What’s In The Stimulus Plan
For Contractors?
Congress and the administration have put into place a comprehensive economic
stimulus plan in an attempt to revitalize the economy. Several spending
provisions of the American Recovery and Reinvestment Act of 2009 (the Act)
will have a direct impact on many sectors of the construction industry. The
Act also contains a number of tax-related provisions that may be of benefit
to contractors. Here’s an overview of some of the new law’s major
provisions.
Construction Spending
The overall package contains over $140 billion in spending for a variety of
construction programs. Transportation infrastructure--which includes highway
and bridge construction, high-speed rail corridors and transit funding--is
slated to receive $49.3 billion. Building infrastructure will receive $29.6
billion for projects that include Veterans Administration medical
facilities; public housing; and military construction, operations and
maintenance. Energy and technology projects, such as the expansion of the
electricity grid and the weatherization assistance program, are in line to
receive $29.8 billion. The bill also sets aside $21.4 billion for water and
environmental infrastructure.
Bonus Depreciation and Section 179 Expensing
A provision allowing a first-year depreciation “bonus” equal to 50% of the
cost (technically, the “adjusted basis”) of qualified new business assets
has been extended for a year, generally for property placed in service
through 2009.
In addition, under the Act, the dollar limit on asset purchases eligible for
Section 179 expensing is $250,000 for the 2009 tax year, extending the same
limit that applied for 2008. The $250,000 deduction maximum is reduced to
the extent the cost of qualifying property placed in service during the
taxable year is greater than $800,000.
Net Operating Losses
Eligible small businesses with net operating losses (NOLs) for a taxable
year ending in 2008 (or, at the taxpayer’s option, a taxable year beginning
in 2008) may elect to increase the usual two-year carryback period to as
many as five years. Carrying back an NOL to an earlier tax year may result
in a refund of taxes paid for that year.
Renewable Energy Provisions
The Act provides business and individual taxpayers with several tax
incentives for producing and conserving energy from renewable sources. For
example, the $4,000 cap on the 30% business energy tax credit for certain
small wind energy property is repealed.
Estimated Taxes
The new law temporarily eases the estimated tax requirement for individuals
who received the majority of their 2008 income from a small business and
whose adjusted gross income was less than $500,000 ($250,000 if married
filing separately). For 2009, qualifying individuals may pay estimated tax
of 90% (versus 100% or 110%) of the tax liability shown on their 2008 tax
return.
Encouraging New Hiring
The new law also expands the Work Opportunity Tax Credit available to
employers that hire members of certain targeted groups by adding new
targeted groups (unemployed veterans and disconnected youth). The amount of
the credit available to an employer is determined by the amount of qualified
first-year wages paid by the employer.
Somerset Can Help
Let's make sure you are receiving the maximum benefit of the Act's tax-related provisions. Contact Somerset today.
Work-In-Process is provided by
Somerset for our clients and other interested persons upon request.
Since technical information is presented in generalized fashion, no
final conclusion on these topics should be made without further review.
For additional information on the issues discussed,
please contact
Ken
Hedlund,
Jay Feller,
Steve George,
Chris
Mayfield or
Rebecca Ogle
of our
Construction & A/E Team.
This document is not intended or written to be used, and cannot be used,
for the purpose of avoiding tax penalties that may be imposed on the
taxpayer.
Somerset CPAs,
P.C.
3925 River Crossing Parkway, Third Floor
Indianapolis, Indiana 46240
317.472.2200 • 800.469.7206 • FAX 317.208.1200
www.IndianaConstructionCPAs.com
