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HORNE Tax Alert

The American Recovery and Reinvestment Act of 2009

Significant Tax Provisions for Financial Institutions

• De Minimis Safe Harbor Exception for Tax-Exempt Interest Expense for Financial Institutions - Tax-exempt obligations issued in 2009 and 2010 are not taken into account in determining the pro rata portion of interest incurred by a financial institution that is disallowed. This exception applies for up to 2% of the average adjusted bases of all assets of the taxpayer.
• Modification of Small Issuer Exception to Tax-Exempt Interest Expense Allocation Rules for Financial Institutions - The 2009 Recovery Act amends the small issuer exception so the limit for tax-exempt obligations issued in 2009 and 2010 is $30 million (rather than $10 million).
• Revocation of IRS Guidance Exempting Banks from Loss Limit Rules - The 2009 Recovery Act revoked prior IRS guidance exempting banks from loss limitation rules following an ownership change. Pre-2009 Recovery Act law provided that any deduction allowed after an ownership change to a bank for losses on loans or bad debts would not be subject to limitation under Code Sec. 382.
• Treatment of Certain Ownership Changes - The 2009 Recovery Act provides that the Code Sec. 382 loss limitation rules do not apply to an ownership change occurring under a restructuring plan pursuant to the Emergency Economic Stabilization Act of 2008, which authorized the Troubled Asset Relief Program (TARP).
• 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.

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.