Changes to QIP May Prompt Adjustments to Some Georgia Tax Returns

Georgia business owners may need to adjust depreciation taken on qualified improvement property in 2019 now that the state has adopted 15-year recovery periods and does not allow 100% bonus depreciation.

The QIP recovery period first became an issue with the adoption of the Tax Cuts and Jobs Act in 2017, when through a technical glitch, language was omitted that would have made QIP 15-year property eligible for bonus depreciation. Consequently, QIP defaulted to 39-year depreciation period and was not eligible for 100% bonus depreciation.

The omission was not corrected until March when the CARES Act added language to give QIP a depreciable life of 15 years.

The state of Georgia passed a bill in June to conform with all new federal laws adopted as of March 27, 2020, and delineated those provisions for which the state would not conform. The 15-year QIP was not listed as an exception; therefore, qualified improvement property is treated as 15-year property for Georgia taxes.

This is a big change for Georgia taxpayers. Historically, QIP in Georgia has always been 39-year property – even before the passage of the TCJA.

The question now is how to account for the change, which would be addressed on either the 2019 or 2020 tax returns. Many business filers may want to take advantage of the accelerated depreciation. Members of our Business & Tax Advisory Group are working closely with the Georgia Department of Revenue’s Tax Policy group to help create instructions for how to apply this change. We will keep you posted as we learn more. In the meantime, please reach out to your tax manager if you have any questions.

Zachary Collins, CPA, is a Senior with our Business & Tax Advisory Group. He can be reached at zcollins@antarescpas.com.