If you are an organization that has previously justified a supply chain initiative and is now challenged to properly fund this initiative OR your organization would like to investigate a new supply chain initiative, but has hesitated even performing the justification and analysis because you fear the challenge of properly funding this initiative, there may be some new options to consider. enVista is currently working with several customers and prospects to understand the impact of Internal Revenue Code Section 179, recently revised from 2008 provisions for 2009.
Under Code Sec. 179, a taxpayer can elect to deduct as an expense, rather than to depreciate, up to a specified amount of the cost of new or used tangible personal property placed in service during the tax year in the taxpayer’s trade or business. The non-indexed annual expensing limit for tax years beginning in 2008 was $250,000. The maximum annual expensing amount generally is reduced dollar-for-dollar by the amount of section 179 property placed in service during the tax year in excess of a specified investment ceiling. For tax years beginning in 2008, the investment ceiling limitation was $800,000. For tax years beginning in 2009, the Recovery Act keeps the expensing limit to $250,000 and the investment ceiling limit to $800,000 in place.
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Under the Economic Stimulus Act of 2008, for property placed in service after Dec. 31, 2007 and before Jan. 1, 2009 (Jan. 1, 2010 for certain longer-lived property), an additional depreciation deduction is allowed equal to 50% of the adjusted basis of qualified property. The Recovery Act extends this rule for property generally acquired before Jan. 1, 2010 (before Jan. 1, 2011 for certain longer-lived property). Qualified property includes most types of new property other than buildings.
For companies considering supply chain opportunities in 2009, The Recovery Act specifically calls out off the shelf computer software, testing equipment and machinery and equipment as examples of qualifying property, while warehouses, rental property, buildings, docks, and trailers immobile with wheels detached and permanent utilities as examples of non-qualifying property.
enVista recommends developing a quantifiable capital expenditure bill of materials with associated costs, combined with an associated return on investment to support your supply chain project and your potential use of the 2009 Recovery Act.