The 2017 tax reform act amended Section 168(k) to provide for 100% bonus depreciation for qualified property acquired after September 27, 2017, and placed in service before 2023 (2024 for certain aircraft and longer production period property), with declining percentages thereafter. The IRS and Treasury previously published a series of regulations, including proposed and final regulations in 2019 and final regulations in 2020, implementing these provisions. The IRS recently issued Rev. Proc. 2020-50, which provides procedures for bonus depreciation automatic accounting method changes, elections, and election revocations to comply with the bonus depreciation regulations.
Modifications to the rules implementing the 2017 bonus depreciation provisions over the course of the regulatory process have resulted in a changing landscape for determining optimal treatment of property eligible for bonus depreciation. Rev. Proc. 2020-50 gives taxpayers some flexibility to change previous decisions, particularly regarding elections, that taxpayers should consider in evaluating the impact on the potential carryback of net operating losses generated in 2018, 2019 or 2020. As always, careful analysis is needed to evaluate the interaction of bonus depreciation and other provisions, such as the base erosion and anti-abuse tax.