Decoupling from Federal Income Tax Laws

Generally, Maryland law conforms to changes to federal income tax laws, unless either of the following decoupling actions occurs:

• If the Maryland legislature enacts new tax legislation that does not follow an amendment to the Internal Revenue Code, then decoupling will occur. The Maryland General Assembly meets every year for 90 days, from mid-January through mid-April (not including special sessions).
• If the Comptroller of Maryland determines that the impact of an amendment to the Internal Revenue Code on Maryland income tax revenue for the fiscal year that begins during the calendar year in which the amendment is enacted will be greater than $5 million, then decoupling will automatically occur for that taxable year.

Budget Reconciliation and Financing Act of 2002

The Budget Reconciliation and Financing Act of 2002 (BRFA) provided for a decoupling from federal income tax law for Maryland purposes with regard to two components of the Job Creation and Worker Assistance Act of 2002:

• Special 30 percent depreciation allowance.
• Five-year net operating loss carryback.

Some provisions of BRFA require decoupling from two components of the Jobs and Growth Tax Relief and Reconciliation Act of 2003:

• Special 50 percent depreciation allowance.
• Expanded federal Section 179 expensing.

Budget Reconciliation and Financing Act of 2004

The Budget Reconciliation and Financing Act of 2004 made permanent Maryland's decoupling from costs that a taxpayer may treat as an expense under Section 179 of the Internal Revenue Code.

In addition, BRFA 2004 defines heavy duty SUVs and adopts IRS depreciation deduction limits, as if these vehicles were rated at 6,000 pounds or less. The American Jobs Creation Act of 2004 changed the federal depreciation for heavy duty SUVs placed in service after October 23, 2004, which, in most cases, results in a decoupling modification on the Maryland return.

For more information, see Administrative Release No.38, Decoupling from Federal Income Tax Laws.