C51. The Department has determined that a separately calculated Michigan depreciation amount is allowable for assets claiming IRC 168(k) bonus depreciation from which Michigan has decoupled. When the asset is sold, will the Michigan book-value..
The adjusted MBT tax basis will be used in computing gain and any ITC recapture as provided by statute. The Department has determined that because the definition of "federal taxable income" decouples bonus depreciation, provided for under IRC §168(k), from the amount of taxable income computed for federal income taxes that a separate MBT depreciation amount would need to be computed. The amount of depreciation that would have been allowed under federally accepted depreciation methods if §168(k) were not in effect will be allowed for determining MBT business income. The depreciation method used by the taxpayer to adjust MBT business income must be consistently used over the life of the asset until it is retired or otherwise disposed of. The depreciation allowed for MBT will be different than federal depreciation in instances where "bonus depreciation" was taken in reporting federal taxable income. Therefore, when bonus depreciation was taken on a federal return, a taxpayer under the MBT will have assets that will have different adjusted tax bases.
The MBT adjusted tax base should be used when computing any MBT gain on disposition of the asset. This adjusted MBT gain will consistently be used in the calculation of any ITC recapture under the MBT.
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