The stimulus package expanded consumer tax incentives for homeowners who make energy efficient home improvements and for individuals and businesses that purchase or lease hybrid vehicles.  These consumer tax benefits, initially introduced in the Energy Policy Act of 2005 (EPACT), have been extended through 2010.  In addition, the total available tax credit has been tripled (from $500 to $1,500), the available tax credit has been increased to 30 percent of the cost of each qualified energy efficiency improvement, and the cap on geothermal heat pumps and solar water heaters has been removed.   In addition to federal tax incentives, consumers may also be eligible for state or utility sponsored rebates and state tax incentives.  More information can be found at the United States Department of Energy and the Alliance to Save Energy.

On June 15^th, the Small Business Administration began accepting applications for their short-term deferred-payment ARC loan program.  By the end of the first week, however, only four national banks had signed on to the program and only 72 of an estimated 10,000 loans had been approved nationwide, none of which were in North Carolina.  The program has picked up momentum in its second week as information has become more readily available to small businesses as well as lenders.

SBA spokesperson Jonathan Swain is not worried about the slow start, saying “We always knew there would be a ramp-up period. We knew there would be lenders who would need to take some time to look at the loans, the terms, their customers, and — specifically with larger lenders — how it would impact their system.”  The SBA has held in-person and virtual informational sessions in the past two weeks to address lender questions, and say that thousands of lenders have been in attendance.  In addition, they have staffed a call center to field questions about the loan (866.947.8081) to supplement the information available on their website.

In North Carolina, Wachovia and BB&T are currently participating in the ARC loan program.  BB&T is limiting their participation to existing clients.  Those interested in obtaining an ARC loan application through Wachovia should call 800.877.1722.  For an application through BB&T, call 800.562.6228.

Unpacking the Stimulus Package, Vol. 3

The Stimulus Package created, extended or expanded several business tax deductions and credits to help small businesses struggling as a result of the economic downturn.  As some of these tax breaks are only available this year, companies have just a few months to take action.  Here are some of the key provisions:

• If your business had a net operating loss (NOL) in 2008, you can carry the loss back over five years instead of the usual two years. This means you can get a refund of taxes you paid in prior years by submitting an Application for Tentative Refund.  The IRS will generally process these in ninety days.
• You can deduct up to $250,000 worth of new and used machinery, equipment, vehicles, furniture and other qualifying property that your small business purchases during 2008 and 2009.  Without the new law, the limit of this Section 179 deduction would have dropped to $133,000.  This deduction can be claimed on your 2009 tax return on Form 4562.
• In addition to the $250,000 Section 179 deduction, your business can deduct 50% of the remaining cost of most new (not used) assets that were purchased Jan 1, 2008 through Dec 31, 2009.  This is referred to as “bonus depreciation”, and can be claimed on your 2009 tax return.
• The new bonus depreciation also increases the first-year depreciation deduction of new vehicles for your business by $8,000.  The increase does not apply to large SUVs and pickups.  For new cars, the estimated maximum first-year depreciation deduction for 2009 is now $10,960, and the estimated maximum first-year deduction for light trucks is $11,060.
• Finally, many individual small business taxpayers may be able to defer, until the end of the year, paying a larger part of their 2009 tax obligations.  If your total income is less than $500,000 and 50% of it is from a small business, you only have to pay 90% of your estimated taxes in 2009.

Click here for step-by-step instructions on how to take advantage of each of these tax breaks.

Unpacking the Stimulus Package, Vol.2

Small businesses hoping to take advantage of the SBA’s America’s Recovery Capital Loan Program (“ARC”) should be proactive in securing their place in the program, which only allows for about 10,000 loans nationwide, or an average of 200 per state. The SBA anticipates a high demand for these loans, so businesses looking to apply should make sure they have all of their paperwork and supporting documentation ready by the June 15^th launch of the program.

Business owners should first verify that their bank participates in the ARC program. For a list of banks that make SBA loans, click here. Each bank will set its own procedures and timeline for issuing loans. It is likely that applicants will need to provide financial statements (and/or tax returns) for the past two years – showing the business was profitable before the economic downturn and can become profitable again. In general, the business must have been profitable in at least one of the last 3 years to be eligible for the ARC program.

Applicants will also need to provide information about the loans that they intend to pay with ARC funds. Each lender will be limited to 50 loans per week. If a bank makes less than 50 loans, they can carry the unused allocation over to other weeks, but lenders will be capped at a maximum of 1,000 loans through the program’s duration. The ARC loan program is scheduled to run through Sept. 30, 2010, or until its funding runs out, whichever comes first.  Loan proceeds are provided over a six-month period and repayment of the ARC loan principal is deferred for 12 months after the last disbursement of the proceeds.  Repayment can extend up to five years.