Today President Bush signed into law H.R. 3221, the Housing and Economic Recovery Act of 2008.
Section 3081 of the Act allows certain taxpayers to accelerate R&D and AMT credit carryovers by electing to trade current year bonus depreciation for pre-2006 R&D and AMT credits.
As it relates to the R&D tax credit, practitioners should note that this provision is primarily of interest to C corporations with pre-2006 R&D credit carryforwards that they cannot currently use and who have also invested currently in machinery and equipment, qualifying leasehold improvements, or nonstructural building components. These corporations can elect to claim straight-line depreciation instead of the accelerated and bonus depreciation for eligible property purchased and originally used between April 1, 2008 and December 31, 2008. Up to twenty percent of the difference between the bonus and accelerated depreciation and straight-line depreciation can be used to increase the R&D credit limitation, further limited to the lesser of $30 million or six percent of the dollar value of the pre-2006 R&D credit carryforwards.
This provision will benefit C corporations that have R&D credit carryforwards that they can no longer use, such as formerly profitable manufacturers with large R&D credit carryforwards or high tech start-up companies.
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