The American Taxpayer Relief Act, passed January 2, 2013, addressed expired and expiring business tax credits and other provisions retroactively for 2012 and looking forward to 2014. Journal of Accountancy published an in-depth review of the provisions and how they’ll affect business owners.
Our last post gave you an overview of the retroactive effects of the act. In today’s post, we’ll outline the future provisions, which won’t have an immediate effect, but will help you plan ahead.
50% Bonus Depreciation
The ATRA extends the Sec. 168(k) provision for 50% bonus depreciation, which allows for an additional first-year depreciation deduction of 50% (if certain qualified property was acquired after December 2007 and put into service before January 2014).
Election to Claim AMT Credit in Lieu of Bonus Depreciation
The act also extends the Sec 168(k)(4) option for corporations with pre-2006 AMT credit carryforwards to forgo bonus depreciation for property put into service before January 2014 (Jan. 1, 2015, for certain long-production-period property and certain aircraft), and convert a portion into currently refundable credits. To use this option, taxpayers must agree to forgo the bonus depreciation and, instead, depreciate using the straight-line method. Amounts of credit are limited to the lesser of $30 million or 6% of the credits generated in tax years beginning before January 2006, that were not used in tax years ending before April 2008.
Note that these two extensions create a temporary book-tax difference, decreasing a taxpayer’s DTA and taxes payable. The extensions are effective for 2013 only and aren’t retroactive to 2012. These extensions will not usually have an effect on a calendar-year corporation’s tax provision.