings, so the section 179 regulations could have an impact on the amount of tax revenue collected.

[Carl]

More than likely it's for the "tangible property tax".  Here in FL where I'm at (no state income tax) counties can assess a tangible property tax on non-real estate property used for the production of income, each year that property is used in income production. Typically, the tax is a percentage of the FMV of the asset, which gets lower each passing year.

If using SEC179 you reduce the cost basis of the non-real estate asset to zero, that would mean they can't assess the tax after the first year. Therefore the reasoning for non-conformity to federal methods.

[Anonymous_]

I am not certain about other states that levy a tangible personal property tax, but that particular tax in Florida (assessed and collected by each county) is completely decoupled from any federal income tax deduction, such as bonus depreciation, Section 179, et al. (i.e., the basis may be reduced to zero for federal income tax purposes but Florida has its own schedule for the purposes of its tangible personal property tax.