By Sandy LeDuc
LeDuc and Sikowitz
On March 9, 2002 The Job Creation and Worker Assistance Act of 2002 went into effect with the expectation that it would stimulate the economy and assist New York businesses. The law affects the years 2001 through 2004.
Retroactive 30% Bonus Depreciation
Economic stimulation has become synonymous with changes in depreciation. Among other changes a generous 30% bonus, first-year depreciation for new assets acquired after September 10, 2001 and before September 11 2004 has been added.
First-year depreciation caps for luxury autos purchased after September 10 and before 2003 have been raised $4,600 to $7,660.
The additional bonus depreciation is mandatory unless the taxpayer elects out. Previously filed returns should be reviewed for the need for amendments.
Net Operating Losses
Anticipating operating losses for American businesses in 2001 and 2002, lawmakers provided more opportunity for the recovery of taxes paid in prior years by allowing taxpayers to carry net operating losses back 5 years instead of the 2 provided under prior law. Net operating losses not used up in the carryback period can be carried forward for 20 years. Taxpayers still have the option of electing to carry all losses forward.
Alternative Minimum Tax
Under prior law, only 90% of a business's alternative minimum taxable income (AMTI) could be offset by alternative tax net operating losses (ATNOL). The 2002 Act allows AMTI to be reduced by 100% by ATNOL carryforwards from prior years into 2001 and 2002 or ATNOLs originating in 2001 and 2002 and carried back to prior years.
Individual Alt Min is reduced as well for years 2001 through 2003.
Cash Method of Accounting Extended
Businesses required because of their revenue volume to report under the accrual method may qualify to report certain fee revenue on the cash basis if the business has a history of non-collectibility. This is known as the non-accrual experience method and requires some detailed
recordkeeping.
New York Liberty Zone
Enhancements to many deductions and credits have been created for businesses in lower Manhattan. Higher depreciation limits for rehabilitation and credits for job creation and retention in the Zone are provided.
Extensions and Clarifications
The law has extended various work credits. The rules regarding deemed-sales as of January 1, 2001 were clarified. SEP contribution limits were raised from 15% to 25%.
Summer 2002 -Volume 12, Number 3