Ariz. Admin. Code § 15-2D-306

Current through Register Vol. 30, No. 25, June 21, 2024

Section R15-2D-306 - Amortization of Property Used for Atmospheric and Water Pollution Control

A. A taxpayer may elect to amortize, over a 60-month period, the adjusted basis of any device, machinery, or equipment that is certified by the Arizona Department of Environmental Quality as property that collects and controls atmospheric and water pollutants and contaminants at their source. The amortization subtractions allowed for the 60-month period are in lieu of the federal depreciation and amortization related to the pollution control property. The related federal depreciation and amortization deducted in computing federal taxable income is an addition to income under A.R.S. § 43-1121. The adjusted basis for purposes of amortization is the basis for determining depreciation under Internal Revenue Code § 167 on the date the pollution control property is placed in service. The adjusted basis does not include land or buildings.

B. A taxpayer that elects to amortize pollution control property shall include a statement in the original or amended return for the taxable year of election. The taxpayer shall identify in the statement each piece of property subject to the election, the month the property is placed in service, the adjusted basis of the property, and the date of certification by the Arizona Department of Environmental Quality.

C. The amortization period is 60 consecutive months beginning with the month the property is placed in service. If the property is disposed of or retired from service before the end of the 60-month period, the amortization period ends with the month of disposition or retirement. The monthly amortization allowable is computed by dividing the adjusted basis of the property at the beginning of the amortization period by 60. The total amortization subtraction for a particular taxable year is the sum of the amortization for each month of the amortization period that falls within the taxable year.

D. A taxpayer may elect to discontinue the amortization election before the end of the 60-month amortization period.

1. A taxpayer shall include a statement in the original or amended return for the taxable year that the election to discontinue amortization is effective. The taxpayer shall identify in the statement each piece of property for which the election to discontinue amortization applies and the last month of amortization.

2. Generally, a taxpayer is not required to make the addition to income referred to in subsection (A) for the months following the election to discontinue amortization. However, an addition to income is required for the federal depreciation or amortization that exceeds the adjusted basis not previously recovered through depreciation or amortization. For example, a taxpayer elects to discontinue amortization after 48 months. If the property had an adjusted basis of $100,000 at the beginning of the amortization period, the adjusted basis remaining to be recovered is $20,000 ($100,000 minus the previous amortization of $80,000). If federal depreciation for the property is $10,000 per year for 10 years, an addition to income of $10,000 per year is required beginning with the third taxable year following the election to discontinue amortization.

Ariz. Admin. Code § R15-2D-306

Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2). Section repealed; new Section adopted by final rulemaking at 6 A.A.R. 4105, effective October 4, 2000 (Supp. 00-4).