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Tax Tidbit 12/15/08: 2008 Stabilization Act: Tax Changes Affecting Businesses

On October 3, 2008, President Bush signed into law a $700 billion financial markets rescue package, called the Emergency Economic Stabilization Act of 2008. The package also includes some valuable individual and business tax incentives that are intended to help revive the economy. 

The business tax incentives cover a wide range of activities and industries. We have highlighted some of the key incentives and invite you to discuss them with us in more detail. 

Research tax credit -  The rescue package extends the research tax credit to amounts paid or incurred in 2008 and 2009. It also increases the alternative simplified research credit to 14 percent starting next year, a significant incentive for smaller firms to use the research credit to grow their businesses. 

Leasehold improvements -Qualifying restaurant improvements and retail leasehold improvements will be eligible for 15-year cost recovery rather than a 39-year period, through December 31, 2009. It applies to both owner-occupied businesses and restaurants, as well as leased establishments. 

Energy conservation -  The new law extends a host of energy tax incentives, some targeted to consumers (including businesses) and others to producers and manufacturers. Most notable are the extension of the special deduction for energy efficient commercial buildings through December 31, 2013; and the substantial, long-term tax breaks given to businesses that develop or use solar energy. For businesses in urban areas, a $20/month transportation tax-free fringe benefit may be set up for employees who bicycle to work. 

Charitable contributions -The Tax Code gives businesses enhanced deductions for contributions of food to charitable organizations, as well as contributions of books and computer equipment to qualifying schools. The new law extends these tax breaks through December 31, 2009. S-Corporation shareholders may also be eligible for special tax treatment when making charitable contributions of qualifying property.

Other business extenders - The rescue package also targets a whole host of extended, enhanced and expanded tax breaks to specific businesses. If you believe your operations touch upon any of these areas, please contact our offices for further details.

In addition to tax breaks only available to businesses, the Emergency Economic Stabilization Act of 2008 also provides tax relief to individuals in their capacities as business owners or shareholders. All told, the Emergency Economic Stabilization Act of 2008 is one of the largest tax laws in recent years, a law in which there is something for almost everyone. Some of these breaks, however, require quick action before the 2008 tax year ends; others call for careful coordination with standard year-end tax strategies; and still others require planning now to maximize the benefits available in 2009 and beyond.

We encourage you to contact our office to discuss in more detail how the new Emergency Economic Stabilization Act of 2008 applies to you and your business.  Andrew D. Ross, CPA of Bedard, Kurowicki & Co., CPA's, PC (908) 782-7900 x 113, adr@bkc-cpa.com, or visit www.bkc-cpa.com.