By George Jones, Washington Staff Writer
For 2008, a special tax law allow small business owners to write off up to $250,000 in capital expenses. In addition, all businesses will be able to take an immediate 50 percent bonus depreciation deduction in the first year, for equipment being depreciated over time and not expensed. Part of the recently approved Economic Stimulus Act of 2008, the tax provisions should increase business spending, boosting the national economy.
To help better take advatage of the new law, the Department of Treasury will be releasing a notice containing guidance on bonus depreciation, announced Deputy Assistant Secretary for Tax Policy, Karen Gilbreath Sowell, at a meeting of the National Association of Manufacturers (NAM) in Washington, D.C. on April 4, 2008. She stated that the notice, which will be released shortly, will formalize rules that have been in place based on guidance issued during the last round of general bonus depreciation from September 11, 2001 through September 10, 2004.
Sowell also left open the possibility of further administrative guidance on bonus depreciation that could liberally interpret certain aspects of the rules to more closely implement the intent of Congress. She emphasized, however, that "looking into" the issue should in no way be interpreted at this time as having come to a conclusion that anything further can be done without additional Congressional action.
Sowell recognized that businesses generally are concerned about fulfilling the "placed in service" requirement of the bonus depreciation law. The special rules are confined to the short window of a single year, 2008, during which the asset must be both "acquired" and "placed in service." Many businesses that order equipment that in any way requires customization are particularly concerned that manufacturing time is such that they may not take delivery and put the equipment into service in time to meet the tight 2008 "placed in service" deadline.
Members of the audience, as well as NAM president and former Michigan governor, John Engler, pressed Sowell to agree to the rational behind a liberal administrative interpretation of "placed in service." Again, Sowell would only commit to having Treasury "consider the issue."
While noncommittal about the direction of any further guidance on bonus depreciation, Sowell was enthusiastic in her assessment of the benefits of the economic stimulus package in general and bonus depreciation in particular. According to Treasury estimates, more than 500,000 new jobs will be created by the end of the year as the direct result of the economic stimulus tax package, she stated.
In touting the anticipated benefits of the stimulus checks being distributed in May, Sowell echoed a statistic cited by Commerce Secretary Carlos M. Gutierrez who addressed the NAM meeting immediate preceding her--that 70 percent of our economy is based on consumer spending. However, she also attributed the anticipated jobs growth in no small part to the impact that bonus depreciation and increased expensing for small businesses will have by encouraging businesses to make capital investments sooner and more aggressively.
Sowell reviewed the impact of bonus depreciation as a key element in the economic stimulus package. She underscored the fact that 50-percent bonus depreciation is taken in addition to regular depreciation. She gave as an example the fact that a $50 million purchase of qualifying assets would create an additional $7 million in tax savings for most businesses, based on a $25 million bonus depreciation deduction and a $5 million MACRS deduction assuming a five-year life.
Addressing NAM members and other businesses, Sowell concluded that she hoped that people would feel free to "pick up the phone or reach out" to Treasury with any technical question that may arise on bonus depreciation. Should the need arises, she promises that "published guidance will be issued on an expedited basis."
- Related items:
- Social Security Numbers Determine Order of Rebate Check Deliveries
- IRS Sending Rebate Information Packets to SS, VA Beneficiaries
- You Must File 2007 Tax Return To Receive Stimulus Rebate in 2008
- Economic Stimulus Package Clears Congress
- Survey Finds Most Consumers Would Not Spend Tax Rebate
- National Economic Stimulus Legislation Agreement Announced
- Economic Stimulus Plan: How Might It Work?
- Tax Round-Up: A Look Ahead to Changes in 2008
Posted April 29, 2008.
|
