Many of these tax law opportunities in the American Recovery and Reinvestment Act expire December of 2009 and require quick action to obtain the benefits. First-year 50% bonus depreciation. ARRA extends the 50% bonus first-year depreciation allowance that was available for 2008 acquisitions to acquisitions of qualifying property in 2009. The extension applies to qualifying property placed in service in 2009 (2010 for longer production period property and certain transportation property). Increased Section 179 expensing. During 2009, small businesses can elect to expense up to $250,000 of the cost of qualifying property under Code Sec. 179. Without the extension by ARRA, the limit would have dropped to $133,000. (The existing $25,000 expensing limit still applies to sports utility vehicles.) The $250,000 maximum expensing amount is reduced if the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $800,000. Expanded net operating loss (NOL) carryback. Under a provision in ARRA, many small businesses that had expenses exceeding their income for 2008 can choose to carry the loss back for up to five years, instead of the usual two years. For small businesses that were profitable in the past but lost money in 2008, this could mean a special tax refund. The option is available for a small business that has no more than an average of $15 million in gross receipts over a three-year period. This option is available only for a limited time. A corporation that operates on a calendar-year basis, for example, must file a claim by Sept. 15, 2009. For eligible individuals, the deadline is Oct. 15, 2009. Discharge of business indebtedness. Under a provision in ARRA, certain businesses that repurchase specific types of debt in 2009 and 2010 can pay taxes on cancellation of debt income over a five year period, starting with tax year 2014. S corporation built-in gains holding period. For tax years beginning in either 2009 or 2010, ARRA eliminates the corporate level tax on the built-in gains of an S corporation that converted from C corporation status at least seven tax years before the current tax year. COBRA Health Insurance continuation subsidy. Under a provision in ARRA, employees who were involuntarily terminated after Aug. 31, 2008 and before Jan. 1, 2010, and who elect COBRA health continuation coverage, are entitled to receive a 65% subsidy on their COBRA premiums. For periods of COBRA coverage beginning after Feb. 16, 2009, the involuntarily terminated employee must be treated as having paid the required COBRA premium if the individual pays 35% of the premium amount. The employer (or, in some cases, multiemployer health plan or insurer) may recover the other 65% by taking the subsidy amount as a credit on its quarterly employment tax return. Other Miscellaneous provisions:
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