April 7, 2011
The IRS is allowing taxpayers the ability to use 100% Bonus Depreciation or step-down to 50% Bonus Depreciation. The Joint Committee on Taxation (JCT) recently released the “General Explanation of Tax Legislation Enacted in the 111th Congress” known as the “Blue Book”(JCS-2-11). In the Blue Book, Congress states that it is their intent that “a taxpayer may elect 50 percent (rather than 100 percent) bonus depreciation with respect to all property in any class of property placed in service during a taxable year.” The IRS has decided to follow JCT’s guidance and allow taxpayers the opportunity to select 50% bonus depreciation versus 100% bonus depreciation for the tax year that includes September 9, 2010 on a class by class basis for assets that were placed in service from September 9, 2010 through December 31, 2010.
This is a reversal from the IRS’s original stand that a step-down election from 100% to 50% bonus depreciation could not be made and the only option for a taxpayer that did not want to take the 100% bonus depreciation was to opt out of bonus depreciation entirely.
If you have already filed your taxes or plan to by April 18th, 2011 without making the 50% step-down election and wish to do so, the IRS has provided an automatic six month extension to make the election provided by Section 301.9100-2(b) of the IRS Regulations. Within the six month extension period, an amended return must be filed, showing the election, with “FILED PURSUANT TO §301.9100-2” stated at the top of the document and sent to the same address had the filing been timely made. No request for letter ruling is required and user fees do not apply.
At the time of this publication, the IRS has not extended the ability to elect 50% instead of 100% bonus depreciation beyond December 31, 2010.