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News From Touchstone Business Advisors
From time to time, Touchstone has new business listings, changes to existing listings or important new developments, which are first previewed to those valued clients, who have previously expressed an interest in a business acquisition or sale. If you have a business associate who would be interested in hearing about our services, listings and receiving our articles, please forward this newsletter and they will be able to sign-up for future notices. You can also keep abreast of these changes and download NDA forms and business profiles on our website: www.touchstonebiz.com |
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American Recovery and Reinvestment Act of 2009: BUSINESS INCENTIVES
The new law showers businesses with over $75 billion in tax benefits for 2009 and 2010 alone. It does so by extending bonus depreciation, increasing Code Sec. 179 expensing, allowing a five-year carryback of net operating losses (NOLs) to small businesses, and providing other business-related incentives.
Bonus Depreciation
The new law extends the 50-percent first-year bonus depreciation allowed under the 2008 Economic Stimulus Act through December 31, 2009. The extension is retroactive to January 1, 2009. The new law also extends, through 2010, the additional year of bonus depreciation allowed under the 2008 Economic Stimulus Act for property with a recovery period of 10 years or longer, for transportation property (tangible personal property used to transport people or property), and for certain aircraft. 50-percent bonus depreciation is taken on top of the regular depreciation reported for the year the property is placed in service. As with any accelerated depreciation, however, a large current depreciation deduction results in smaller future deductions.
Higher Caps on Vehicle Depreciation
Also extended for bonus depreciation purposes, the regular dollar cap for new vehicles placed in service in 2009 is raised again by $8,000, effective January 1, 2009. This increase mirrors the temporary 2008 cap increase. For 2008, the regular first-year depreciation dollar cap of $2,960 for autos was raised to $10,960
if bonus depreciation is elected ($11,160 for light trucks and vans).
Code Sec. 179 Expensing
The new law extends the increased 2008 Code Sec. 179 expensing (aka, small business expensing) amounts to 2009. The 2008 Economic Stimulus Act increased the amount of Code Sec. 179
expensing for 2008 to $250,000 and increased the threshold for reducing the deduction to $800,000. Without the 2009 extension, businesses placing property in service in 2009 would have been limited to a $125,000 inflation adjusted maximum deduction with a $500,000 cap. Unlike bonus depreciation, Code Sec. 179 expensing is available on new or used property. However, the $800,000 qualifying property ceiling effectively limits Code Sec. 179 expensing to small businesses.
NOL Carryback
The new law provides a five-year carryback of 2008 NOLs but only for qualified small businesses with average gross receipts of $15 million or less. The new law gives these businesses the choice to carry back NOLs three, four or five years. The new treatment will apply only to NOLs for any tax year beginning or ending in 2008. The normal NOL carryback period, which is two years for all businesses, returns for NOLs incurred in 2009. Earlier versions of the bill provided NOL relief to all businesses and covered both 2008 and 2009. As soon as a taxpayer has filed a 2008 return containing an NOL, it can begin the process of claiming a refund to get cash back into its pockets. The amount of the refund for a carryback year is computed on page 1 of Form 1045 in the case of an individual and on page 1 of Form 1139 in the case of a corporation. The NOL is computed by making specified modifi cations to taxable
income.
Work Opportunity Tax Credit
The new law creates two new categories of targeted groups under the existing Work Opportunity Tax Credit (WOTC): unemployed veterans and disconnected youth. These new categories apply to
individuals who are hired and begin work in 2009 or 2010. The WOTC is combined with the Welfare-to-Work credit for qualified individuals who begin working for an employer after December 31, 2006, and before September 1, 2011.
Refundable Credits in Lieu of Bonus Depreciation
The new law allows businesses to monetize accumulated AMT and R&D credits in lieu of taking bonus depreciation. The election to accelerate these historic AMT and R&D credits originally applied only to 2008, but the new law extends this option to all property qualifying for bonus depreciation placed in service through 2009.
Under the 2008 Economic Stimulus Act, and by extension under the new law, businesses eligible for 50-percent bonus depreciation may instead elect to claim additional research or minimum tax credits that are refundable. The research credit or minimum tax credit is increased by the bonus depreciation amount, which is 20 percent of the difference between depreciation claimed on eligible property with and without bonus depreciation. The bonus depreciation amount is limited to the lesser of (1) $30 million or (2) research and AMT credits accumulated for years before January 1, 2006. The new law also allows a business to change its election from 2008 to 2009, or to make an election in 2009 when no election was made in 2008. This is a sharp difference from recent regulatory guidance issued by the IRS that would make a 2008 election binding on the business
for 2009.
Cancellation of Indebtedness
The new law will allow certain businesses to elect to recognize cancellation of indebtedness income over five years, beginning in 2014, for specifi ed types of business debt repurchased by the business after December 31, 2008, and before January 1, 2011. An applicable debt instrument under the new law means a bond, debenture, note, certificate, or any other instrument constituting indebtedness issued by a C corporation or any other "person" in
connection with the conduct of a trade or business by such person.
Once made, the election is irrevocable. The new law further provides for acceleration of deferred items in triggering circumstances, such as the liquidation or sale of substantially all of the assets of the taxpayer or the cessation of business by the taxpayer. The new law also modifies the rules for original issue discount on certain high yield obligations.
Qualified Small Business Stock
Under current law, investors may exclude 50 percent of the gain from the sale of certain small business stock acquired and held for more than five years. The new law increases the exclusion to 75
percent for stock acquired after the date of enactment and before January 1, 2011. A small business cannot have assets over $50 million and must conduct an active trade or business.
S Corp Built-In Gain Period
The new law temporarily shortens, from 10 to seven years, the holding period for assets subject to the built-in gains tax imposed after a C corp elects to become an S corp. This reduction applies to C corps that convert to S corps in tax years beginning in 2009 and 2010. The built-in gains tax prevents C corps from avoiding corporate level tax on the disposition of appreciated assets it acquired while a C corp by first converting to S status.
However, these rules also discourage S conversions in situations
in which the business may not survive under C corp rules. The new law will give shareholders more flexibility during the current economic crisis.
Estimated Taxes
The new law decreases required estimated tax payments for individuals whose incomes primarily come from a small business in 2009. Rather than being required to make quarterly estimated
tax payments based on 100 percent of their 2008 returns, the new law allows computation based on 90 percent. The individual's AGI
must be less than $500,000 and he or she must certify that more than 50 percent of the gross income shown on his or her return for the prior tax year was income from a small business. Income from a small business generally means income from a trade or business with an average number of employees of 500 or fewer.
COBRA Benefits
The new law allows an individual who is involuntarily separated from employment between September 1, 2008, and January 1, 2010, to elect to pay 35 percent of his/her COBRA coverage and have it treated as paying the full amount. The former employer will be required to pay the remaining 65 percent but, in effect, will be reimbursed by crediting those amounts against income tax withholding and payroll taxes it is otherwise required to remit to the federal government. Income and other limitations on COBRA
coverage apply. |
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NEW LISTING:
Niche Manufacturing and Construction
Company
This unique company has a very focused niche that has held up in spite of the economic downturn and is well positioned for growth under new management. The company's features include:
· Profitable 23 year operating history;
· Direct to consumer sales of custom home storage sheds;
· Construction of custom garages; and
· Highly visible RE with 11,000 sf mfg and storage facility.
This is a stand alone company or perfect platform acquisition or addition to existing construction or home products company. Low cost, high quality reputation. Many potential add-ons to fuel future growth.
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NEW LISTING: Curves Franchise Resale in Prime Boulder Location
Profitable club with 7-year track record, one of only two Curves in a large territory (population of Boulder Metro areas >250K) with consistent growth potential of women who work or live in Boulder.
Solid and loyal membership (strong attendance and retention records), as well as an excellent staff and long-term history. Spacious bright club in a perfect location, plenty of parking on a highly trafficked road, with easy access to Boulder's major in/out highway (Hwy 36). Smart system installed in 2008.
Absentee owner with limited resources has limited club's growth. Ideally suited for owner-operator to grow membership to
levels previously achieved in this territory
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UPDATE ON TOUCHSTONE LISTINGS
B2B Outdoor Advertsing Mfg/Dist Company
- Consistent Sales, RE Available
Fleet Truck/Van Repair & Maintenance Company
- Full Service Facility and Mobile Service
Art, Jewelry & Home Decor Gallery
- Great Retail Location and 17 year Operating History
Curves Franchise Resale
- High Growth Redeveloping Denver Neighborhood
Day Spa and Salon
- Great Acquisition Opportunity for Value of Inventory & Equipment
For Detailed
Information See www.touchstonebiz.com
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