The recently enacted "American Recovery and Reinvestment
Act of 2009" (2009 Economic Stimulus Act) includes a
wide-range of tax incentives.
Extension of Bonus Depreciation
Last year, Congress temporarily allowed businesses 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 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 Carryback of Net Operating Losses
Prior to the new law, net operating losses (NOLs) could be
carried back to the two years before the year of the loss
and carried forward for the succeeding twenty years.
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.
Incentives to Hire Unemployed Veterans and Disconnected
Youth
Businesses are allowed to claim a work opportunity tax
credit equal to 40% of the first $6,000 of wages paid to
employees of one of nine targeted groups. The new law
expands the work opportunity tax credit to include two new
targeted groups: (1) unemployed veterans; and (2)
disconnected youth.
Individuals qualify as unemployed veterans if they were
discharged or released from active duty from the Armed
Forces during 2008, 2009 or 2010 and received unemployment
compensation for more than four weeks during the year
before being hired. Individuals qualify as disconnected
youths if they are between the ages of 16 and 25 and have
not been regularly employed or attended school in the past
6 months.
Accumulated AMT and R&D Credits
The new law extends the provision contained in the
Foreclosure Prevention Act of 2008 and allows AMT and loss
taxpayers in 2009 to receive 20% of the value of their old
AMT or research and development (R&D) credits to the extent
such taxpayers invest in assets that qualify for bonus
depreciation.
Delayed Recognition of 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 over 10 years for specified
types of business debt repurchased by the business in 2009
or 2010.
Qualified Small Business Stock
The new law increases the exclusion for gain from the sale
of certain small business stock held for more than five
years from 50% to 75% for stock issued after the enactment
date and before 2011.
S Corporation Holding Period
The new law temporarily shortens the holding period of
assets subject to the built-in gains tax from 10 years to 7
years.
Estimated Taxes
The new law decreases required estimated tax payments for
individuals whose incomes primarily come from a small
business in 2009. Rather than being required to make
quarterly estimated tax payments based on 100% of their
2008 returns, the new law allows computation based on 90%.
To qualify, the individual's adjusted gross income must be
less than $500,000 and he or she must certify that more
than 50% of the gross income shown on his or her return for
the prior tax year was income from a small business.
Income from a small business generally means income from a
trade or business with an average number of employees of
500 or fewer.
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Prior to the new law, net operating losses (NOLs) could be
carried back to the two years before the year of the loss
and carried forward for the succeeding twenty years. 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.
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