Extension of bonus depreciation. Last year, Congress temporarily allowed business to recover the costs of capital
expenditures made in 2008 faster than the ordinary depreciation schedule would allow 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 small businesses quickly recover
the cost of certain capital expenses, small business taxpayers may elect to write off the cost of these expense in
the year of acquisition in lieu of recovering these costs over time through depreciation. Last year, Congress temporarily
increased the amount that small 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 extends the maximum NOL
carryback period from two years to five years for small businesses with gross receipts of $15 million or less.
Incentives to hire unemployed veterans and disconnected youth. Businesses are allowed to claim a work opportunity
tax credit equal to 40% of the first $6,000 of wages paid to employees of one of nine targeted groups. The new law expands
the work opportunity tax credit to include two new targeted groups: (1) unemployed veterans; and (2) disconnected youth.
Individuals qualify as unemployed veterans if they were discharged or released from active duty from the Armed Forces during
2008, 2009 or 2010 and received unemployment compensation for more than four weeks during the year before being hired. Individuals
qualify as disconnected youths if they are between the ages of 16 and 25 and have not been regularly employed or attended school in the past 6 months.
Extension of monetization of accumulated AMT and R&D credits in lieu of bonus depreciation. The new law extends the provision
contained in the Foreclosure Prevention Act of 2008 and allows AMT and loss taxpayers in 2009 to receive 20% of the value of their
old AMT or research and development (R&D) credits to the extent such taxpayers invest in assets that qualify for bonus depreciation.
Delayed recognition of certain cancellation of debt income. To benefit certain businesses that buy their own debt at a discount,
the new law lets the businesses recognize cancellation of debt income (“CODI”) over 10 years (defer tax on CODI for the first four or
five years and recognize this income ratably over the following five tax years) for specified types of business debt repurchased by
the business in 2009 or 2010.
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 corp 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 Notice 2008-83, 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.
Long-term extension and modification of renewable energy production tax credit. The new legislation extends the placed-in-service
date for wind facilities for three years (through December 31, 2012). It also extends the placed-in-service date through December 31, 2013
for certain other qualifying facilities: closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropower; landfill gas;
waste-to-energy; and marine renewable facilities.
Temporary election to claim the investment tax credit in lieu of the production tax credit. Facilities that produce electricity
from solar facilities are eligible to take a 30% investment tax credit in the year the facility is placed in service. Facilities that produce
electricity from wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, waste-to-energy, and
marine renewable facilities are eligible for a production tax credit, payable over a ten-year period. The Act provides a temporary election to
claim the investment tax credit in lieu of the production tax credit.
Business energy credit. The new law enhances the business energy credit by eliminating the cap on small wind property and repealing
the basis reduction requirement for subsidized energy financing.
Tax credits for alternative fuel pumps. The new law provides an increase for 2009 and 2010 in the 30% alternative refueling property
credit for businesses (capped at $30,000) to 50% (capped at $50,000).
Credit for investment in advanced energy facilities. The new law establishes a new manufacturing investment tax credit for investment in
advanced energy facilities, such as facilities that manufacture components for the production of renewable energy, advanced battery technology,
and other innovative next-generation green technologies.
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