2017 Tax Year – Individual Income Tax

1 2017 Tax Year Individual Income Tax State Conformity to the provisions in the 2017 Disaster Relief Act, 2017 Tax Cuts and Jobs Act and 2018 Budget Act Most states conform to the provisions of the Internal Revenue Code (IRC). States achieve this either by automatically applying the changes to their state tax code as they occur or by conforming to the IRC as of a fixed date. Some states decouple from IRC provisions adjusting their state tax code to better fund their revenue needs. The following is a summary of the major provisions affecting Individual Income tax included in the above federal tax acts. It is not intended to cover corporate provisions, retirement plan provisions that are non- Income tax related or provisions that affect a limited number of taxpayers. Alabama Alabama automatically conforms to the IRC, absent any legislation specifically decoupling from federal law. To date, no new decoupling provisions have been legislated.

2 Therefore, Alabama conforms to all provisions of the three acts. However, Alabama has its own computation of the standard deduction, which does not include the additional standard deduction for certain disaster victims. Alaska - Alaska has no personal Income tax. Arizona Each year the Arizona legislature considers whether or not to amend the Arizona Revised Statutes to conform to changes made to the IRC during the prior year. Typically, no new non-conformity additions or subtractions are created, although prior non-conformity provisions (such as for bonus depreciation for assets placed in service prior to 2017 ) remain in place. Legislation for 2017 IRC conformity provisions has not yet passed the legislature. Practitioners should be alert for future developments. Arkansas Arkansas has not yet adopted any provisions of the IRC after January 1, 2017 . Therefore, the following items will require adjustment on the Arkansas return: Bonus depreciation continues to be unallowable.

3 Section 179 expensing continues to be allowed at $25,000. No special provisions exist for qualified hurricane distributions or qualified wildfire distributions. Tuition and fees deduction is not allowable. Exclusion of discharge of indebtedness on principal residence must be added back. Private mortgage insurance deduction is not allowable. Adjust charitable contributions to account for any additional contributions allowed on the federal return due to suspension of AGI limitations. Adjust casualty losses to comply with the normal $100 and 10% of AGI limitations. No additional standard deduction allowed for qualified disaster casualty losses. Note that Arkansas has its own standard deduction amount. Medical expenses subject to 10% AGI limitation, rather than limitation. California 2017 Disaster Relief Act: California automatically conforms to the following Individual provisions: Allows qualified hurricane retirement distributions to be spread over 3 years.

4 California does not conform to the following provisions. Therefore, the following adjustments will need to be made on Schedule CA: Adjust charitable contributions to account for any additional contributions allowed on the federal return due to suspension of AGI limitations. Adjust casualty losses to comply with the normal $100 and 10% of AGI limitations. No additional standard deduction allowed for qualified hurricane casualty losses. Note that California has its own standard deduction amount. Substitution of prior-year Income to compute the California earned Income tax credit or child tax credit is not allowed. 2017 Tax Cuts and Jobs Act: California automatically conforms to the following Individual provision: Repeal of ability to recharacterize Roth conversions. Use of AGI limitation for medical expenses. California does not conform to the following provisions. Therefore, the following adjustments will need to be made on Schedule CA: California continues to require adjustments for Section 179 expense and bonus depreciation.

5 2018 Budget Act: California automatically conforms to the following Individual provisions: Allows qualified wildfire retirement distributions to be spread over 3 years. California does not conform to the following provisions. Therefore, the following adjustments will need to be made on Schedule CA: Tuition and fees deduction is not allowable. Exclusion of discharge of indebtedness on principal residence must be added back. Private mortgage insurance deduction is not allowable. Adjust charitable contributions to account for any additional contributions allowed on the federal return due to suspension of AGI limitations. Adjust casualty losses to comply with the normal $100 and 10% of AGI limitations. No additional standard deduction allowed for qualified wildfire casualty losses. Note that California has its own standard deduction amount. Substitution of prior-year Income to compute the California earned Income tax credit or child tax credit is not allowed.

6 Colorado Colorado automatic conforms to the IRC, absent any legislation specifically decoupling from federal law. To date, no new decoupling provisions have been legislated. Colorado conforms to all provisions of the three acts listed above. Connecticut Connecticut automatically conforms to the IRC, absent any legislation specifically decoupling from federal law. To date, no new decoupling provisions have been legislated. Connecticut conforms to all provisions of the three acts listed above. However, Connecticut has its own computation of the standard deduction, which does not include the additional standard deduction for certain disaster victims. Delaware Delaware automatically conforms to the IRC, absent any legislation specifically decoupling from federal law. To date, no new decoupling provisions have been legislated. However, Delaware has its own computation of the standard deduction, which does not include the additional standard deduction for certain disaster victims.

7 District of Columbia The District of Columbia automatically conforms to the IRC, absent any legislation specifically decoupling from federal law. To date, no new decoupling provisions have been legislated. However, previous decoupling provisions, such as those for Section 179 and bonus depreciation, will still be in effect. Florida - Florida has no personal Income tax. Georgia For 2017 , Georgia has adopted all provisions of all three acts listed above except the following: Georgia continues to decouple from bonus depreciation and has not adopted the Section 179 deduction for certain real property. Hawaii As a general rule, Hawaii conforms to the IRC in existence as of December 31, 2016, unless specifically addressed by legislation. Therefore, the following items will require adjustment on the Hawaii return: Bonus depreciation continues to be unallowable. Section 179 expensing continues to be allowed at $25,000.

8 No special provisions exist for qualified hurricane distributions or qualified wildfire distributions from retirement plans. Tuition and fees deduction is not allowable. Exclusion of discharge of indebtedness on principal residence must be added back. Private mortgage insurance deduction is not allowable. Adjust charitable contributions to account for any additional contributions allowed on the federal return due to suspension of AGI limitations. Adjust casualty losses to comply with the normal $100 and 10% of AGI limitations. No additional standard deduction allowed for qualified disaster casualty losses. Note that Hawaii has its own standard deduction amount. Medical expenses subject to 10% AGI limitation, rather than limitation. Idaho Idaho has conformed to the IRC after passage of the 2017 Tax Cuts and Jobs Act. However, previous differences between federal law and Idaho law, such as bonus depreciation, still exist.

9 Compliance with the 2018 Budget Act is still pending legislation. Practitioners should be alert for future developments. Illinois Illinois automatically conforms to the IRC, absent any legislation specifically decoupling from federal law. To date, no new decoupling provisions have been legislated. However, previous decoupling provisions remain in effect. Also, Illinois has no provisions for itemized deductions or the standard deduction. Indiana As a general rule, Indiana conforms to the IRC in existence as of January 1, 2016, unless specifically addressed by legislation. The Indiana instructions are currently based on the assumption that the Indiana General Assembly will adopt conformity to the changes in the three acts listed above. Practitioners should be alert for future legislation on conformity. If legislation does not occur and returns have been filed based on the instructions, amended returns may need to be filed Iowa Iowa conforms to the Internal Revenue Code as of January 1, 2015.

10 Iowa has not yet adopted conformity for any of the provisions in any of the three acts listed above or for the 2015 PATH Act, with limited exceptions. Therefore, the following items will require adjustment on the Iowa return: Bonus depreciation continues to be unallowable. Section 179 expensing continues to be allowed at $25,000. No special provisions exist for qualified hurricane distributions or qualified wildfire distributions from retirement plans. Tuition and fees deduction is not allowable. Exclusion of discharge of indebtedness on principal residence must be added back. Private mortgage insurance deduction is not allowable. Adjust charitable contributions to account for any additional contributions allowed on the federal return due to suspension of AGI limitations. Adjust casualty losses to comply with the normal $100 and 10% of AGI limitations. No additional standard deduction allowed for qualified disaster casualty losses.