Business Provisions
Section 179 Expensing. Expensing of up to $100,000 of assets was extended two years (for 2006 and 2007). This amount is phased out if more than $400,000 of qualified property is placed in service in one year. Both amounts are indexed for inflation.
The section 179 deduction for SUVs with weight of 14,000 pounds or less is limited to $25,000. The limitation does not apply to vehicles with a certain seating capacity, cargo area, and integral enclosure. Effective for property placed in service after the date of enactment.
Start-Up and Organizational Costs. Taxpayers can elect to deduct up to $5,000 of start-up and $5,000 of organizational expenses in the first year of business. However, the $5,000 amounts are reduced by the amount by which the total cost of start-up or organizational expenses exceeds $50,000, respectively. Expenses not deductible in the first year of the business are amortized over 15 years, consistent with the amortization period for section 197 intangibles. Effective for expenses incurred after the date of enactment.
Credit for Production of Oil and Gas From Marginal Wells. A new credit for production of crude oil or qualified natural gas is allowed as part of the general business credit. The credit is the sum of (1) $3.00 per barrel for the production of crude oil and (2) $.50 per 1,000 cubic feet of qualified natural gas production. The maximum amount of production on which credit can be claimed is 1,095 barrels or barrel equivalents. The credit is reduced as oil and gas prices increase. Unused credits can be carried back five years. If the production also qualifies for the credit for fuel from nonconventional sources, the taxpayer can only claim the new marginal wells credit if the taxpayer elects not to claim the credit for fuel from nonconventional sources. Effective for production in taxable years beginning after December 31, 2004.
Work Opportunity Credit: Up to 40% (25% in certain circumstances) credit of first-year wages, up to $6,000 of wages per eligible employee. Up to $3,000 of qualifying summer employment is eligible for the credit. The New York Liberty Zone Work Opportunity Credit is also extended. These credits were extended through 2005.
Welfare-To-Work Credit: The welfare-to-work credit allowed to employers who hire qualifying welfare recipients. Employers may claim a 35% credit of the first $10,000 of eligible wages in the first year of employment plus a 50% credit for the first $10,000 of eligible wages in the second year of employment. Extended through 2005.
Research Credit: The business credit for research expenses is extended through 2005. The credit was scheduled to expire June 30, 2004.
Credit for Energy Produced from Renewable Resources: This credit is extended through 2005.
Percentage Depletion: The temporary suspension of the income limitation for claiming percentage depletion is extended through 2005.
Charitable Contributions of Computer Technology And Equipment Used For Educational Purposes: For qualifying contributions (IRC section 170(e)(6)), this provision limits the reduction of the allowed contribution based on other-than-long-term capital gain. Extended through 2005.
Environmental Remediation Costs: Qualifying environmental cleanup costs (IRC section 198) may continue to be expensed. Extended through 2005.
Cancellation of Indebtedness Income on Transfer of Partnership Interest. In determining cancellation of indebtedness income, a partnership that transfers a partnership interest to a creditor in satisfaction of a debt is treated as if it paid cash equal to the fair market value of the partnership interest. Effective for cancellations of indebtedness occurring on or after the date of enactment.
Not Extended
1. Bonus Depreciation: The rules allowing 30% and 50% bonus depreciation do not apply after 2004 unless these provisions are included in a later bill.
2. IRS User Fees: Unless included in a later bill, the IRS may not assess user fees for letter ruling requests, determination letters, etc. after 2004.
