American Recovery and Reinvestment Act -- Sufficient Stimulus?May 2009 By Erik Cagle
President Barack Obama and his American Recovery and Reinvestment Act (ARRA) of 2009 are offering relief in an effort to wiggle the country out of the worst recession in decades. Signed into law February 17, the $787 billion economic stimulus package, among other things, extended both the enhanced IRC Section 179 Expensing (a.k.a. small business expensing) and the 50 percent Bonus Depreciation provisions through the end of 2009. They were both components of the Economic Stimulus Act of 2008.
A quick review: under bonus depreciation, businesses are allowed to immediately write off 50 percent of the cost of appreciable property acquired and installed during 2009. With the small business expensing, companies can write off a maximum of $250,000 of capital expenditures in 2009, to a phase-out once capex exceeds $800,000.
ARRA also includes an Alternative Minimum Tax (AMT) patch for 2009, a $70 billion tax extension that should shield about 26 million taxpayers from the AMT.
Two-Year Survival Plan
Companies currently in a loss position can also benefit from the longer net operating loss (NOL) carryback period. It gives small businesses in the red the ability to get immediate refunds of income taxes paid in earlier years. For NOLs in a tax year beginning or ending in 2008, ARRA allows eligible small firms to increase the carryback period from two to as many as five years. Eligible businesses qualify with $15 million (or less) in average gross receipts.
Printing Industries of America was disappointed with the NOL carryback provision, and wrote letters to Congressional Democrats and Republicans to pass legislation extending the net operating loss carryback period to five years for 2008 and 2009. All in all, reports Lisbeth Lyons, director of Government Affairs for PIA, it is a step in the right direction for printers.
“There’s a lot more spending in the stimulus than there were tax incentives,” she notes. “However, the tax incentives that were included feature some good provisions for business. We’re always supportive of these types of tax incentives to help jump-start the manufacturing economy.”