Summary of General Business and Investment, Alternative Energy Incentive, and Tax-Exempt/Tax Credit Bond Tax Provisions of the Recently-Enacted American Recovery and Reinvestment Tax Act of 2009 (Act)

Set forth below is a summary of the general business and investment, alternative energy incentive, and tax-exempt/tax credit bond tax provisions of the Act¹. The Act became effective on February 17, 2009.

General Business and Investment Provisions

Section 179 ² Expensing

Prior to the Act, Section 179 allowed taxpayers to deduct (rather than capitalize and thereafter depreciate) up to $125,000 (temporarily increased by Congress to $250,000 for 2008 only), indexed for inflation, of the cost of Section 179 property ³ placed in service for any taxable year beginning after 2006 and before 2011. This $125,000 limitation was reduced by each dollar of Section 179 property placed in service during the taxable year in excess of $500,000 (temporarily increased by Congress to $800,000 for 2008 only), indexed for inflation.

The Act extends these temporary 2008 limits of $250,000 and $800,000 through 2009.

Extension of 50% Bonus Depreciation

The Act extends 50% “bonus depreciation”—that is, the ability for businesses to claim an immediate deduction of 50% of the cost of eligible “depreciable property” (e.g., equipment, tractors, wind turbines, solar panels, and computers)—to eligible depreciable property placed in service in 2009.

Acceleration of Alternative Minimum Tax (AMT) and Research and Development (R&D) Credits

The Act extends, through 2009, the ability of taxpayers to accelerate the recognition (and “cashing out”) of a portion of their historic AMT or R&D credits in lieu of claiming bonus depreciation.⁴ The amount of these credits that a taxpayer may accelerate is calculated based on the amount that the taxpayer invests in property that would otherwise qualify for bonus depreciation, but not in excess of the lesser of: (a) 6% of the historic AMT and R&D credits; or (b) $30 million. Also, under the Act, these limitations will be separately applied to 2008 and 2009 elections.