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State Taxes

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State Taxes

State taxes Index A Accuracy of deposits rule, Accuracy of Deposits Rule Additional Medicare Tax, Reminders, Additional Medicare Tax withholding. State taxes , Additional Medicare Tax withholding adjustments. State taxes Adjustments, 13. State taxes Reporting Adjustments to Form 941 or Form 944 Aliens, nonresident, Withholding income taxes on the wages of nonresident alien employees. State taxes , Withholding of social security and Medicare taxes on nonresident aliens. State taxes Allocated tips, Allocated tips. State taxes Archer MSAs, Health Savings Accounts and medical savings accounts. State taxes Assistance (see Tax help) B Backup withholding, Nonpayroll Income Tax Withholding Business expenses, employee, Employee business expense reimbursements. State taxes C Calendar, Calendar Certain foreign persons treated as American employers, Foreign persons treated as American employers. State taxes Change of business address or responsible party, Change of Business Address or Responsible Party COBRA premium assistance credit, COBRA premium assistance credit. State taxes Correcting employment taxes, Correcting employment taxes. State taxes Correcting errors, (prior period adjustments) Form 941, Prior Period Adjustments D Delivery services, private, Private Delivery Services Depositing taxes Penalties, Deposit Penalties Rules, 11. State taxes Depositing Taxes Differential wage payments, Differential wage payments. State taxes E E-file, Electronic filing by reporting agents. State taxes Election worker, State and local government employers. State taxes Electronic, Electronic deposit requirement. State taxes Electronic deposit requirement, Electronic deposit requirement. State taxes Electronic Federal Tax Payment System (EFTPS), Electronic deposit requirement. State taxes Electronic filing, Electronic Filing and Payment, Electronic filing by reporting agents. State taxes Eligibility for employment, Hiring New Employees Employees defined, Employee status under common law. State taxes Employer identification number (EIN), 1. State taxes Employer Identification Number (EIN) Employer responsibilities, Paying Wages, Pensions, or Annuities F Family employees, 3. State taxes Family Employees Final return, Final return. State taxes Form 944, 12. State taxes Filing Form 941 or Form 944 Fringe benefits, Fringe benefits. State taxes FUTA tax, 14. State taxes Federal Unemployment (FUTA) Tax G Government employers, Federal Government employers. State taxes H Health insurance plans, Health insurance plans. State taxes Health Savings Accounts (HSAs), Health Savings Accounts and medical savings accounts. State taxes Hiring new employees, Hiring New Employees Household employees, Exceptions. State taxes I Income tax withholding, Income Tax Withholding, 16. State taxes How To Use the Income Tax Withholding Tables Information returns, Information Returns International social security agreements, International social security agreements. State taxes L Long-term care insurance, Health insurance plans. State taxes Lookback period, When To Deposit M Meals and lodging, Meals and lodging. State taxes Medical care, Medical care reimbursements. State taxes Medical savings accounts, Health Savings Accounts and medical savings accounts. State taxes Medicare tax, Social Security and Medicare Taxes Mileage, Per diem or other fixed allowance. State taxes Monthly deposit schedule, Monthly Deposit Schedule Moving expenses, Moving expenses. State taxes N New employees, Hiring New Employees Noncash wages, Wages not paid in money. State taxes Nonemployee compensation, Nonpayroll Income Tax Withholding P Part-time workers, Part-Time Workers Payroll period, 8. State taxes Payroll Period Penalties, Deposit Penalties, Penalties. State taxes Private delivery services, Private Delivery Services Publications (see Tax help) R Reconciling Forms W-2 and Forms 941 or 944, Reconciling Forms W-2, W-3, and 941 or 944. State taxes Recordkeeping, Recordkeeping Reimbursements, Accountable plan. State taxes , Nonaccountable plan. State taxes , Per diem or other fixed allowance. State taxes Repayments, wages, Wage Repayments S Seasonal employers, Exceptions. State taxes Semiweekly deposit schedule, Semiweekly Deposit Schedule Sick pay, Sick pay. State taxes Social security and Medicare taxes, Social Security and Medicare Taxes Social security number, employee, 4. State taxes Employee's Social Security Number (SSN) Spouse, Business Owned and Operated by Spouses Standard mileage rate, Per diem or other fixed allowance. State taxes Statutory employees, Employee status under common law. State taxes Statutory nonemployees, Statutory employees. State taxes Successor employer, Successor employer. State taxes , Successor employer. State taxes Supplemental wages, 7. State taxes Supplemental Wages T Tax help, How To Get Tax Help Telephone help, Telephone Help Third-party sick pay tax adjustment, Adjustment of tax on third-party sick pay. State taxes Tip Rate Determination Agreement, Tip Rate Determination and Education Program. State taxes Tip Rate Determination and Education Program, Tip Rate Determination and Education Program. State taxes Tips, 6. State taxes Tips, Tips treated as supplemental wages. State taxes Trust fund recovery penalty, Trust fund recovery penalty. State taxes TTY/TDD information, How To Get Tax Help U Unemployment tax, federal, 14. State taxes Federal Unemployment (FUTA) Tax V Vacation pay, Vacation pay. State taxes W Wage repayments, Wage Repayments Wages defined, 5. State taxes Wages and Other Compensation Wages not paid in money, Wages not paid in money. State taxes Withholding Backup, Nonpayroll Income Tax Withholding Certificate, Using Form W-4 to figure withholding. State taxes Exemption, Exemption from federal income tax withholding. State taxes Fringe benefits, Withholding on fringe benefits. State taxes Income tax, Income Tax Withholding Levies, Amounts exempt from levy on wages, salary, and other income. State taxes Nonresident aliens, Withholding of social security and Medicare taxes on nonresident aliens. State taxes Pensions and annuities, Nonpayroll Income Tax Withholding Percentage method, Percentage Method Social security and Medicare taxes, Social Security and Medicare Taxes Table instructions, 16. State taxes How To Use the Income Tax Withholding Tables Tips, Tips treated as supplemental wages. State taxes Wage bracket method, Wage Bracket Method Z Zero wage return, Paying Wages, Pensions, or Annuities Prev  Up     Home   More Online Publications
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Domestic and International Programs

The Domestic and International Index (.pdf) lists all Appeals domestic and international related issues, including contact information, as follows:

  • ACI - Appeals Coordinated Issues
  • ACIcc - Appeals Coordinated Issues, Category of Case
  • CCI - Compliance Coordinated Issues
  • DCI - Decoordinated Issue (Decoordinated in Appeals information available)
  • EM - Appeals Emerging Issues
  • LT - Listed Transactions
  • SME - Subject Matter Expert
  • TOI - Transactions of Interest
  • UIL - Uniform Issue List

The Domestic and International Index is an alphabetical listing of all issues and should be referred to for all current contact information. It is searchable, using Acrobat Search.

ACI or ACIcc - An issue or category of case, is an issue of IRS-wide impact or importance requiring coordination with Appeals to ensure uniformity and consistency nationwide. This is achieved through the coordination of efforts between Appeals Officers (AO) and designated Technical Specialists (TS). The ACI program encompasses legal issues and factual issues and category of case.

An AO assigned a case with an ACI must consult with the TS prior to the scheduling of the initial conference to obtain current information. For ACIs, except those designated an ACIcc, the AO must get review and concurrence from the TS prior to discussing the settlement with the taxpayer.  Such review and concurrence extends to all aspects of the settlement including closing documents.

CCI - When Compliance coordinates an issue and issues a Coordinated Issue Paper (CIP) Appeals designates the issue as a Compliance Coordinated Issue (CCI).   Appeals generally develops Appeals Settlement Guidelines (ASG) for CCIs.   Effective with the date of the issuance of a CIP, the AO must get the review and concurrence of the Appeals’ TS before discussing the settlement with the taxpayer.  For a list of CCIs visit the Large Business and International (LB&I) Division Coordinated Issue Papers webpage.

EM – An Appeals Emerging Issue is an issue that surfaced in an industry or specialty area in a number of Appeals cases or it is understood cases will be coming to Appeals in the near future with the issue.  The AO assigned a case with an emerging issue is required to contact the designated TS (before holding the initial conference) to gain insight into both the industry or specialty area and the issue. He/she is required to maintain contact with the coordinator. Review and concurrence is not required until such time as an issue may be redesignated a CCI or ACI.

Appeals Settlement Guidelines (ASG)
NOTE: Since specialists may have changed since the finalized ASG was approved, it is recommended that you refer to the Domestic and International Index (.pdf) for contact information.

Page Last Reviewed or Updated: 16-Jan-2014

The State Taxes

State taxes Depreciation Table of Contents Introduction Special Depreciation AllowanceQualified Property Election Not To Claim the Allowance Rules for Returns Filed Before June 1, 2002 Passenger Automobiles New York Liberty Zone BenefitsSpecial Liberty Zone Depreciation Allowance Increased Section 179 Deduction Liberty Zone Leasehold Improvement Property If you depreciate business property that you acquired and placed in service after September 10, 2001, new law contains provisions that may affect your depreciation deduction for that property. State taxes Publication 946, How To Depreciate Property, contains information on depreciation. State taxes However, Publication 946 does not contain the new provisions because it was printed before the law was enacted. State taxes The new provisions are in the Supplement to Publication 946, which is reprinted below. State taxes Supplement to Publication 946 How To Depreciate Property   Introduction After Publication 946 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. State taxes The new law made several changes in the tax rules explained in the publication. State taxes Some of the changes apply to property placed in service during 2001. State taxes This supplemental publication describes those changes and explains what you should do if you are affected by them. State taxes The situations and examples in Publication 946 do not reflect any of the changes made by the Job Creation and Worker Assistance Act of 2002. State taxes The new law contains the following provisions. State taxes 30% depreciation deductions (special depreciation allowance and special New York Liberty Zone (Liberty Zone) depreciation allowance) for the year qualified property is placed in service after September 10, 2001. State taxes An increased dollar limit on the section 179 deduction for qualified Liberty Zone property purchased after September 10, 2001. State taxes A shorter recovery period for qualified Liberty Zone leasehold improvement property placed in service after September 10, 2001. State taxes An increase in the maximum depreciation deduction for 2001 for a qualified passenger automobile placed in service after September 10, 2001. State taxes If you believe you qualify for an increased deduction under any of these new rules, you must file the revised 2001 Form 4562 (dated March 2002) for 2001 calendar or fiscal years and 2000 fiscal years ending after September 10, 2001. State taxes If you have already filed a tax return, this supplemental publication explains how to claim these benefits and how to elect not to claim the special depreciation allowance or special Liberty Zone depreciation allowance. State taxes See Table 2 at the end of the supplement for an overview of the rules that apply if you filed your return before June 1, 2002. State taxes Special Depreciation Allowance You can take a special depreciation allowance for qualified property you place in service after September 10, 2001. State taxes The allowance is an additional deduction of 30% of the property's depreciable basis. State taxes To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. State taxes See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. State taxes The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. State taxes There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. State taxes In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. State taxes Example 1. State taxes On November 1, 2001, you bought and placed in service in your business qualified property that cost $100,000. State taxes You did not elect to claim a section 179 deduction. State taxes You can deduct 30% of the cost ($30,000) as a special depreciation allowance for 2001. State taxes You use the remaining $70,000 of cost to figure your regular depreciation deduction for 2001 and later years. State taxes Example 2. State taxes The facts are the same as in Example 1, except that you choose to deduct $24,000 of the property's cost as a section 179 deduction. State taxes You use the remaining $76,000 of cost to figure your special depreciation allowance of $22,800 ($76,000 × 30%). State taxes You use the remaining $53,200 of cost to figure your regular depreciation deduction for 2001 and later years. State taxes Qualified Property To qualify for the special depreciation allowance, your property must meet the following requirements. State taxes It is new property of one of the following types. State taxes Property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. State taxes See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. State taxes Water utility property. State taxes See 25-year property on page 22 in Publication 946. State taxes Computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. State taxes (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. State taxes ) Qualified leasehold improvement property (defined later). State taxes It meets the following tests (explained later under Tests To Be Met). State taxes Acquisition date test. State taxes Placed in service date test. State taxes Original use test. State taxes It is not excepted property (explained later under Excepted Property). State taxes Qualified leasehold improvement property. State taxes    Generally, this is any improvement to an interior part of a building that is nonresidential real property, provided all of the following requirements are met. State taxes The improvement is made under or pursuant to a lease by the lessee (or any sublessee) or the lessor of that part of the building. State taxes That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. State taxes The improvement is placed in service more than 3 years after the date the building was first placed in service. State taxes   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. State taxes The enlargement of the building. State taxes Any elevator or escalator. State taxes Any structural component benefiting a common area. State taxes The internal structural framework of the building. State taxes   Generally, a binding commitment to enter into a lease is treated as a lease and the parties to the commitment are treated as the lessor and lessee. State taxes However, a binding commitment between related persons is not treated as a lease. State taxes Related persons. State taxes   For this purpose, the following are related persons. State taxes Members of an affiliated group. State taxes The persons listed in items (1) through (9) under Related persons on page 8 of Publication 946 (except that “80% or more” should be substituted for “more than 10%” each place it appears). State taxes An executor and a beneficiary of the same estate. State taxes Tests To Be Met To qualify for the special depreciation allowance, the property must meet all of the following tests. State taxes Acquisition date test. State taxes    Generally, you must have acquired the property either: After September 10, 2001, and before September 11, 2004, but only if no written binding contract for the acquisition was in effect before September 11, 2001, or Pursuant to a written binding contract entered into after September 10, 2001, and before September 11, 2004. State taxes   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001, and before September 11, 2004. State taxes Placed in service date test. State taxes   Generally, the property must be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. State taxes   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. State taxes Original use test. State taxes   The original use of the property must have begun with you after September 10, 2001. State taxes “Original use” means the first use to which the property is put, whether or not by you. State taxes Additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test. State taxes Excepted Property The following property does not qualify for the special depreciation allowance. State taxes Property used by any person before September 11, 2001. State taxes Property required to be depreciated using ADS. State taxes This includes listed property used 50% or less in a qualified business use. State taxes Qualified New York Liberty Zone leasehold improvement property (defined next). State taxes Qualified New York Liberty Zone leasehold improvement property. State taxes   This is any qualified leasehold improvement property (as defined earlier) if all of the following requirements are met. State taxes The improvement is to a building located in the New York Liberty Zone (defined later under New York Liberty Zone Benefits). State taxes The improvement is placed in service after September 10, 2001, and before January 1, 2007. State taxes No written binding contract for the improvement was in effect before September 11, 2001. State taxes Election Not To Claim the Allowance You can elect not to claim the special depreciation allowance for qualified property. State taxes If you make this election for any property, it applies to all property in the same property class placed in service during the year. State taxes To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. State taxes When to make election. State taxes   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. State taxes   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). State taxes Attach the election statement to the amended return. State taxes At the top of the election statement, write “Filed pursuant to section 301. State taxes 9100–2. State taxes ” Revoking an election. State taxes   Once you elect not to deduct the special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. State taxes A request to revoke the election is subject to a user fee. State taxes Rules for Returns Filed Before June 1, 2002 The following rules apply if you placed qualified property in service after September 10, 2001, and filed your return before June 1, 2002. State taxes The rules apply to returns for the following years. State taxes 2000 fiscal years that end after September 10, 2001. State taxes 2001 calendar and fiscal years. State taxes Claiming the allowance. State taxes   If you did not claim the allowance on your return and did not make the election not to claim the allowance, you can do either of the following to claim the allowance. State taxes File an amended return by the due date (not including extensions) of your return for the year following the year the property was placed in service. State taxes Write “Filed Pursuant to Rev. State taxes Proc. State taxes 2002–33” at the top of the amended return. State taxes File Form 3115, Application for Change in Accounting Method, with your return for the year following the year the property was placed in service. State taxes Your return must be filed by the due date (including extensions). State taxes Write “Automatic Change Filed Under Rev. State taxes Proc. State taxes 2002–33” on the appropriate line of Form 3115. State taxes You must also file a copy (with signature) of the completed Form 3115 with the IRS National Office no later than when you file the original with your return. State taxes For more information about filing Form 3115, including the address to send it to, see Revenue Procedure 2002–9, Revenue Procedure 2002–19, and Revenue Procedure 2002–33. State taxes Example 1. State taxes You are an individual and you use the calendar year. State taxes You placed qualified property in service for your business in December 2001. State taxes You filed your 2001 income tax return before April 15, 2002. State taxes You did not claim the special depreciation allowance for the property and did not make the election not to claim the allowance. State taxes You can claim the special allowance by filing an amended 2001 return by April 15, 2003, with “Filed Pursuant to Rev. State taxes Proc. State taxes 2002–33” at the top of the amended return. State taxes You must file an amended return by April 15, 2003, even if you get an extension of time to file your 2002 tax return. State taxes Example 2. State taxes The facts concerning your 2001 return are the same as in Example 1. State taxes In addition, you got an automatic 4-month extension of time (to August 15, 2003) to file your 2002 return. State taxes You can claim the special allowance by filing a Form 3115 (with “Filed Pursuant to Rev. State taxes Proc. State taxes 2002–33” on the appropriate line) with your 2002 return by August 15, 2003. State taxes You must also file a copy of this Form 3115 with the IRS National Office no later than when you file your 2002 return. State taxes Electing not to claim the allowance. State taxes   Generally, you have elected not to claim the special depreciation allowance for a class of property if you: Filed your return timely (including extensions) for the year you placed qualified property in service and indicated on a statement with the return that you are not claiming the allowance, or Filed your return timely and filed an amended return within 6 months of the due date of the original return (not including extensions) and indicated on a statement with the amended return that you are not claiming the allowance. State taxes The statement must indicate that you are not deducting the special depreciation allowance and the class of property to which the election applies. State taxes The statement can be either attached to or written on the return. State taxes You can, for example, write “not deducting 30%” on Form 4562. State taxes Deemed election. State taxes   If you have not followed either of the procedures described above to elect not to claim the allowance, you may still be treated as making the election. State taxes You will be treated as making the election if you meet both of the following conditions. State taxes You filed your return for the year you placed the property in service and claimed depreciation, but not the special allowance, for any class of property. State taxes You do not file an amended return or a Form 3115 within the time prescribed for claiming the special allowance. State taxes See Claiming the allowance, earlier. State taxes Passenger Automobiles The limit on your depreciation deduction (including any section 179 deduction) for any passenger automobile that is qualified property (defined earlier) placed in service after September 10, 2001, and for which you claim the special depreciation allowance is increased. State taxes Generally, the limit is increased from $3,060 to $7,660. State taxes However, if the automobile is a qualified electric car, the limit is increased from $9,280 to $23,080 ($22,980 if placed in service in 2002). State taxes Table 1 shows the maximum deduction amounts for 2001. State taxes Table 1. State taxes Maximum Deduction for 2001 Qualified Vehicle Placed in Service Before Sept. State taxes 11 Placed in Service After Sept. State taxes 10 Passenger automobile $3,060 $7,660 Electric car 9,280 23,080 1 1$22,980 if you place an electric car in service in 2002. State taxes Election not to claim the allowance. State taxes   The increased maximum depreciation deduction does not apply if you elected not to claim the special depreciation allowance as explained earlier under Election Not To Claim the Allowance and Rules for Returns Filed Before June 1, 2002. State taxes New York Liberty Zone Benefits Several benefits are available for property you place in service in the New York Liberty Zone (Liberty Zone). State taxes They include a special depreciation allowance for the year you place the property in service, an increased section 179 deduction, and the classification of certain leasehold improvement property as 5-year property. State taxes Area defined. State taxes   The New York Liberty Zone is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway) in the Borough of Manhattan in the City of New York, New York. State taxes Special Liberty Zone Depreciation Allowance You can take a special depreciation allowance for qualified Liberty Zone property you place in service after September 10, 2001. State taxes The allowance is an additional deduction of 30% of the property's depreciable basis. State taxes To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. State taxes See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. State taxes The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. State taxes There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. State taxes In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. State taxes You cannot claim the special Liberty Zone depreciation allowance for property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. State taxes Qualified property is eligible for only one special depreciation allowance. State taxes Example 1. State taxes On November 1, 2001, you bought and placed in service in your business, which is in the Liberty Zone, qualified Liberty Zone property that cost $200,000. State taxes You did not elect to claim a section 179 deduction. State taxes You can deduct 30% of the cost ($60,000) as a special Liberty Zone depreciation allowance for 2001. State taxes You use the remaining $140,000 of cost to figure your regular depreciation deduction for 2001 and later years. State taxes Example 2. State taxes The facts are the same as in Example 1, except that you choose to deduct $59,000 of the property's cost as a section 179 deduction. State taxes (See Increased Section 179 Deduction, later, for information concerning how this section 179 deduction amount is figured). State taxes You use the remaining $141,000 of cost to figure your special Liberty Zone depreciation allowance of $42,300 ($141,000 × 30%). State taxes You use the remaining $98,700 of cost to figure your regular depreciation deduction for 2001 and later years. State taxes Qualified Liberty Zone Property For a 2001 calendar or fiscal year and a 2000 fiscal year that ends after September 10, 2001, property qualifies for the special Liberty Zone depreciation allowance if it meets the following requirements. State taxes It is one of the following types of property. State taxes Used property depreciated under MACRS with a recovery period of 20 years or less. State taxes See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. State taxes Used water utility property. State taxes See 25-year property on page 22 in Publication 946. State taxes Used computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. State taxes (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. State taxes ) Certain nonresidential real property and residential rental property (defined later). State taxes It meets the following tests (explained later under Tests to be met). State taxes Acquisition date test. State taxes Placed in service date test. State taxes Substantial use test. State taxes Original use test. State taxes It is not excepted property (explained later under Excepted property). State taxes Nonresidential real property and residential rental property. State taxes   This property is qualifying property only to the extent it rehabilitates real property damaged, or replaces real property destroyed or condemned, as a result of the terrorist attack of September 11, 2001. State taxes Property is treated as replacing destroyed or condemned property if, as part of an integrated plan, such property replaces real property included in a continuous area that includes real property destroyed or condemned. State taxes   For these purposes, real property is considered destroyed (or condemned) only if an entire building or structure was destroyed (or condemned) as a result of the terrorist attack. State taxes Otherwise, the property is considered damaged real property. State taxes For example, if certain structural components of a building (such as walls, floors, or plumbing fixtures) are damaged or destroyed as a result of the terrorist attack, but the building is not destroyed (or condemned), then only costs related to replacing the damaged or destroyed structural components qualify for the special Liberty Zone depreciation allowance. State taxes Tests to be met. State taxes   To qualify for the special Liberty Zone depreciation allowance, your property must meet all of the following tests. State taxes Acquisition date test. State taxes   You must have acquired the property by purchase after September 10, 2001, and there must not have been a binding written contract for the acquisition in effect before September 11, 2001. State taxes   For information on the acquisition of property by purchase, see Property Acquired by Purchase on page 15 of Publication 946. State taxes   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001. State taxes Placed in service date test. State taxes   Generally, the property must be placed in service for use in your trade or business or for the production of income before January 1, 2007 (January 1, 2010, in the case of qualifying nonresidential real property and residential rental property). State taxes   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. State taxes Substantial use test. State taxes   Substantially all use of the property must be in the Liberty Zone and in the active conduct of your trade or business in the Liberty Zone. State taxes Original use test. State taxes   The original use of the property in the Liberty Zone must have begun with you after September 10, 2001. State taxes   Used property can be qualified Liberty Zone property if it has not previously been used within the Liberty Zone. State taxes Also, additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test if the original use of the property in the Liberty Zone began with you. State taxes Excepted property. State taxes   The following property does not qualify for the special Liberty Zone depreciation allowance. State taxes Property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. State taxes Property required to be depreciated using ADS. State taxes This includes listed property used 50% or less in a qualified business use. State taxes Qualified New York Liberty Zone leasehold improvement property (defined earlier in Excepted Property under Special Depreciation Allowance). State taxes Example. State taxes In December 2001, you bought and placed in service in your business in the Liberty Zone the following property. State taxes New office furniture with a MACRS recovery period of 7 years. State taxes A used computer with a MACRS recovery period of 5 years. State taxes The computer had not previously been used within the Liberty Zone. State taxes Because the office furniture is new property, it qualifies for the special depreciation allowance, but not the special Liberty Zone depreciation allowance. State taxes Because the computer is used property that had not previously been used in the Liberty Zone, it qualifies for the special Liberty Zone depreciation allowance, but not the special depreciation allowance. State taxes Election Not To Claim the Liberty Zone Allowance You can elect not to claim the special Liberty Zone depreciation allowance for qualified property. State taxes If you make this election for any property, it applies to all property in the same property class placed in service during the year. State taxes To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. State taxes When to make the election. State taxes   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. State taxes   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). State taxes Attach the election statement to the amended return. State taxes At the top of the election statement, write “Filed pursuant to section 301. State taxes 9100–2. State taxes ” Revoking an election. State taxes   Once you elect not to deduct the special Liberty Zone depreciation allowance for a class of property, you cannot revoke the election without IRS consent. State taxes A request to revoke the election is subject to a user fee. State taxes Returns filed before June 1, 2002. State taxes   The rules that apply to the special depreciation allowance discussed earlier in Rules for Returns Filed Before June 1, 2002 under Special Depreciation Allowance also apply to the special Liberty Zone depreciation allowance. State taxes Increased Section 179 Deduction Under section 179 of the Internal Revenue Code, you can choose to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. State taxes For tax years beginning in 2000, that limit was $20,000. State taxes For tax years beginning in 2001 and 2002, that limit is generally $24,000. State taxes If the cost of qualifying section 179 property placed in service in a year is over $200,000, you must reduce the dollar limit (but not below zero) by the amount of the cost over $200,000. State taxes Increased Dollar Limit The dollar limit on the section 179 deduction is increased for certain property placed in service in the Liberty Zone. State taxes The increase is the smaller of the following amounts. State taxes $35,000. State taxes The cost of section 179 property that is qualified Liberty Zone property placed in service during the year. State taxes If you use the revised 2001 Form 4562 (dated March 2002) for a tax year beginning in 2000, you must reduce the section 179 dollar limit to $20,000 before adding the additional amount for qualified property. State taxes Qualified property. State taxes   To qualify for the increased section 179 deduction, your property must be section 179 property that is either: Qualified Liberty Zone property, or Property that would be qualified Liberty Zone property except that it is eligible for the special depreciation allowance. State taxes Qualified Liberty Zone property is explained earlier in Qualified Liberty Zone Property under Special Liberty Zone Depreciation Allowance. State taxes Property eligible for the special depreciation allowance is explained earlier in Qualified Property under Special Depreciation Allowance. State taxes For information on the requirements that must be met for property to qualify for the section 179 deduction, see What Property Qualifies? on page 14 of Publication 946. State taxes Example 1. State taxes In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $25,000. State taxes Because this cost is less than $35,000, the dollar limit on the section 179 deduction is increased by $25,000 to $49,000 ($24,000 + $25,000). State taxes Example 2. State taxes In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $75,000. State taxes Because $35,000 is less than the cost of the property you place in service, the dollar limit on the section 179 deduction you can claim is increased by $35,000 to $59,000 ($24,000 + $35,000). State taxes Reduced Dollar Limit Generally, you must reduce the dollar limit for a year by the cost of qualifying section 179 property placed in service in the year that is more than $200,000. State taxes However, if the cost of your Liberty Zone property exceeds $200,000, you take into account only 50% (instead of 100%) of the cost of qualified property placed in service in a year. State taxes Example. State taxes In 2002, you place in service in your business, which is in the Liberty Zone, qualified property costing $460,000. State taxes Your increased dollar limit is $59,000 ($35,000 + $24,000). State taxes Because 50% of the cost of the property you place in service ($230,000) is $30,000 more than $200,000, you must reduce your $59,000 dollar limit to $29,000 ($59,000 - $30,000). State taxes Recapture Rules Rules similar to those explained on page 20 of Publication 946 under When Must You Recapture the Deduction? apply with respect to any qualified property you stop using in the Liberty Zone. State taxes Returns Filed Before June 1, 2002 If you filed a return before June 1, 2002, and did not deduct the increased section 179 amount for qualified property placed in service after September 10, 2001, you can deduct the increased amount by filing an amended return by the due date (not including extensions) of the return for the year after the year the property was placed in service. State taxes This rule applies to returns for the following years. State taxes 2000 fiscal years that end after September 10, 2001. State taxes 2001 calendar and fiscal years. State taxes On the amended return, write “Filed Pursuant to Rev. State taxes Proc. State taxes 2002–33. State taxes ” Liberty Zone Leasehold Improvement Property Qualified Liberty Zone leasehold improvement property (described earlier in Qualified Property under Special Depreciation Allowance) is 5-year property. State taxes This means that it is depreciated over a recovery period of 5 years. State taxes For information about recovery periods, see Which Recovery Period Applies? on page 23 of Publication 946. State taxes The straight-line method must be used with respect to qualified Liberty Zone leasehold improvement property. State taxes Under ADS, the recovery period for qualified Liberty Zone leasehold improvement property is 9 years. State taxes Returns Filed Before June 1, 2002 If you filed either of the following returns before June 1, 2002, and did not depreciate qualified Liberty Zone leasehold improvement property placed in service during the tax year as 5-year property using the straight line method, you should file an amended return before you file your return for the year after the year the property was placed in service. State taxes Your 2000 fiscal year return (for a 2000 fiscal year that ends after September 10, 2001). State taxes Your 2001 calendar or fiscal year return. State taxes On the amended return, write “Filed Pursuant to Rev. State taxes Proc. State taxes 2002–33. State taxes ” Table 2. State taxes Rules for Returns Filed Before June 1, 2002 Note:This chart highlights the rules for returns affected by the Job Creation and Worker Assistance Act of 2002 that were filed before June 1, 2002, without accounting for any of the new benefits under the law. State taxes See the text for definitions and examples. State taxes Do not rely on this chart alone. State taxes IF you want to. State taxes . State taxes . State taxes THEN you. State taxes . State taxes . State taxes BY. State taxes . State taxes . State taxes claim the special depreciation allowance or special Liberty Zone depreciation allowance • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service, or • must file Form 3115, Application for Change in Accounting Method, with your return for the year after the year the property was placed in service • the due date (including extensions) of your return for the year after the year the property was placed in service, and • must file a copy of your completed Form 3115 with the IRS National Office • the date you file the original Form 3115 with your return for the year after the year the property was placed in service. State taxes elect not to claim the special depreciation allowance or the special Liberty Zone depreciation allowance 1 • must have filed your return timely for the year the property was placed in service, and   • must file an amended return stating you are not claiming the allowance • the date that is 6 months after the due date of the original return (not including extensions). State taxes deduct the increased section 179 amount • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service. State taxes use a 5-year recovery period for depreciating qualified Liberty Zone leasehold improvement property • should file an amended return • the date you file your return for the year after the year the property was placed in service. State taxes 1See also Deemed election under Rules for Returns Filed Before June 1, 2002, earlier. State taxes Prev  Up  Next   Home   More Online Publications