Multistate: More States Update Their Conformity to the IRC

Indiana House Bill 1001 was recently signed into law and adopts changes made to the Internal Revenue Code (IRC) as of March 31, 2021, applicable retroactively to January 1, 2021. Previously, Indiana conformed to the IRC as of January 1, 2020. Under Indiana law, any change to the Code prior to March 31, 2021 that affects the computation of individual adjusted taxable income or corporate taxable income, as well as the income of certain insurance companies and trusts and estates, applies to the same tax year for Indiana purposes as it does for federal purposes. The bill specifically decouples from certain provisions of the IRC— most of which affect individuals; however, corporations are required to add back the amount by which business meals deductions exceed 50 percent. Additionally, the Indiana Department of Revenue recently released comprehensive guidance addressing the conformity update, which clarifies (among other items) that Indiana now adopts the federal treatment of Qualified Improvement Property and has conformed to the federal treatment of PPP loans.

Hawaii’s legislature recently sent House Bill 1041 to the governor, which adopts the changes to the IRC as of December 31, 2020, applicable to tax years beginning after December 31, 2020. The bill confirms that Hawaii will exclude forgiven PPP loan amounts from gross income. However, Hawaii does not appear to adopt P.L. 116-260 section 276(b)(2) that allows deductions for expenses paid for with forgiven loan amounts. Stay tuned to TWIST for further conformity updates.