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President Obama Signs Bill that Averts Fiscal Cliff

The Senate passed H.R. 8, the “American Taxpayer Relief Act”, in the very early morning hours of Jan. 1, 2013. The House subsequently passed the bill later that day. Late last night President Obama signed the bill into law. The following is a brief overview of the key provisions within the Act.

Depreciation Provisions

  1. The 15-year straight-line cost recovery for qualified leasehold improvements (QLI), qualified restaurant buildings and improvements (QRI), and qualified retail improvements has been extended from January 1, 2012 through December 31, 2013 for property placed in service after December 31, 2011. Only QLI retains bonus depreciation.
  2. The 7-year recovery period for motorsports entertainment complexes was extended for 2012 through December 31, 2013 for property placed in service after December 31, 2011.
  3. The use of accelerated depreciation for business property on an Indian reservation was extended through December 31, 2013 for property placed in service after December 31, 2011. Section 168(j) allows for 5-year property to be depreciated over 3 years; 15-year property to be depreciated over 9 years; and nonresidential real property to be depreciated over 22 years (rather than 39 years).
  4. The increased expensing limitations and treatment of certain real property as Code Sec. 179 property were extended through December 31, 2013 for property placed in service after December 31, 2011.
  5. The Act also extends and modifies the bonus depreciation provisions with respect to property placed in service after December 31, 2012 but before January 1, 2014, in tax years ending after December 31, 2012. We are still using the 50% rate to determine first year bonus depreciation. The modifications are mainly to the election to accelerate the AMT credit rather than using bonus depreciation.

Business Credits

  1. The Code Sec. 41 research (R&D) credit is modified and retroactively extended for two years through 2013. It is now effective for 2012 and 2013.
  2. The temporary minimum low-income tax credit rate for non-federally subsidized new buildings under Code Sec. 42(b)(2)(A) is extended to apply to housing credit dollar amount allocations made before Jan. 1, 2014.

Energy Credits

  1. The credit for energy-efficient new homes under Code Sec. 45L is retroactively extended for two years through 2013.

For more details on the Act, and how the provisions effect you and your business, contact us today.