Magazine article The CPA Journal

New York City-MACRS Modification Unconstitutional

Magazine article The CPA Journal

New York City-MACRS Modification Unconstitutional

Article excerpt

In R.J. Reynolds Tobacco Co. v. The City of New York Department of Finance, the New York State Supreme Court (the State's lowest level court) recently found portions of New York City's depreciation modification rules to be unconstitutional. For years prior to 1994, the New York City Administrative Code requires a corporation to add back to corporate net income Federal accelerated depreciation deductions taken for property placed into service outside of New York. The court held that the statutory disallowance of Federal ACRS/MACRS depreciation on non-New York State property impermissibly discriminated against interstate commerce.

The court noted that because New York State and New York City have identical provisions with regard to the depreciation addback methodology, the unconstitutionality of the city's provision would apply similarly to the state.

In general, a taxpayer's entire net income under the New York State and City corporate tax statutes must be in conformity with the Federal taxable income that the taxpayer is required to report to the U.S. Treasury Department. Over the years, however, the state and city legislatures have enacted the following depreciation adjustments to Federal taxable income to arrive at entire net income:

1982 Corporations could not utilize ACRS depreciation allowed under IRC Sec. …

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