Quality Magazine

Important Capital Equipment Incentive Extended

April 15, 2010

WASHINGTON - An important business tax incentive has been extended for the 2010 tax year. Expanded Section 179 “small business” expensing can now be used for new and used equipment purchased and placed in service this year. The provision had been allowed to expire at the end of 2009. It was extended as part of “The Hiring Incentives to Restore Employment Act (HIRE) Act” that President Obama signed into law last month.

The bipartisan HIRE Act is the result of an effort to create jobs in a targeted and relatively inexpensive ($17.6 billion – small by Washington standards) manner. Section 179 was one of only four basic provisions included in the original bill – a testament to the strong support of the business community, particularly small- and medium-sized manufacturers.

Section 179 allows a business to expense the first $250,000 of capital expenditures up to $800,000. After total CAPEX purchases exceed $800,000, the incentive begins phasing out dollar for dollar. This tax break can be a powerful one, especially at a time when orders definitely could use a boost.

In addition to the Section 179 expensing, The HIRE Act also includes tax credits for employers who hire new workers; Build America Bonds, which allow state and local governments to lower their borrowing costs; and a one-year extension of funding for transportation programs in the Surface Transportation Act. The new law does NOT include extension of 50% bonus depreciation which expired at the end of 2009. AMT continues to strongly advocate for its extension for 2010.