Request By:
Honorable Steven Connelly
Attorney at Law
208 Short Street
Berea, Kentucky 40403
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Alex W. Rose, Assistant Attorney General
You stated in your letter that House Bill 342 recently amended KRS 141.010(3) to provide that for tax years beginning on or after January 1, 1982, except as otherwise provided, the "Internal Revenue Code" referred to in the Kentucky statutes would mean the Code in effect on December 31, 1981. Then you asked, "Does this amendment mean that, for the tax year 1981, an individual can utilize the federal rules on accelerated depreciation?"
The answer to your question is "yes". House Bill 342 provided that the Economic Recovery Tax Act (ERTA) of 1981 is effective for Kentucky at the dates specified in the Act which includes the accelerated depreciation provisions effective for assets purchased after December 31, 1980. Other changes in the Internal Revenue Code from the prior reference date of December 31, 1979, (established by House Bill 299 of the 1980 Legislative Session) apply to Kentucky only for taxable years beginning after December 31, 1981.
Thus, an individual taxpayer may claim identical depreciation for both Kentucky and federal income tax purposes on those assets acquired after December 31, 1980. It should be noted, however, that corporations -- except Subchapter S corporations -- are required by House Bill 342 to apply a statutory reduction factor to the ERTA accelerated depreciation.