For purposes of both the corporate excise and the personal income tax, Massachusetts generally follows current Code for § 179 which provides an election to expense certain depreciable business assets. The 2003 Federal Act amended IRC § 179 to increase both the deduction dollar limit and the threshold for figuring any reduction in the dollar limit. Subject to the rules and limitations included in § 179 and § 280F, for both corporate excise and personal income tax purposes, Massachusetts adopts the increased maximum § 179 deduction of $100,000, as well as any inflation adjustments to this amount, for taxable years beginning after 2002 and before 2006.1
Listed Property. Code § 280F limits annual depreciation deductions for certain "listed property," including passenger automobiles and other property used for transportation.2 Any deduction allowable under IRC § 179 with respect to listed property is subject to the limitations of § 280F in the same manner as if it were a depreciation deduction allowable under § 168.3 As part of the amendments to IRC § 168(k), the 2003 Federal Act increased the limitations on first-year depreciation for certain business property that is listed property under § 280F, but due to decoupling from IRC § 168(k), Massachusetts law does not incorporate these increases for purposes of both the corporate excise and the personal income tax.
Passenger Automobiles. Federal law requires the limitations on depreciation deductions at IRC 280F to be increased by a price inflation adjustment amount for passenger automobiles.4 Rev. Proc. 2003-75 contains various inflation adjustment tables for depreciation limitations for business vehicles placed in service in 2003 depending on both the vehicle classification and the system of depreciation used.5 For both corporate excise and personal income tax purposes, Massachusetts follows only those inflation adjustments found in Rev. Proc. 2003-75 that do not incorporate the increases enacted by the amendments of IRC § 168(k); Massachusetts does not adopt the higher limitations in Rev. Proc. 2003-75 for "§ 168(k)(1) property" or "§ 168(k)(4) property."
Accordingly, for property placed in service in 2003, in determining the Massachusetts depreciation limitation amount for both corporate excise and personal income tax purposes, taxpayers are permitted to use the following tables in Rev. Proc. 2003-75:
Table 1. Passenger automobiles (that are not § 168(k)(1) passenger automobiles, § 168(k)(4) passenger automobiles, trucks, vans, or electric automobiles).
Table 4. Trucks and vans (that are not § 168(k)(1) passenger automobiles or § 168(k)(4) passenger automobiles).
Table 7. Electric Automobiles (that are not § 168(k)(1) passenger automobiles or § 168(k)(4) passenger automobiles).
In Rev. Proc. 2003-75, Tables 2, 3, 5, 6, 8 and 9 allow higher federal depreciation deductions for passenger automobiles that are also IRC § 168(k) property, but these deductions are not adopted by Massachusetts. Where a taxpayer is allowed to use one of the tables for IRC §168(k) property in Rev. Proc. 2003-75 for federal purposes, the taxpayer must use the appropriate Table 1, 4 or 7 for Massachusetts purposes.