On February 13, 2008 President Bush signed H.R. 5140, entitled Economic Stimulus Act of 2008 (the Act). This Act includes provisions increasing I.R.C. §179 expense while also allowing bonus depreciation for a certain time period.

With regards to I.R.C. §179 expense, this Act provides for an increase in §179 expense in an amount up to $250,000 for tax years beginning after December 31, 2007. In addition, the limitation in the amount of §179 expense allowed shall be reduced (but not below zero) by the amount by which the cost of section 179 property placed in service during such taxable year exceeds $800,000 (used to be $200,000).

With regards to the bonus depreciation, this Act provides that there is a special depreciation allowance for certain property acquired after December 31, 2007 and before January 1, 2009. This Act allows a bonus first-year depreciation deduction of fifty percent (50%) of the adjusted basis of qualified property. Qualified property includes: (1) tangible property with a recovery period not exceeding twenty (20) years; (2) purchased computer software; (3) water utility property; and (4)qualified leasehold improvement property. The qualified property must be acquired and placed in service by the taxpayer after December 31, 2007 and before January 1, 2009. Qualified property does not include property that was acquired by the taxpayer pursuant to a written binding contract dated December 31, 2007 or before. In order to qualify for the bonus depreciation, the property's original use must begin with the taxpayer. In addition, the Act provides that qualified property cannot be subject to both this bonus depreciation and any bonus depreciation allowed under the GO Zone rules.

If you have any questions or need assistance, please contact one of the following Baldwin Haspel Burke & Mayer tax attorneys:

Jerome J. Reso, Jr. (504) 585-7869
John A. Rouchell (504) 585-7854
Karl J. Zimmermann (504) 585-7871
Leon Rittenberg, Jr. (504) 585-7855
Leon Rittenberg, III (504) 585-7845
Kernan A. Hand (504) 585-7856
Matthew A. Treuting (504) 585-7991
Jason J. Alley (504) 585-7711