FASTER EXPENSING OF INPLANT MODULAR BUILDINGS UNDER PROVISIONS OF ECONOMIC STIMULUS PACKAGE OF 2009

5/31/2009

The Economic Stimulus Package of 2009 includes two significant tax breaks primarily for small to medium size business owners. The provisions, designed to encourage business spending, come in the form of bigger depreciation write-offs which means bigger savings on inplant modular buildings over conventional construction.

Section 179 Deduction: Section 179 depreciation deductions are allowed for qualifying assets placed in service in tax years beginning in 2009. Under the Section 179 deduction, many small and medium-sized businesses can instantly depreciate most or all of the cost of qualifying new and used assets in the year they are first placed in service. Most depreciable business assets (other than real estate) qualify for the Section 179 deduction. The maximum write-off is $250,000. There is a phase out provision whereby the deduction is reduced dollar-for-dollar by purchases of qualifying property in excess of $800,000.

First-Year Bonus Depreciation: 50% first-year bonus depreciation is allowed for qualifying new (not used) assets that are both purchased and placed in service during calendar 2009. Unlike the Section 179 deduction privilege, 50% first-year bonus depreciation is available to even the largest businesses. However, small and medium-sized businesses that can take advantage of both the Section 179 deduction and 50% first-year bonus depreciation are the biggest winners. After writing off the 50% bonus depreciation the remaining cost can be written-off under the Section 179 rules.

PortaFab feels modular inplant buildings are qualified property subject to these new IRS provisions.

Being able to expense a modular building of $20,000 versus depreciate a conventionally constructed building with a depreciable life of 39 years will result in a present value savings of $92,000 assuming investment return of 8%.

Please consult with a tax advisor to ensure which of the available alternatives best meets your financial needs.