|
|
| Tax School Homepage |
| businesses. |
| Accelerated depreciation for property on Indian reservations |
|
The Internal Revenue code offers faster accelerated depreciation periods for property placed in service in Indian reservations. Recovery periods for qualified property placed in service on an Indian reservation after 1993 and before 2015 are shorter than those listed in previous years. For example, if the property class 3-year property, the recovery period for the property placed in service in an Indian reservation is only 2 years. Furthermore, if the property is a 15-year property, the recovery period for this property if it is placed in service in an Indian reservation is only 9 years. The property must be used in an active business in operation in an Indian reservation for the property to be qualified property. Property that would not be qualified would be property that is used or located outside an Indian reservation on a regular basis, unless it is infrastructure property that is available to the general public. Property that is depreciated under ADS, would not be qualifying property either. |
| For federal tax purposes, certain property on Indian reservations is subject to special MACRS recovery periods. This all has to do with the Job Creation and Worker Assistance Act of 2002. However, California does not conform to this new provision. You need to depreciate such property as normal by filling out form FTB 3885A to figure the adjustment to make on Schedule CA of Form 540 or Form 540NR. If a more accelerated depreciation method was used for federal tax purposes, then a higher amount was allowed and you need to claim a smaller amount for California. Therefore, you must make the adjustment on Schedule CA. California is not a generous with the depreciation systems in Indian reservations as federal. |
| Amortization of pollution control facilities |
|
All pollution control facilities should be offered generous tax breaks for their part in controlling pollution. A pollution control facility is a facility to rid of or control pollution or contamination by removing or altering or preventing the omission of pollutants, contaminants, wastes or heat and which the government has jurisdiction and control. Federal tax law provides for accelerated write-off of pollution control facilities. California also provides a write-off just like federal but only for facilities located in California. Use Form FTB 3885A to enter an amortization deduction on your California tax return. You will have amounts in your federal tax return and if the federal amount and the California amounts are different you need to make an adjustment on Schedule CA of Form 540 or Form 540NR, line 12, line 17, or line 18, column C. It only makes sense that California only offers tax breaks for pollution control facilities located in California. Regardless of where the pollution control facility is located, it is beneficial to the entire world since everything is interconnected. |
| Expenditure for tertiary injectants incurred in the crude oil industry |
|
The allowance of tax breaks for expenditures for tertiary injectants incurred in the crude oil industry sounds like a tax break for the big oil companies. Crude oil in the purest form must be refined in order to produce gasoline, diesel fuel, kerosene and other products. The crude oil must go through a process before it can reach our gasoline stations and factories. It goes without saying, if the price of crude oil goes up, gas prices will also go up. |
| For federal tax purposes, there are “qualified tertiary injectant expenses” that can be deducted in the process of obtaining crude oil for the production of the crude oils final products such as gasoline. A taxpayer is allowed a deduction for the taxable year an amount equal to the qualified tertiary injectant expenses of the tertiary injectants which are injected during the tax year. Therefore, the Internal Revenue Service allows a deduction for the cost of tertiary injectants which are part of the tertiary recovery system. |
| Copyright © 2014 [Hera's Income Tax School]. All Annual Federal Tax Refresher Course rights reserved. |
| Revised: 07/09/15 |
| 16 |
| Back to Tax School Homepage |
