Economic stimulus package piques business interest

Most interest in the bill’s journey through Congress has focused on tax rebates for individuals and married couples, but businesses stand to gain from two incentives that have received little attention.

One incentive allows for temporary bonus depreciation on newly purchased property, and the other doubles the amount that can be deducted from taxable income for qualified expenses, said Krystal Russell, a senior accountant with Whitlock, Selim & Keehn LLP.

With such perks in mind, Northstar Battery Co.’s chief financial officer is researching the package’s provisions, said Joel Gibson, Northstar Battery’s vice president of operations. Northstar is wrapping up a 52,000-square-foot addition at its production facility in northeast Springfield’s Partnership Industrial Center.

“We need to look into that, certainly, because one of the things we’re doing is investing a substantial amount of money in this new facility,” he said. “Phase I alone … is in the neighborhood of $50 million.”

Gibson said Northstar, which manufactures lead-acid batteries, already has received state tax credits under the Enhanced Enterprise Zone program and would need to determine whether there are any restrictions that prohibit the company from taking advantage of incentives built into the stimulus act.

Depreciation details

Russell said a recent bonus depreciation incentive was made available to businesses following Sept. 11, 2001. The new version enables companies to immediately claim 50 percent depreciation on personal property – not real estate – purchased in 2008 that has a depreciable period of up to 20 years, such as a vehicle. That’s on top of regular depreciation, Russell said.

The stimulus package also raises the maximum amount of taxable deductions on property purchased by companies this year to $250,000 – the highest ever – from $128,000.

Russell said a company must purchase the property during fiscal 2008, which varies from business to business, to claim the higher tax deduction. The enhanced expensing provision will allow companies to write off more for equipment purchases this year, she said, noting that qualifying vehicles must weigh more than 7,000 pounds and be on a truck chassis.

Russell said she expected some of WSK’s business clients, particularly manufacturers, to take advantage of the higher deductions.

“It can even affect mom-and-pop businesses,” she added. “If they needed to buy new equipment and they were holding off on doing so, it could be a good time to do it because they would get the benefit of that expenditure immediately.”

Both sides of coin

Reed Olsen, an economics professor at Missouri State University, said he thought the stimulus package was necessary, but he questioned whether the business incentives and tax rebates would have a lasting effect on the ailing U.S. economy.

“Fiscal policy is kind of a blunt instrument and usually too late,” Olsen said. “Investment is a relatively small part of the economy, less than 1 percent. Businesses are more likely to get a bigger impact from consumer spending that trickles down than they are through these business tax write-offs. … Writing off expenses is not generally a good policy in a recession.”

The U.S. Chamber of Commerce, which lobbied for the bonus depreciation and increased expensing provisions, hailed the passage of the stimulus package. Bruce Josten, the chamber’s executive vice president, said in a Feb. 13 news release that the legislation would “encourage immediate investment, increase productivity and further the prospects of long-term economic growth.”

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