In the recently enacted “Tax Increase Prevention Act of 2014,” Congress has once again extended a package of expired or expiring individual, business, and energy provisions known as “extenders.” The extenders are a varied assortment of more than 50 individual and business tax deductions, tax credits, and other tax-saving laws which have been on the books for years but which technically are temporary because they have a specific end date. Congress has repeatedly temporarily extended the tax breaks for short periods of time (e.g., one or two years), which is why they are referred to as “extenders.” The new legislation generally extends the tax breaks retroactively, most of which expired at the end of 2013, for one year through 2014.
401. Bonus depreciation and AMT relief are retroactively extended to apply to property placed in service before Jan. 1, 2015 (Jan. 1, 2016 for certain property)
Under Code Sec. 168(k), a taxpayer that owns “qualified property” (see below) is, generally, allowed 50% depreciation (bonus depreciation) in the year that the property is placed in service (with corresponding reductions in basis and, thus, reductions of the regular depreciation deductions otherwise allowed in the placed-in-service year and in later years).
The following are the requirements for qualified property under Code Sec. 168(k)(2):
… the property must be of a qualifying type; i.e., generally, most machinery, equipment or other tangible personal property; most computer software; and certain leasehold improvements;
… the property must not be property that must be depreciated under the alternative depreciation system;
… the property must not be the subject of certain disqualifying transactions involving users other than the taxpayer or persons related to the taxpayer or the other users;
… the property’s original use generally must begin with the taxpayer after Dec. 31, 2007;
… the property must meet a timely-placed-in-service requirement; and
… the property must meet a timely acquisition requirement
Thus, bonus depreciation is extended retroactively for one year by the extension of the deadlines for the timely-placed-in-service requirement (above) and, as discussed below, the timely-acquisition requirement.