How federal policymakers account for the concerns of state and local governments in the formulation of federal tax policy.

Income Allow Federal Federal

Used as ACRS/MACRS Asset

State Tax Depreciation Expense State Base (2) (3) Election (4) ALABAMA Yes Yes Yes ALASKA Yes Yes Yes ARIZONA Yes Yes Yes ARKANSAS No Yes Yes CALIFORNIA Yes No Yes COLORADO Yes Yes Yes CONNECTICUT Yes Yes Yes DELAWARE Yes Yes Yes FLORIDA Yes Yes Yes GEORGIA Yes Yes No HAWAII Yes Yes No IDAHO Yes Yes No ILLINOIS Yes Yes No INDIANA Yes Yes No IOWA Yes Yes No KANSAS Yes Yes Yes KENTUCKY Yes Yes No LOUISIANA Yes Yes Yes MAINE Yes Yes No MARYLAND Yes Yes No MASSACHUSETTS Yes Yes No MICHIGAN Yes No No MINNESOTA Yes Yes Yes MISSISSIPPI No Yes Yes MISSOURI Yes Yes Yes MONTANA Yes Yes Yes NEBRASKA Yes Yes Yes NEVADA NEW HAMPSHIRE Yes Yes Yes NEW JERSEY Yes Yes Yes NEW MEXICO Yes Yes Yes NEW YORK Yes Yes Yes NORTH CAROLINA Yes Yes Yes NORTH DAKOTA Yes Yes Yes OHIO Yes Yes Yes OKLAHOMA Yes Yes Yes OREGON Yes Yes Yes PENNSYLVANIA Yes Yes Yes RHODE ISLAND Yes Yes Yes SOUTH CAROLINA Yes Yes Yes SOUTH DAKOTA TENNESSEE Yes Yes Yes TEXAS Yes Yes Yes UTAH Yes Yes Yes VERMONT Yes Yes Yes VIRGINIA Yes Yes Yes WASHINGTON WEST VIRGINIA Yes Yes Yes WISCONSIN Yes Yes Yes WYOMING DIST. OF COLUMBIA No Yes Yes

Allow

Federal Allow

Bonus Domestic

Depreciation Allow Production State (5) Depletion (6) Deduction (7) ALABAMA Yes No Yes ALASKA Yes Yes Yes ARIZONA No Yes Yes ARKANSAS No Yes No CALIFORNIA No Yes No COLORADO Yes Yes Yes CONNECTICUT No Yes Yes DELAWARE Yes Yes Yes FLORIDA Yes Yes Yes GEORGIA Yes Yes No HAWAII Yes Yes No IDAHO Yes Yes Yes ILLINOIS Yes Yes Yes INDIANA Yes Yes No IOWA Yes Yes Yes KANSAS Yes Yes Yes KENTUCKY Yes Yes Yes LOUISIANA Yes Yes Yes MAINE Yes Yes No MARYLAND Yes Yes No MASSACHUSETTS Yes Yes No MICHIGAN No Yes Yes MINNESOTA No No No MISSISSIPPI No Yes No MISSOURI No Yes Yes MONTANA Yes Yes Yes NEBRASKA No Yes Yes NEVADA NEW HAMPSHIRE No Yes No NEW JERSEY No Yes Partial NEW MEXICO Yes Yes Yes NEW YORK No Yes Yes NORTH CAROLINA No Yes No NORTH DAKOTA Yes Yes No OHIO No Yes Yes OKLAHOMA No Yes Yes OREGON Yes No No PENNSYLVANIA No Yes Yes RHODE ISLAND No Yes Yes SOUTH CAROLINA No Yes No SOUTH DAKOTA TENNESSEE No Yes No TEXAS No Yes No UTAH Yes Yes Yes VERMONT No Yes Yes VIRGINIA No Yes Yes WASHINGTON WEST VIRGINIA Yes Yes No WISCONSIN No Yes Yes WYOMING DIST. OF COLUMBIA No Yes Yes (1) First five columns from Commerce Clearing House; last column from Center on Budget and Policy Priorities ("State Revenue Losses from the Federal 'Domestic Production Deduction Will Double in 2007," January, 2007). (2) California date for federal reconciliation method; Michigan does not have a corporate tax but a business tax where major components are compensation, business income, and additions and subtractions to business income. (3) New Jersey MARCS maybe used for property after July 7,1993; New York and Oregon MACRS may be used generally for property after 1994; North Dakota allows only form assets after 1983; Pennsylvania requires straight line depreciation for reality. (4) Arkansas, California, DC, Hawaii, Indiana, Kentucky, Maine, Maryland, New Hampshire, New York, Ohio, Rhode Island, South Carolina, Texas, and Wyoming all limit expense allocation to the pre-JGTRRA amount of $25,000; Arizona also restricts to pre-JGTRRA but adds 20 percent of amounts exceeding the limit for years one through four; Nebraska has the same pre-JGTRRA limit and a 20 percent addition beginning after July 1, 2006; New York excludes sports utility vehicles over 600 pounds. (5) Illinois, Maine, Pennsylvania, Nebraska, North Carolina, Ohio, and Oklahoma all require some amount (partial to full) addback; Iowa and Missouri allow 50 percent bonus depreciation of property purchased form May 6, 2003 to December 31, 2004 but disallow 30 percent bonus depreciation after September 10, 2001 and before September 11, 2004; Michigan allows bonus depreciation in computing federal taxable income amount that is the tax base for a single businesses tax but federal depreciation must be added back; New York excepts Qualified Resurgence Zone and Qualified New York Liberty Zone property; Texas allows bonus depreciation for corporations that elect to use the federal income tax method of reporting taxable capital if the same method was used for federal tax. (6) Alabama, Alaska, Delaware, Iowa, Louisiana, New Hampshire, North Carolina, Texas, and Wisconsin allow depletion except oil and gas wells; Minnesota, Missouri, Montana, and Tennessee only allow cost depletion; Arizona excepts mining exploration expenses, Maryland exempts oil, and Oregon allows depletion only on metal mines; Colorado has an exception for a 27.5 percent depletion rate for oil shale, Oklahoma has a 22 percent allowance for oil and gas and Kentucky has special provisions for coal royalties. (7) Alabama and Pennsylvania allow deduction on corporate tax only; as noted earlier, Michigan does not have corporate tax, and deduction is allowed on personal income tax; New Jersey deduction is allowed for qualified property produced or manufactured by the taxpayers