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Washington Tax Alert - September 17, 2008 - Election to increase credits in lieu of bonus depreciation

Washington Tax Alert from Don Barnes, dbarnes@washingtontaxlaw.com
September 17, 2008

On July 30, 2008, President Bush signed into law a housing stimulus bill, The Housing Assistance Tax Act of 2008, P.L. 110-289. One of the revenue provisions in the bill permits corporations to claim additional alternative minimum tax credits or additional research credits in lieu of bonus depreciation with respect to certain property acquired after March 31, 2008. A corporation making this election foregoes the additional first-year depreciation allowance with respect to such property and must use the straight line method.

The operation of this new election (see IRC § 168(k)(4)) is complicated, and Treasury is expected to issue additional guidance. In effect, the provision allows corporations to monetize unused AMT and research credits by accelerating them in lieu of bonus depreciation.