Making the Most of the
Economic Stimulus Act
A Webinar Presented by
NPES and PIA/GATF
Welcome and Introduction
 Today’s Presenters
 Lisbeth Lyons, VP of Govt. Affairs PIA/GATF
 Mark Nuzzaco, NPES Dir. of Govt. Affairs
 Dennis Tingey, Tax Specialist, US Dep. Of Treasury
 Kathleen Reed, Chief, Branch 7, Office of Associate
Chief Counsel (Income Tax and Accounting) IRS
 Stuart Margolis, CPA, Principal, MargolisBecker
Importance of Capital Investment to
Company Profitability
 PIA/GATF economic research shows that profit
leaders (top 25 percent in terms of profit) are
more capital intensive than profit challengers
(bottom 75 percent).
 Net assets per factory employee for profit
leaders is $100,800 versus profit challengers of
$84,900. So profit leaders have, over the years,
invested more in equipment.
 The key is to invest smartly of course--invest to
improve productivity and save cost.
Recent History of Stimulus Tax Provisions
 Job Creation and Worker Assistance Act of 2002
Section 179 Expensing increased from $24K to $25K (starting in 2003)
& 30 % Bonus Depreciation (placed-in-service through Dec.31, 2004).
 Jobs and Growth Tax Relief Reconciliation Act or 2003,
Section 179 Expensing increased from $25K to $100K (placed-in-service through
Dec. 31, 2005) & 50% Bonus Depreciation (placed-in-service through Dec. 31,
2004).
 Tax Increase Prevention and Reconciliation Act of 2005,
Section 179 Expensing of $100K extended through Dec. 31, 2009 and indexed.
 U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq
Accountability Appropriations Act, 2007
Section 179 Expensing increased from 100K(indexed) to 125K through 2011 and
indexed.
 Economic Stimulus Act of 2008
Section 179 Expensing increased from $125K(indexed) to $250,000 for tax years
beginning in 2008, and 50% Bonus Depreciation (placed-in-service through Dec. 31,
2008.)
Enhanced Section 179 Expensing
 Eligible Property
 Tax Years Beginning in 2008
 Limits to Deduction
 The Annual Dollar Limit
 The Annual Investment Limit
 The Annual Taxable Income Limit
 Less Obvious Advantages of Section 179 Deduction
Enhanced Section 179 Expensing
Eligible Property
Property that may be deducted in the year of purchase, rather than
depreciated over the asset’s useful life, includes:
 Machinery and equipment, including printing, publishing and
converting technology
 Furniture and fixtures
 Most storage facilities
 Single-purpose agricultural or horticultural structures
 Of-the-shelf computer software
 Property only has to be “new to the purchaser”
Enhanced Section 179 Expensing
Tax Years Beginning in 2008
Property may be placed-in-service after December 31, 2008 if the
taxpayer is using a fiscal “tax year” that extends into 2009 provided
that it begins in 2008.
Enhanced Section 179 Expensing
Limits to Deduction
The Annual Dollar Limit refers to the amount a taxpayer can claim
under Section 179 each year. This amount has been indexed for
inflation as follows:
 2002 $24,000
 2003 $100,000
 2004 $102,000
 2005 $105,000
 2006 $108,000
 2007 $125,000
 2008 $250,000
 2009 $250,000/$125,000 + Index
 2010 $125,000 + Index
Enhanced Section 179 Expensing
Limits to Deduction
The Annual Investment Limit refers to the total amount of deductible
property a taxpayer can put into service in a year before the Section
179 deduction starts to phase out. This amount has also been
indexed for inflation as follows:
 2003, phase-out begins at $400,000
 2004, phase-out begins at $410,000
 2005, phase-out begins at $420,000
 2006, phase-out begins at $430,000
 2007, phase-out begins at $500,000
 2008, phase-out begins at $800,000
 2009, phase-out begins at $800,000/$500,000 + Index
 2010, phase-out begins at $500,000 + Index
Enhanced Section 179 Expensing
Limits to Deduction
The Annual Taxable Income Limit refers to the fact that a taxpayer’s
annual deduction is limited to their aggregate taxable income from
the active conduct of any trade or business.
The Section 179 deduction is not automatic. Taxpayers must elect
to take the deduction by using IRS form 4562.
For more information see IRS Publication 946: How to Depreciate
Property.
50 Percent Bonus Depreciation
 Eligible Property
 Acquisition of Property
 Placed-in-service Date
 Original Use of Property
50 Percent Bonus Depreciation
Eligible Property
Property that may be deducted in the year of purchase, rather than
depreciated over the asset’s useful life, includes:
 Machinery and equipment, including printing, publishing and
converting technology
 Furniture and fixtures
 Most storage facilities
 Single-purpose agricultural or horticultural structures
 Of-the-shelf computer software
 Property must be new
50 Percent Bonus Depreciation
Acquisition of Property
For 50% Bonus Depreciation the taxpayer must acquire the property
after December 31, 2007and before January 1, 2009, but only if no
binding contract was in existence before January 1, 2008.
50 Percent Bonus Depreciation
Placed-in-service Date
The property must be placed in service before January 1, 2009.
50 Percent Bonus Depreciation
Original Use of Property
The regulations provide that the original use generally means:
 The first use to which the property is put, whether or not the use
corresponds to the use of the property by the taxpayer. Thus, new
property initially used by a taxpayer for personal use and then
subsequently converted by the taxpayer for use in a trade or
business satisfies the original use requirement.
 However, new property acquired by a taxpayer for personal use and
then subsequently acquired by a different taxpayer for use in its
trade or business does not satisfy the original use requirement.
 Likewise, additional capital expenditures incurred by a taxpayer to
recondition or rebuild property acquired or owned by the taxpayer
satisfies the original use requirement.
50 Percent Bonus Depreciation
Original Use of Property cont.
The regulations provide that the original use generally means:
 However, the cost of reconditioned or rebuilt property acquired by
the taxpayer does not satisfy the original use requirement.
 The question of whether property is reconditioned or rebuilt is a
question of fact.
 The regulations provide a safe harbor that property containing used
parts will not be treated as reconditioned or rebuilt if the cost of the
used parts is not more than 20% of the total cost of the property.
50 Percent Bonus Depreciation
Original Use of Property cont.
The regulations provide that the original use generally means:
 The regulations provide special rules for certain sale-leaseback and
syndication transactions. Concisely, if other requirements are met,
an equipment purchaser in a rent-to-own transaction is eligible to
claim the depreciation bonus if they purchase the machine within
three months of the date on which it is first put into service, and if
the machine has had only one user during that period.
How Much Your Company Can Save
Six-color, 56 Inch Wide Sheetfed Press with
Coater
Example Price: Without Tax Cut: $3.5 Million
New 50% Bonus First-year Depreciation = $1.75 Million
Plus Regular Depreciation = $250,000
Total First-year Depreciation = $2 Million (57% of new asset)
Tax Savings = $800,000 (assuming 40% effective tax rate)
New Effective Price With Tax Cut =
$2.7 Million – a 23% Savings!
Eight-color, 40 Inch Wide Heatset Web Press
Example Price: Without Tax Cut: $ 8 Million
New 50% Bonus First-year Depreciation = $4 Million
Plus Regular Depreciation = $570,000
Total First-year Depreciation = $4.57 Million (57% of new asset)
Tax Savings = $1.8 Million (assuming 40% effective tax rate)
New Effective Price With Tax Cut =
$6.2 Million – a 23% Savings!
Good Reasons to Buy New Technology Now
These examples illustrate the powerful affect of the new investment incentives. Prices used fall into a range
for the types of machines used in these examples, but could vary depending upon factors of the sale, such
as features of the machine and terms and conditions of the transaction; seek counsel from your tax advisor
regarding specific circumstances and transactions..
Pre-press Equipment
GOOD REASON # 1 (Total 2008 purchases do not exceed $800,000)
 Color Scanner
 Example Price - Without Tax Cut: $100,000
 Enhanced Sec. 179 Small Business Expensing Provision = $250,000/year
(up $800,000 of investment)
 Total First-year Depreciation = $100,000 (100% of new asset)
 Tax Savings = $40,000 (assuming 40% effective tax rate)
 New Effective Price - With Tax Cut = $60,000 - a 40% Savings!
Good Reasons to Buy New Technology Now
GOOD REASON # 2 (Total 2008 purchases exceed $1,050,000)
 RIPs (Raster Image Processor)
 Example Price - Without Tax Cut: $400,000
 New 50% Bonus First-year Depreciation = $200,000
 Plus Regular Depreciation = $28,000
 Total First-year Depreciation = $228,000 (57% of new asset)
 Tax Savings = $91,200 (assuming 40% effective tax rate)
 New Effective Price – With Tax Cut = $308,800 – a 23% Savings!
Good Reasons to Buy New Technology Now
Press Equipment
GOOD REASON # 3 (Total 2008 purchases exceed $1,050,000)
 Two-color, Small Sheetfed Press
 Example Price – Without Tax Cut: $100,000
 New 50% Bonus First-year Depreciation = $50,000
 Plus Regular Depreciation = $7,000
 Total First-year Depreciation = $57,000 (57% of new asset)
 Tax Savings = $22,800 (assuming 40% effective tax rate)
 New Effective Price - With Tax Cut = $77,200 - a 23% Savings!
Good Reasons to Buy New Technology Now
GOOD REASON # 4
 Six-color, 56 Inch Wide Sheetfed Press with Coater
 Example Price – Without Tax Cut: $3.5 Million
 New 50% Bonus First-year Depreciation = $1.75 Million
 Plus Regular Depreciation = $250,000
 Total First-year Depreciation = $2 Million (57% of new asset)
 Tax Savings = $800,000 (assuming 40% effective tax rate)
 New Effective Price – With Tax Cut = $2.7 Million – a 23% Savings!
Good Reasons to Buy New Technology Now
GOOD REASON # 5
 Eight-color, 40 Inch Wide Heatset Web Press
 Example Price – Without Tax Cut: $ 8 Million
 New 50% Bonus First-year Depreciation = $4 Million
 Plus Regular Depreciation = $570,000
 Total First-year Depreciation = $4.57 Million (57% of new asset)
 Tax Savings = $1.8 Million (assuming 40% effective tax rate)
 New Effective Price – With Tax Cut = $6.2 Million – a 23% Savings!
Good Reasons to Buy New Technology Now
Finishing & Converting Equipment
GOOD REASON # 6 (Total 2008 purchases do not exceed $800,000)
 Paper Cutter
 Example Price – Without Tax Cut: $50,000
 Enhanced Sec. 179 Small Business Expensing Provision = $250,000/year
(up $800,000 of investment)
 Total First-year Depreciation = $50,000 (100% of new asset)
 Tax Savings = $20,000 (assuming 40% effective tax rate)
 New Effective Price - With Tax Cut = $30,000 - a 40% Savings!
Good Reasons to Buy New Technology Now
GOOD REASON # 7 (Total 2008 purchases are $900,000)
 Mid-range Saddle Stitch Machine
 Example Price - Without Tax Cut: $200,000
 Partially phased out Sec. 179 Small Business Expensing Provision =
$150,000 ($100,000 over $800,000 limit)
 New 50% Bonus First-year Depreciation = $25,000
 Plus Regular Depreciation = $3,500
 Total First-year Depreciation = $178,500 (89% of new asset)
 Tax Savings = $71,400 (assuming 40% effective tax rate)
 New Effective Price – With Tax Cut = $128, 600 – a 36% Savings!
Good Reasons to Buy New Technology Now
GOOD REASON # 8 (Total 2008 purchases do not exceed $800,000)
 Laser Digital Converting System (die-cutter)
 Example Price - Without Tax Cut: $500,000
 Enhanced Sec. 179 Small Business Expensing Provision = $250,000/year
(up $800,000 of investment)
 Plus New 50% Bonus First-year Depreciation = $125,000
 Plus Regular Depreciation = $17,500
 Total First-year Depreciation = $392,500 (79% of new asset)
 Tax Savings = $157,000 (assuming 40% effective tax rate)
 New Effective Price – With Tax Cut = $343,000 – a 31% Savings!
THE POWER OF 50% BONUS FIRST-YEAR
DEPRECIATION
 If you need new equipment and are ready to invest, waiting
until 2009 will cost you time and a lot of money!
 The following examples tell the story!
 The following examples assume that the purchasing company’s
total capital equipment investment in the year has exceeded the
maximum amount allowable for Section 179 Expensing.
THE POWER OF 50% BONUS FIRST-YEAR
DEPRECIATION
Pre-press Equipment
Example #1: Color Scanner
PURCHASED IN 2008
 Example Price - $100,000
 New 50% Bonus First-year Depreciation = $50,000
 Plus Regular Depreciation = $7000
 Total First-year Depreciation = 57,000
 Tax Savings = $22,800 (assuming 40% effective tax rate)
 Effective Price with New Bonus First-year Depreciation = $77,200
PURCHASED IN 2009
 Example Price - $100,000
 No New 50% Bonus First-year Depreciation = $Zero
 Only Regular Depreciation = $14,000
 Total First-year Depreciation = 14,000
 Tax Savings = $5,600 (assuming 40% effective tax rate)
 Effective Price without New Bonus First-year Depreciation = $94,400
You Saved $17,200 by Buying in 2008 Rather Than Waiting Until 2009
THE POWER OF 50% BONUS FIRST-YEAR
DEPRECIATION
EXAMPLE #2: RIPs (Raster Image Processor)
PURCHASED IN 2008
 Example Price - $400,000
 New 50% Bonus First-year Depreciation = $200,000
 Plus Regular Depreciation = $28,000
 Total First-year Depreciation = $228,000
 Tax Savings = $91,200 (assuming 40% effective tax rate)
 Effective Price with First-year Bonus Depreciation = $308,800
PURCHASED IN 2009
 Example Price - $400,000
 No New 50% Bonus First-year Depreciation = $Zero
 Only Regular Depreciation = $56,000
 Total First-year Depreciation = $56,000
 Tax Savings = $22,400 (assuming 40% effective tax rate)
 Effective Price without First-year Bonus Depreciation = $377,600
You Saved $68,600 by Buying in 2008 Rather Than Waiting Until 2009
THE POWER OF 50% BONUS FIRST-YEAR
DEPRECIATION
Press Equipment
EXAMPLE #3: Six-color, 56 Inch Wide Sheetfed Press with Coater
PURCHASED IN 2008
 Example Price – $3,500,000
 New 50% Bonus First-year Depreciation = $1,750,000
 Plus Regular Depreciation = $245,000
 Total First-year Depreciation = $1,995,000
 Tax Savings = $798,000 (assuming 40% effective tax rate)
 Effective Price with New 50% Bonus First-year Depreciation = $2,702,000
PURCHASED IN 2009
 Example Price – $3.5 Million
 No New 50% Bonus First-year Depreciation = $Zero
 Only Regular Depreciation = $490,000
 Total First-year Depreciation = $490,000
 Tax Savings = $196,000 (assuming 40% effective tax rate)
 Effective Price without New 50% Bonus First-year Depreciation = $3,304,000
You Saved $602,000 by Buying in 2008 Rather Than Waiting Until 2009
THE POWER OF 50% BONUS FIRST-YEAR
DEPRECIATION
EXAMPLE #4: Eight-color, 40 Inch Wide Heatset Web Press
PURCHASED IN 2008
 Example Price – $8,000,000
 New 50% Bonus First-year Depreciation = $4,000,000
 Plus Regular Depreciation = $560,000
 Total First-year Depreciation = $4,560,000
 Tax Savings = $1,824,000 (assuming 40% effective tax rate)
 Effective Price with New 50% Bonus First-year Depreciation = $6,176,000
PURCHASED IN 2009
 Example Price –$8,000,000
 No New 50% Bonus First-year Depreciation = $Zero
 Only Regular Depreciation = $1,120,000
 Total First-year Depreciation = $1,120,000
 Tax Savings = $448,000 (assuming 40% effective tax rate)
 Effective Price without 50% Bonus First-year Depreciation = $7,552,000
You Saved $1,376,000 by Buying in 2008 Rather Than Waiting Until 2009
THE POWER OF 50% BONUS FIRST-YEAR
DEPRECIATION
Finishing & Converting Equipment
EXAMPLE #5:Mid-range Saddle Stitch Machine
PURCHASED IN 2008
 Example Price - $200,000
 New 50% Bonus First-year Depreciation = $100,000
 Plus Regular Depreciation = $14,000
 Total First-year Depreciation = $114,000
 Tax Savings = $45,600 (assuming 40% effective tax rate)
 Effective Price with New 50% Bonus First-year Depreciation = $154,400
PURCHASD IN 2009
 Example Price - $200,000
 No New 50% Bonus First-year Depreciation = $Zero
 Only Regular Depreciation = $28,000
 Total First-year Depreciation = $28,000
 Tax Savings = $11,200 (assuming 40% effective tax rate)
 Effective Price without New 50% Bonus First-year Depreciation = $188,800
You Saved $34,400 by Buying in 2008 Rather Than Waiting Until 2009
THE POWER OF 50% BONUS FIRST-YEAR
DEPRECIATION
EXAMPLE #6: Laser Digital Converting System (die-cutter)
PURCHASED IN 2008
 Example Price - $500,000
 New 50% Bonus First-year Depreciation = $250,000
 Plus Regular Depreciation = $35,000
 Total First-year Depreciation = $285,000
 Tax Savings = $114,000 (assuming 40% effective tax rate)
 Effective Price with New 50% Bonus First-year Depreciation = $386,000
PURCHASED IN 2009
 Example Price - $500,000
 No New 50% Bonus First-year Depreciation = $Zero
 Only Regular Depreciation = $70,000
 Total First-year Depreciation = $70,000
 Tax Savings = $28,000 (assuming 40% effective tax rate)
 Effective Price without New 50% Bonus First-year Depreciation = $472,000
You Saved $86,000 by Buying in 2008 Rather Than Waiting Until 2009
SO WHAT ARE YOU WAITING FOR?!?!?!?!?!
For more information contact:
NPES Government Affairs Director Mark J. Nuzzaco at
703-264-7235, or e-mail: mnuzzaco@npes.org
THE POWER OF 50% BONUS FIRSTYEAR DEPRECIATION
Good Reasons to Buy New Technology Now