New Tax Law Impacts Construction
Industry
The Small Business and
Work Opportunity Tax Act of 2007, which was signed into law by the President
on May 25, 2007, contains several provisions that have an impact on the
construction industry. Here’s a brief overview of some of those provisions.
Section 179 Expensing
The Section 179 expensing election allows you to take an immediate deduction
for the cost of most kinds of depreciable assets in the year they are placed
in service instead of claiming depreciation deductions over a multi-year
period. The new law provides for an immediate increase of the expensing
limit from $112,000 to $125,000 for 2007. The expensing limit is reduced
dollar for dollar when the total qualifying assets placed in service exceed
$500,000 for tax year 2007. In addition, the higher expensing election has
been extended through 2010 and thresholds will be indexed for inflation.
The Work Opportunity Tax Credit (WOTC)
The WOTC is a tax credit that employers may receive on an elective basis
when they hire individuals in certain targeted groups. The new law expands
the targeted groups to include more disabled veterans and people living in
counties that have experienced significant population losses. Employers who
hire disabled veterans are eligible to receive twice the normal credit of
$2,400 per eligible employee. Under the new law, employees must begin work
before September 1, 2011. The previous hiring deadline had been December 31,
2007.
GO Zone Incentives
The new law also contains several tax relief provisions targeted at
businesses operating in the parts of the Gulf Coast hit by hurricanes in
2005. Businesses in this region can expense an additional $100,000 in
eligible equipment and machinery purchases under Section 179 for both 2007
and 2008 due to a one-year extension of the higher limit. The deadline for
placing GO Zone buildings in service that qualify for enhanced low-income
housing credits has been extended by two years to December 31, 2010.
Any qualified GO Zone repair or reconstruction is treated as a qualified
rehabilitation for purposes of the qualified mortgage bond rules.
If you’d like to determine if and how these new provisions of the tax law
could impact your business,
please contact us for
details.
Work-In-Process is provided by
Somerset for our clients and other interested persons upon request.
Since technical information is presented in generalized fashion, no
final conclusion on these topics should be made without further review.
For additional information on the issues discussed, please contact
Ken
Hedlund,
Jay Feller,
Steve George,
Chris
Mayfield or
Rebecca Ogle
of our
Construction & A/E Team.
This document is not intended or written to be used, and cannot be used,
for the purpose of avoiding tax penalties that may be imposed on the
taxpayer.
Somerset CPAs,
P.C.
3925 River Crossing Parkway, Third Floor
Indianapolis, Indiana 46240
317.472.2200 • 800.469.7206 • FAX 317.208.1200
www.somersetcpas.com
