educational

Tax Changes in 2009

On Feb. 17, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the "Recovery Act" or the "Act"). Most of the tax changes are targeted to affect qualifying small businesses. This article provides a summary of the key tax changes affecting businesses that survived the debates in Congress and made it into the Act.

New Asset Purchases
The Recovery Act affects businesses acquiring new assets by extending the bonus depreciation on certain qualified property (which was set to expire at the end of last year) and increasing the first year write-off expense limits under what is referred to as a 'Section 179' election.

First year bonus depreciation provides a taxpayer with an election to accelerate 50 percent of an asset's depreciation to the year of purchase while the Section 179 election allows qualifying businesses a write-off of up to $250,000 of the cost of certain new asset purchases. The maximum amount of the write-off under Section 179 is phased out for businesses that acquire more than $800,000 of eligible assets, and is therefore generally available to smaller businesses.

A business that cannot benefit from bonus depreciation (e.g., a company that is in a loss before taking into account depreciation) may have accumulated unusable R&D or Alternative Minimum Tax credits (e.g., because of income limitations in prior years). Last year, these businesses were incentivized to acquire new assets and, by election, were able to forego bonus depreciation and instead accelerate the use of those accumulated credits to offset tax. The Recovery Act extends this law to asset purchases in 2009.

Net Operating Losses
Another tax incentive for qualifying businesses comes in the form of increasing the net operating loss (NOL) carry-back period from two years to five years. Under the new law, businesses with less than $15 million in annual gross receipts may be able to take advantage of the new expansion of the NOL period. As such, businesses that qualify could potentially receive refunds from previous years. For example, a company that generates an NOL in 2008 may be able to carry back that loss to 2003. If the company had taxable income and paid tax in 2003, a deduction for the NOL in that year (as a result of the carry-back) could mean an immediate refund of 2003 taxes.

Additional Tax Incentives to Businesses
The Recovery Act also includes favorable tax changes in respect to companies that acquire their own debt at a discount, hire certain workers (under the work opportunity credit), and invest in renewable energy projects. Small business owners may also be eligible for reduced estimated taxes in 2009 if they rely on the available safe harbors.

Montage Services Inc. provides international and domestic tax consulting and advisory services, primarily for corporations. To inquire about a particular tax issue or seek consulting services, contact Scott Wentz, managing director, at (415) 963-4016 or scott@montage-services.com.

Related:  

Copyright © 2024 Adnet Media. All Rights Reserved. XBIZ is a trademark of Adnet Media.
Reproduction in whole or in part in any form or medium without express written permission is prohibited.

More Articles

opinion

Why Cyber Insurance Is Crucial for Adult Businesses

From streaming services and interactive platforms to ecommerce and virtual reality experiences, the adult industry has long stood at the forefront of online innovation. However, the same technology-forward approach that has enabled adult businesses to deliver unique and personalized content to consumers worldwide also exposes them to myriad risks.

Corey D. Silverstein ·
opinion

Best Practices for Payment Gateway Security

Securing digital payment transactions is critical for all businesses, but especially those in high-risk industries. Payment gateways are a core component of the digital payment ecosystem, and therefore must follow best practices to keep customer data safe.

Jonathan Corona ·
opinion

Ready for New Visa Acquirer Changes?

Next spring, Visa will roll out the U.S. version of its new Visa Acquirer Monitoring Program (VAMP), which goes into effect April 1, 2025. This follows Visa Europe, which rolled out VAMP back in June. VAMP charts a new path for acquirers to manage fraud and chargeback ratios.

Cathy Beardsley ·
profile

WIA Profile: Siren Obscura

Siren Obscura grew up in Arizona, surrounded by rugged beauty and desert landscapes that she describes as having a quiet power to them. That environment strongly shaped her appreciation for contrasts and natural light, which plays a significant role in her work today.

Women In Adult ·
opinion

How to Thwart Holiday Fraudsters With Finesse

The holiday season is a prime time for shopping. Unfortunately, it’s also peak season for credit card fraud. With increased transactions both online and in-store, fraudsters have more opportunities to exploit vulnerabilities — and they are getting better at it every day.

Jonathan Corona ·
opinion

How to Halt Hackers as Fraud Attacks Rise

For hackers, it’s often a game of trial and error. Bad actors will perform enumeration and account testing, repeating the same test on a system to look for vulnerabilities — and if you are not equipped with the proper tools, your merchant account could be the next target.

Cathy Beardsley ·
profile

VerifyMy Seeks to Provide Frictionless Online Safety, Compliance Solutions

Before founding VerifyMy, Ryan Shaw was simply looking for an age verification solution for his previous business. The ones he found, however, were too expensive, too difficult to integrate with, or failed to take into account the needs of either the businesses implementing them or the end users who would be required to interact with them.

Alejandro Freixes ·
opinion

How Adult Website Operators Can Cash in on the 'Interchange' Class Action

The Payment Card Interchange Fee Settlement resulted from a landmark antitrust lawsuit involving Visa, Mastercard and several major banks. The case centered around the interchange fees charged to merchants for processing credit and debit card transactions. These fees are set by card networks and are paid by merchants to the banks that issue the cards.

Jonathan Corona ·
opinion

It's Time to Rock the Vote and Make Your Voice Heard

When I worked to defeat California’s Proposition 60 in 2016, our opposition campaign was outspent nearly 10 to 1. Nevertheless, our community came together and garnered enough support and awareness to defeat that harmful, misguided piece of proposed legislation — by more than a million votes.

Siouxsie Q ·
opinion

Staying Compliant to Avoid the Takedown Shakedown

Dealing with complaints is an everyday part of doing business — and a crucial one, since not dealing with them properly can haunt your business in multiple ways. Card brand regulations require every merchant doing business online to have in place a complaint process for reporting content that may be illegal or that violates the card brand rules.

Cathy Beardsley ·
Show More