Guidance Issued on 2009 Depreciation Substitute Election Extension
By Lauren Gardner
Publication date: 07/01/2009
The Internal Revenue Service June 30 issued guidance on the extension of a tax code provision that allows taxpayers to elect out of the 50 percent bonus depreciation benefit and increase certain credit limitations instead, addressing corresponding issues.
Revenue Procedure 2009-33 provided guidance to corporations with respect to property qualified for the election, as well as the time and manner for making the election under new tax code Section 168(k)(4)(H), IRS said. The guidance also explained how to calculate the amount by which the Section 38(c) business and Section 53(c) alternative minimum tax (AMT) credit limitations may be increased if the elections under the new code section are made or not, it said.
The bonus depreciation deduction under Section 168(k)(1) was enacted under the 2008 economic stimulus package. The Section 168(k)(4) opt-out election was added to the code by the Housing and Economic Recovery Act of 2008 (Pub. L. No. 110-289). The American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5) added Section 168(k)(4)(H) to the Internal Revenue Code to extend the stimulus first-year depreciation deduction and thus apply it to eligible extension property.
The new guidance modified and superseded portions of previous revenue procedures (Rev. Proc. 2008-65, Rev. Proc. 2009-16) released concerning the depreciation benefit and the corresponding opt-out election.
Guidance Specifies Time, Manner
The revenue procedure defined “extension property” as property that is qualified solely because the placed-in-service date was extended to before 2010, or before 2011 in the cases of long-production period property, transportation property, or certain aircraft under Section 168(k)(2)(B) or (C), IRS said.
The 2009 economic recovery law allows a taxpayer to elect to not apply Section 168(k)(4) to extension property. If a taxpayer chooses this option, his or her election will continue to apply to eligible property that is not extension property, IRS said. A corporate taxpayer must make the election not to apply Section 168(k)(4) to extension property by the federal income tax return due date for his or her first taxable year ending after Dec. 31, 2008, it said.
The guidance also provided an automatic six-month extension for late elections, as long as the taxpayer files his or her income tax return for such a taxable year on time, IRS said.
Separate bonus depreciation amounts, maximum amounts, and maximum increase amounts are calculated and applied to extension property and to qualified property that is not extension property if a taxpayer makes the Section 168(k)(4) election for its first taxable year ending after March 31, 2008, and does not elect to apply the section to extension property, IRS said.
Rev. Proc. 2009-33 will appear in Internal Revenue Bulletin 2009-29 dated July 20.
Register now for our upcoming free Webinar on making the Section 168(k)(4) Election.
The complete text of this article can be found in the BNA Daily Tax Report, July 1, 2009. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2009, The Bureau of National Affairs, Inc.
Guidance Issued on 2009 Depreciation Substitute Election Extension
By Lauren Gardner
Publication date: 07/01/2009
The Internal Revenue Service June 30 issued guidance on the extension of a tax code provision that allows taxpayers to elect out of the 50 percent bonus depreciation benefit and increase certain credit limitations instead, addressing corresponding issues.
Revenue Procedure 2009-33 provided guidance to corporations with respect to property qualified for the election, as well as the time and manner for making the election under new tax code Section 168(k)(4)(H), IRS said. The guidance also explained how to calculate the amount by which the Section 38(c) business and Section 53(c) alternative minimum tax (AMT) credit limitations may be increased if the elections under the new code section are made or not, it said.
The bonus depreciation deduction under Section 168(k)(1) was enacted under the 2008 economic stimulus package. The Section 168(k)(4) opt-out election was added to the code by the Housing and Economic Recovery Act of 2008 (Pub. L. No. 110-289). The American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5) added Section 168(k)(4)(H) to the Internal Revenue Code to extend the stimulus first-year depreciation deduction and thus apply it to eligible extension property.
The new guidance modified and superseded portions of previous revenue procedures (Rev. Proc. 2008-65, Rev. Proc. 2009-16) released concerning the depreciation benefit and the corresponding opt-out election.
Guidance Specifies Time, Manner
The revenue procedure defined “extension property” as property that is qualified solely because the placed-in-service date was extended to before 2010, or before 2011 in the cases of long-production period property, transportation property, or certain aircraft under Section 168(k)(2)(B) or (C), IRS said.
The 2009 economic recovery law allows a taxpayer to elect to not apply Section 168(k)(4) to extension property. If a taxpayer chooses this option, his or her election will continue to apply to eligible property that is not extension property, IRS said. A corporate taxpayer must make the election not to apply Section 168(k)(4) to extension property by the federal income tax return due date for his or her first taxable year ending after Dec. 31, 2008, it said.
The guidance also provided an automatic six-month extension for late elections, as long as the taxpayer files his or her income tax return for such a taxable year on time, IRS said.
Separate bonus depreciation amounts, maximum amounts, and maximum increase amounts are calculated and applied to extension property and to qualified property that is not extension property if a taxpayer makes the Section 168(k)(4) election for its first taxable year ending after March 31, 2008, and does not elect to apply the section to extension property, IRS said.
Rev. Proc. 2009-33 will appear in Internal Revenue Bulletin 2009-29 dated July 20.
Register now for our upcoming free Webinar on making the Section 168(k)(4) Election.
The complete text of this article can be found in the BNA Daily Tax Report, July 1, 2009. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2009, The Bureau of National Affairs, Inc.
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