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HORNE Tax Alert

The American Recovery and Reinvestment Act of 2009

Significant Tax Provisions That May Affect Your Business

  • Bonus Depreciation - Extended from 2008 through 2009, businesses can immediately deduct up to 50% of the cost of most types of new depreciable property other than buildings. The first-year depreciation dollar cap for new automobiles placed in service in 2009 was raised by $8,000 which results in a projected $10,960 for passenger autos and $11,160 for a light truck or van.
  • Small Business Expensing - In 2008, Congress increased the amount that small businesses could write-off immediately for capital expenditures otherwise depreciated over time to $250,000 subject to a phase-out once capital expenditures exceeded $800,000. This 2008 increase has been extended through 2009.
  • Carryback Period for Net Operating Losses - Businesses with average annual gross receipts of $15 million or less that incurred a net operating loss in any tax year beginning or ending in 2008 or 2009 can carry the loss back up to five years rather than the usual two years to recover taxes paid in those prior years. Any remaining losses after the carryback may be carried forward for 20 years to offset any future taxable income.
  • Cancellation of Debt Income - When a business cancels or repurchases its debt for an amount less than its adjusted issue price, it realizes cancellation of debt income. Rather than have this income taxed in the year of cancellation, certain businesses will be allowed to defer the tax for the first five years and then recognize it equally over the next five years, for debt repurchased by the business in 2009 and defer the tax for the first four years and recognize equally over the next five years, for debt repurchased in 2010.
  • AMT/R&D Credit Carryovers - In lieu of bonus depreciation, businesses may accelerate the recognition of a portion of their pre-2006 alternative minimum tax or research and development credits, based on the amount invested in property that would otherwise qualify for bonus depreciation.
  • Expansion of Work Opportunity Tax Credit- Businesses currently may claim a credit of 40% of the first $6,000 of wages paid to employees in certain target groups. Two new groups have been added:
    1. unemployed veterans (out of active duty up to five years and unemployed for more than four weeks during the year before being hired)
    2. disconnected youth (between ages of 16 and 25 and not regularly employed or attended school in the past six months)
  • Small Business Capital Gains - Individual shareholders of certain small business stock issued after the date of enactment and before January 1, 2011, can exclude 75% of gain realized from the sale of the stock if held more than five years.

HORNE's tax team is ready to help you with significant tax provisions. For more information, please contact your HORNE advisor or local HORNE office.