Government Affairs
Stimulus Extends Expensing and Bonus Depreciation Through 2009
Investment Incentives Help Provide Business and Jobs for NPES Members
In a development of importance to NPES members and their customers, enhanced IRC Section 179 Expensing and 50% Bonus Depreciation have both been extended through December 31, 2009 in the “Stimulus” legislation, American Recovery and Reinvestment Tax Act of 2009, recently signed into law by President Barack Obama. Both provisions were previously included in the Economic Stimulus Act of 2008, and NPES members report that they have proven to be very effective in encouraging and facilitating capital investment in printing, publishing and converting technology. Accordingly, NPES strongly urged Congress to keep them in force. In addition, the Stimulus extends provisions that allow companies that are currently in a loss position to use unused Alternative Minimum Tax (AMT) and R&D tax credits in lieu of Bonus Depreciation, tax policy also advocated by NPES.
NPES took no position on the overall Stimulus legislation, but it did urge the extension of capital investment incentives as vital to re-starting the American economy. Individually, each provision has great merit, and collectively their synergy is compelling and has lead to more new investment and more new jobs. Following is a summary of the provisions:
Qualifying Property:
In general, qualifying property is defined as depreciable tangible personal property that is purchased for use in the active conduct of a trade or business, including off-the-shelf computer software.
50 % Bonus First-year Depreciation:
The Stimulus continues 50 % Bonus First-year Depreciation on investment in new equipment purchased after December 31, 2007 and “placed-in-service” before January 1, 2010.
Enhanced Section 179 Expensing:
The Stimulus maintains through 2009 the enhanced $250,000 limit on capital investment in equipment that is new or used (new to the purchaser) that can be expensed. Businesses may be able to use both Expensing and 50% Bonus Depreciation to their advantage.
The $250,000 Expensing amount is reduced (but not below zero) by the amount by which the cost of qualifying property placed-in-service during the taxable year exceeds $800,000. The entire $250,000 of enhanced expensing is phased out after the taxpayer invests $1,050,000. Unlike Bonus Depreciation, which is limited to purchases made and placed-in-service before January 1, 2010, $250,000 enhanced expensing may apply to qualifying purchases made both in 2009 and 2010, provided that they are made in “tax years” beginning in 2009.
AMT or R&D Tax Credits:
The Stimulus allows companies to continue to claim their pre-2006 unused AMT or R&D credits in lieu of Bonus Depreciation for qualified capital investments made after March 31, 2008 and before January 1, 2010. The R&D or AMT credit limitation is increased by an amount equal to 20 percent of the Bonus Depreciation amount that would have been claimed absent an election under this new provision, with the increases in the allowable credits refundable for purposes of this provision. The Bonus Depreciation amount is limited to the lesser of six percent of outstanding and unused pre-2006 AMT and R&D credits or $30 million. Placed-in-service requirements continue to apply.
Five-Year Carry Back of Net Operating Losses:
The Stimulus extends from two years to five years the time that businesses, with gross receipts of $15 million or less, can carry back Net Operating Losses (NOLs) for any taxable year beginning or ending during 2008 or 2009. However, losses claimed during the extended carry back period are permanently reduced by ten percent. A business’s gross receipts for a taxable year is determined by taking the average of the 3-taxable-year period ending with the year during which the business seeks to qualify for the NOL carry back. NOLs may still be carried forward twenty years.
Go to http://www.npes.org/tax_calculator09.asp for NPES’s 2009 Stimulus Calculator. For more information contact NPES Government Affairs Director Mark J. Nuzzaco at 703-264-7235, or e-mail: mnuzzaco@npes.org