Job Creation and Worker Assistance Act of 2002 (JCWAA)
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Job Creation and Worker Assistance Act of 2002 (JCWAA)
The two critical provisions are:
A short overview of these two key provisions
is provided below, followed by a set of links to more detailed information.
The reader is cautioned to refer to the tax code and/or a tax specialist
when faced with these and other tax treatment issues.
First-Year, 30% Bonus Depreciation Deduction
This provision allows a business to take an additional first-year, depreciation deduction equal to 30 percent of the original "adjusted (depreciable) basis" -- usually the fully installed cost -- of qualified property. Property eligible for this treatment includes business equipment, computer hardware and most software; but, it does not include real estate or buildings. Property must be acquired after September 10, 2001, and before September 11, 2004. The bonus depreciation is allowed for both the regular tax and the alternative minimum tax (AMT).
In addition, the business is entitled to "normal" first-year MACRS depreciation. However, the depreciable basis of the property and the regular depreciation allowances are adjusted to reflect the additional first-year depreciation deduction.
EXAMPLE: On October 1, 2001, a calendar-year reporting business bought and placed in service a $100,000 five-year property class piece of equipment. The business may claim a first-year (2001) depreciation allowance of $44,000 -- i.e., a $30,000 bonus depreciation ($100,000 times 30%) plus a $14,000 normal first-year MACRS depreciation calculated on the new adjusted basis ([$100,000 minus $30,000] times 20%). In the second year (2002), the MACRS depreciation would be $22,400 ([$100,000 minus $30,000] times 32%). And, so on.
In the above example, the "effective" depreciation percentage for the first year is 44% [($30,000 bonus depreciation plus $14,000 normal first-year depreciation) divided by the $100,000 original adjusted basis]. In the second year, the "effective" depreciation is 22.40% [$22,400 divided by $100,000]. And, so on. ( More examples. )
5-Year Carryback of Net Operating Losses (NOLs)
Net operating losses (NOLs) arising in tax years that end in 2001 or 2002 may now be carried back five years. Previously, such losses could be carried back only two years. [NOTE: A net operating loss (NOL) is, generally, the amount by which business expenses exceed business income for a year.]
Useful Links
CCH Tax Briefing: Corporate Income Tax and "Bonus" Depreciation.
http://tax.cchgroup.com/Tax-Briefings/2003-Corporate-Tax-Bonus-Depreciation.pdf
Estimated Revenue Effects of The "Job Creation and Worker Assistance Act
of 2002".
Prepared by the Staff of the Joint Committee on Taxation (March 6,
2002).
H.R. 3090: Job Creation and Worker Assistance Act of 2002.
Technical
Explanation of the "Job Creation and Worker Assistance Act of
2002."
Prepared by the Staff of the Joint Committee on Taxation (March 6,
2002).
