In March, 2011, the IRS released Revenue Procedure 2011-26, which provides guidance on the 100% bonus depreciation allowance which was enacted in 2010 legislation.
Property available for the bonus depreciation includes most property eligible to be depreciated under the Internal Revenue Code and was purchased and placed in service after September 8, 2010 and before January 1, 2012. Such property includes, but is not limited to, qualified leasehold improvements, certain types of computer software and property with a depreciable life of 20 years of less.
The Revenue Procedure explains some special exceptions that will allow business owners the opportunity to take advantage of the extra depreciation on property that would not normally qualify. While generally, an acquisition of qualified property prior to September 9, 2010, would not qualify for bonus depreciation, if a binding contract existed as of that date, then the property would still qualify. Another exception relates to self constructed property. Bonus depreciation will be permitted on the components of such property that were constructed after September 8, 2010. While the whole property may not be eligible for the bonus depreciation, the new rules permit certain components to still be eligible. The new property has to be placed in service between September 10, 2010 and January 1, 2012. (There are certain exceptions for long construction period property.)
The Revenue Procedure also allows taxpayers to elect to take 50% bonus depreciation instead of 100% for all property in a class of property placed in service after September 9, 2010.
This new Revenue Procedure does include many other intricacies which are likely to be appealing to most taxpayers. The beneficial provisions of the new law should entice many businesses to invest in new equipment while stimulating manufacturing in the US.
More information on Revenue Procedure 2011-26, can be found at the IRS website at www.irs.gov.