The New Boss
The American Recovery and Reinvestment Act of 2009 (ARRA) was passed by both houses of Congress on Feb. 13, 2009 and signed four days later by President Obama. The proposed antidote to a financial crisis that has left the nation gasping for breath since September 2008, the law seeks to revitalize the American economy by allocating $787 billion to a variety of areas including infrastructure maintenance, aid to state and local government, welfare assistance, environmental initiatives, and energy independence programs.
Of the proposed $787 billion, approximately 36 percent ($288 billion) is dedicated to tax relief. Although the bill predominantly favors individual tax cuts, $6.15 billion of the tax relief will apply to businesses, according to the government’s Web site for tracking ARRA spending, www.recovery.gov.
The full text of the legislation is available on the White House’s Web site, but for those who don’t enjoy reading 1,071-page legal documents, here are a few of the tax incentives Relevant to small businesses:
• Bonus depreciation: The llargest portion of money, over $5 billion, can be found in this extension of the Economic Stimulus Act of 2008 (ESA). The cost of certain business expenses, such as cell phones, off-the-shelf computer software and office equipment, which are purchased and put into use during the calendar year, can be recovered over time according to a depreciation schedule. In order to allow businesses to recoup this money more quickly, these purchases are eligible for an immediate 50 percent write-off, reducing the amount of time needed to fully cover the item’s cost per the depreciation calendar. This benefit has been extended to purchases made through 2009.
• Enhanced expensing: Another carryover from the ESA, enhanced expensing is a second option for small businesses trying to recover the costs of capital expenditures, i.e., expenses made that will generate revenue or increase value over time. During the calendar year in which they were purchased, items valued up to $250,000 can be written off as expenses. This is an increase from what was formerly a $128,000 cap. Also, the investment limit for receiving the maximum write-off has been increased from $510,000 to $800,000. These temporary increases now extend to purchases made through 2009.