Business Tax Tips

AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009

The following is an overview of the key tax changes affecting businesses in the recently enacted “American Recovery and Reinvestment Act of 2009” (the 2009 economic stimulus act). Please call our offices for details of how the new changes may affect you and your business.

CHANGES FOR BUSINESSES
Extension of bonus depreciation. Last year, Congress temporarily allowed businesses to recover the costs of capital expenditures made in 2008 faster 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 businesses quickly recover the cost of certain capital expenses, they 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 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 expands the maximum NOL carryback period from two years to five years for businesses with gross receipts of $15 million or less.

Extension of monetization of accumulated AMT and R&D credits in lieu of bonus depreciation. The new law extends through 2009 the provision to receive 20% of the value of the taxpayer’s old AMT or research and development (R&D) credits to the extent such taxpayer invests in assets that qualify for bonus depreciation.

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 seven years.

Repeal of IRS's built-in loss rules. The new law provides a prospective repeal of the controversial IRS guidance which provided that if a bank recognizes a loss from the disposition of a loan or takes a bad debt deduction under the specific charge-off or reserve methods of accounting after a change in ownership, that loss or deduction will not be treated as a built-in loss attributable to the pre-acquisition period.

Contact Us. We hope this information is helpful. If you would like more details about this or any other aspect of the new law, please do not hesitate to call your M+N contact person directly or through each office’s main telephone number:

CLEVELAND 1111 Superior Avenue
Suite 700
Cleveland, Ohio 44114

P 216.363.0100
F 216.363.0500

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CANTON 4774 Munson Street NW
Suite 402
Canton, Ohio 44718

P 330.966.9400
F 330.966.9401

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ELYRIA 1530 West River Road
Suite 200
Elyria, Ohio 44035

P 440.323.3200
F 440.322.9442

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