Washington Tax Alert from Don Barnes, [email protected]
February 11, 2008

President Bush is expected to sign the Economic Stimulus Act of 2008, H.R. 5140, this week.

Notwithstanding bipartisan support and extensive lobbying by home builders and others, the bill does not include a provision permitting a longer carryback period for NOLs.

The rebates for individual taxpayers will be computed by Treasury based on 2007 tax returns, and taxpayers will be required when completing their 2008 tax returns to reconcile the amounts they received with the amount of rebate credit computed on the basis of their 2008 returns. Taxpayers who do not qualify for the credit based on their 2007 tax returns but qualify for the credit based on their 2008 tax returns will be entitled to a credit against their 2008 tax liability. Taxpayers in the converse situation ( i.e. , they qualified for the credit based on their 2007 returns but do not qualify on the basis of their 2008 returns) will not be required to repay the stimulus payment.

The Act also allows additional first-year depreciation equal to 50% of the adjusted basis of qualified property. The additional first-year depreciation is allowed for both regular tax and AMT purposes. In general, the property must be placed in service during 2008 and original use of the property must commence with the taxpayer. Property is not eligible for additional first-year depreciation if a binding written contract for acquisition of the property was in effect before January 1, 2008. Taxpayers may elect out of additional first-year depreciation for any class of property.