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PSLmodels / Business-Taxation

USA Corporate and Pass-Through Business Tax Model
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No effect from 25-year property #79

Closed codykallen closed 5 years ago

codykallen commented 5 years ago

@martinholmer discovered that changing the depreciation method for 25-year property from GDS to Economic had no effect on depreciation. Initially, I was stumped by why this was occurring, as the code seemed to be perfectly capable of changing the depreciation method for the 25-year class.

The reason this had no effect is that in the data from CCC, there is no property with a class life of 25 years.

Under GDS, only 2 property types have lives of 25 years. From IRS publication 946:

25-year property. This class is water utility property, which is either of the following.

  • Property that is an integral part of the gathering, treatment, or commercial distribution of water, and that, without regard to this provision, would be 20-year property.
  • Municipal sewers other than property placed in service under a binding contract in effect at all times since June 9, 1996.

However, in the tax depreciation rules I took from CCC, they classified "Water supply" and "Sewage and waste disposal" as having 20-year class lives. This seems probably incorrect, although not necessarily so, as 20-year property includes "Municipal sewers not classified as 25-year property."

martinholmer commented 5 years ago

@codykallen, thanks for the explanation of the result that was puzzling at first.

codykallen commented 5 years ago

Given that an explanation for this strange outcome has been found, I am closing this PR.

I should note that I am in the process of redoing the production of the investment and capital stock data, as well as collecting the tax information myself. This process ensures that it will be more transparent (citing tax classifications for reference) and that the investment data are easily reproducible (by relying on clear code). Moreover, the new approach will allow me to accurately split investment and capital in a cross-tabulation by asset type and industry, which is not doable using the current approach (of data from B-Tax).

codykallen commented 5 years ago

In the previous comment, I said "I am closing this PR."

I intended to say I am closing issue #79.