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Christine Bucan
Pantín/Beber Silverstein
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christine@thinkbsg.com
Key Points of the 2009 Economic Stimulus Act
Miami, Fla., February 18, 2009 - This is an overview of the key tax changes affecting business in the “American Recovery and Reinvestment Act of 2009” (the 2009 economic stimulus act) signed into law by the President yesterday. Please call our offices for details of how the new changes may affect your specific business.
Extension of bonus depreciation. Last year, Congress temporarily allowed business to recover the costs of capital expenditures made in 2008 faster than the ordinary depreciation schedule would allow by permitting these businesses to immediately write off 50% of the cost of depreciable property acquired in 2008 for use in the United States. The new law extends this temporary benefit for qualifying property purchased and placed into service in 2009.
Extension of enhanced small business expensing (Section 179). In order to help small businesses quickly recover the cost of certain capital expenses, small business taxpayers may elect to write off the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. Last year, Congress temporarily increased the amount that small businesses could write off for capital expenditures incurred in 2008 to $250,000 and increased the phase-out threshold for 2008 to $800,000. The new law extends these temporary increases for capital expenditures incurred in 2009.
Expanded loss carryback of net operating losses for small businesses. Under pre-Act law, net operating losses (NOLs) may be carried back to the two years before the year that the loss arises and carried forward to each of the succeeding twenty years after the year that the loss arises. For 2008, the new law extends the maximum NOL carryback period from two years to five years for small businesses with gross receipts of $15 million or less.
Delayed recognition of certain cancellation of debt income. To benefit certain businesses that buy their own debt at a discount, the new law lets the businesses recognize cancellation of debt income (“CODI”) over 10 years (defer tax on CODI for the first four or five years and recognize this income ratably over the following five tax years) for specified types of business debt repurchased by the business in 2009 or 2010.
In addition to these business provisions, there are several provisions benefiting individual taxpayers with modest incomes including an improved credit for first time home buyers. You may remember that last year's Housing Act included a tax credit giving first-time homebuyers up to a $7,500 (actually, 10% of the purchase price or $7,500, whichever is less) credit for buying a home between April 8, 2008, and July 1, 2009, with single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualifying for the full tax credit. While the credit functioned initially like other tax credits, reducing a person's tax liability on a dollar-for-dollar basis, it was unusual in that, unlike other federal tax credits (for example, the child credit), the credit for first-time homebuyers had to be paid back to the government ratably over a period of 15 years (or earlier if the house is sold). So, as a practical matter, the credit was the equivalent of an interest-free loan from the government. The new legislation scuttles the repayment requirement for homes purchased on or after January 1, 2009. The new law also extends the credit through the end of November 2009, and bumps up the maximum credit amount from $7,500 to $8,000.
If you would like more details about these or any other aspects of the new law, please do not hesitate to call.
About Mallah Furman:
Established in 1960, Mallah Furman is one of South Florida’s largest accounting firms. The Firm provides strategic financial services to South Florida businesses in a broad spectrum of industries and disciplines. For more information, please visit the Firm’s website at www.mallahfurman.com.
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