When Congress enacted bonus depreciation as part of the Economic Stimulus Act of 2008, many businesses were disappointed that this incentive provision yielded no immediate benefit to them because they were in a loss position. The Housing Assistance Tax Act of 2008 (Housing Act) rectified this oversight by adding an elective provision allowing corporations to accelerate some of their unused alternative minimum tax (AMT) and research credits and claim them as refundable credits instead of taking bonus depreciation. Before making this election, eligible corporations should carefully consider whether the immediate benefit gained from a refundable credit is worth the trade-off in reduced future tax savings.
BONUS DEPRECIATION
To qualify for bonus depreciation under Internal Revenue Code (IRC) Section 168(k), the property must be original-use property, so used equipment is not eligible. Qualified property includes most types of new property other than buildings. Examples include business machines, equipment, furniture, computers, software, trucks, and automobiles. Qualified property is defined as property that meets the following conditions:
- The property has a recovery period of 20 years or less, or