Accelerated Deductions from Gross Income
TAX EXPENDITURE | FY2010 | FY2011 | FY2012 |
---|---|---|---|
Accelerated Deductions from Gross Income | 279.7 | 290.7 | 298.6 |
item | description | amount |
---|---|---|
Accelerated Deductions from Gross Income | 298.6 | |
2.301 |
Accelerated Depreciation on Rental Housing
Landlords and investors in rental housing may use accelerated methods of depreciation for new and used rental housing. Rental housing placed in service after 1986 is depreciated on a straight-line basis over a 27.5 year period. Rental housing placed in service before 1987 was depreciable over shorter periods (generally 19 or 20 years), and, instead of straight-line depreciation, the 175% declining balance method was permitted. Straight-line depreciation over the property's expected useful life is the generally accepted method for recovering the cost of buildings. The excess of allowable depreciation over such generally accepted depreciation is a tax expenditure, resulting in a deferral of tax or an interest-free loan. Origin: IRC S. 168 Estimate: $1.9 |
1.9 |
2.302 |
Accelerated Depreciation for Rehabilitation of Low-Income Housing
Expenditures made for the rehabilitation of low-income rental housing may be depreciated over a five-year period, using the straight-line method of depreciation and ignoring salvage value, if the expenditures are made under a binding contract in existence before 1987. Generally, the aggregate expenditures qualifying for the deduction cannot exceed $20,000 per unit, though they must equal at least $3,000 per unit over two consecutive years. Any remaining cost may be depreciated under the accelerated methods described in item 2.301. The accelerated recovery of costs which otherwise would be depreciable over a longer period amounts to a deferral of tax or an interest-free loan. Origin: IRC, S. 167(k) Estimate: N.A. |
N.A. |
2.303 |
Expenditures to remove architectural and transportation barriers to the handicapped and elderly
Taxpayers may elect to deduct up to $35,000 of the costs of removing architectural or transportation barriers to the handicapped in the year these costs are incurred. The immediate deduction of these expenditures, which would otherwise have to be capitalized and depreciated over a longer period, results in a deferral of tax or an interest-free loan. Origin: IRC, S. 190 Estimate: $0.3 |
0.3 |
2.304 |
Five-Year Amortization of Start-Up Costs
Taxpayers may elect to treat certain capital costs of starting a business as deferred expenses and amortize them over five years. Without the election, only costs for particular assets could be recovered through depreciation deductions. Other costs would be part of the basis in the business and generally could not be recovered until the business was sold or discontinued. The election to amortize these costs allows for a deferral of tax or an interest-free loan. Origin: IRC, S. 195 Estimate: $0.2 |
0.2 |
2.305 |
The Accelerated Cost Recovery System (ACRS) for Equipment
For depreciable tangible personal property placed in service after 1980, capital costs must be recovered using the federal Accelerated Cost Recovery System (ACRS), which applies accelerated methods of depreciation over set periods. For property placed in service after 1986, the Federal Tax Reform Act of 1986 prescribes revised ACRS depreciation schedules, generally using double-declining balance depreciation over specified periods that are substantially shorter than actual useful lives. The excess of accelerated depreciation over what is considered to be normal depreciation for tangible personal property (double-declining balance over expected useful lifetimes) is a tax expenditure. Origin: IRC, S. 168 Estimate: $227.6 |
227.6 |
2.306 |
Deduction for Excess First-Year Depreciation
Taxpayers may elect to expense certain business assets purchased during the taxable year. The total deduction cannot exceed $25,000 ($100,000 in the case of taxable years beginning after 2002 and before 2010); for taxpayers whose investment in eligible assets exceeds $200,000 ($400,000 in the case of taxable years beginning after 2002 and before 2010) in the year, the $25,000 ceiling is reduced by $1 for each dollar of investment above $200,000. Any remaining cost may be depreciated according to ACRS as described in item 2.305. The immediate deduction results in a deferral of tax or an interest-free loan. Origin: IRC, S. 179 Estimate: $3.5 |
3.5 |
2.307 |
Accelerated Depreciation on Buildings (other than Rental Housing)
Construction may be depreciated under methods which produce faster depreciation than economic depreciation. The precise rules have been changed repeatedly in recent years by revisions of the federal tax code. For structures (other than housing) placed in service after 1986, federal law requires straight-line depreciation over a 31.5 year life. The excess of accelerated depreciation over economic depreciation is a tax expenditure. For a more detailed description of accelerated depreciation, see item 2.301 above. Origin: IRC, S. 168 Estimate: $6.3 |
6.3 |
2.308 |
Expensing Research and Development Expenditures in One Year
Taxpayers may elect to treat research or experimental expenditures incurred in connection with a trade or business as immediately deductible expenses. Under generally accepted accounting principles, at least some of these costs would otherwise be treated as capital expenditures and depreciated or amortized over a period of years. Their immediate deduction results in a deferral of tax or an interest-free loan. Origin: IRC, S. 174 Estimate: $57.4 |
57.4 |
2.309 |
Expensing Exploration and Development Costs
Certain capital costs incurred in bringing a known mineral deposit into production are deductible in the year incurred. A portion of domestic mining exploration costs can also be expensed, although they will be recaptured if the mine reaches the production stage. Certain intangible drilling and development costs of domestic oil, gas, and geothermal wells are deductible when made, but to a certain extent may be recaptured upon disposition of oil, gas, or geothermal property to which they are properly chargeable. The immediate expensing of these costs, which would otherwise be capitalized and recovered through depreciation or through depletion as the natural resource is removed from the ground, results in a deferral of tax or an interest-free loan. Origin: IRC, S. 193, 263(c), 616, 617 Estimate: $1.1 |
1.1 |
2.310 |
Five-Year Amortization of Certain Operating Rights
Certain bus, trucking and shipping companies may amortize over a five-year period the cost of bus route, freight forwarding and certain other operating rights that have lost their economic value due to federal deregulation of these industries. The five-year amortization of these costs, which would otherwise be capitalized and recovered upon the sale of the business, results in a deferral of tax or an interest-free loan. Origin: Tax Reform Act of 1986, S. 243 Estimate: N.A. |
N.A. |
2.311 |
Five-Year Amortization of Pollution Control Facilities
Taxpayers may elect to amortize the cost of a certified pollution control facility over a five-year period, allowing for accelerated recovery of these costs. Accelerated recovery is only available for pollution control facilities subsequently added to plants that were in operation before 1976. The excess of accelerated recovery over depreciation deductions otherwise allowable results in a deferral of tax or an interest-free loan. Origin: IRC, S. 169 Estimate: N.A. |
N.A. |
2.312 |
Alternative energy sources; deduction
In determining net income, a corporation may elect to take an immediate deduction for expenditures made for certain solar or wind powered systems or units located in Massachusetts and used exclusively in the business, in lieu of all other deductions and credits including the deduction for depreciation. Without this provision, such expenditures would have to be capitalized and depreciated. The immediate deduction results in a deferral of tax or an interest-free loan. Origin: M.G.L. c. 63, S. 38H Estimate: $0.4 |
0.4 |
2.313 |
Seven-Year Amortization for Reforestation
Taxpayers may elect to amortize reforestation costs for qualified timber property over a seven-year period. In the absence of this special provision, these costs would be capitalized and depreciated over a longer period or recovered when the timber is sold. The accelerated cost recovery results in a deferral of tax or an interest-free loan. Origin: IRC, S. 194 Estimate: N.A. |
N.A. |
Key:
ORIGIN | |
IRC | Federal Internal Revenue Code (26 U.S.C.) |
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M.G.L. | Massachusetts General Laws |
U.S.C | United States Code |
ESTIMATES | All estimates are in $ millions. |
