Thompson & McCarty, P.C. CPA

President Bush signed a stimulus package into last week and most of the attention has been on the tax rebates for individuals. However, the bill also contains several provisions that should benefit small and midsized companies.

The bill gives companies a 50 percent bonus deduction on new equipment and increases the limit on expensing capital expenditures to $250,000, double the regular $125,000.

The Section 179 expensing and Bonus depreciation provisions of the bill will help small businesses in terms of providing them with cash flow to expand their businesses.

If businesses are considering expanding a plant or making investments in equipment, the stimulus package gives them help from a cash flow standpoint in paying for it. For an asset that was going to be depreciated over five years, the previous rules allowed 20 percent of that to be depreciated in the first year. Now that same asset can be written off 60% in the first year. For those that were on the bubble about such investment this will probably be enough to push the plan forward.

I am already seeing companies make plans to do that. They will get some relief from estimated tax payments because their expenses will be higher and subsequent tax burden will go down. They can build that into their financial plans for the year.

Now folks I have never claimed to be a genius but, isn't it clear to all who will see that our tax code is an obstacle to our economic success. I can't understand how it can even be argued any other way. When the politicians want to stimulate the economy they vote to relieve some of the tax burden. It is simply common sense.