In a major victory for manufacturers, President Obama signed the bipartisan tax relief and benefits package he negotiated with Congress. In addition to a 13-month extension of unemployment benefits, a one-year 2% payroll tax "holiday" and temporary extension of a host of individual tax breaks, the new law extends all of the Bush-era tax cuts for 2 years (through 2012).

The rate reduction is not the only good news for manufacturers. The new law also includes important provisions that reduce business costs and incentivize innovation and R&D.

100% Expensing - The new law enacts President Obama's proposal to increase bonus depreciation to 100% for new equipment purchased and placed in service after September 8, 2010, and through December 31, 2011.

50% Bonus Depreciation - For investments placed in service after December 31, 2011, and through December 31, 2012, the new law provides for 50% bonus depreciation. Fifty percent bonus depreciation also applies to equipment purchased and placed in service between January 1 and September 7, 2010.

Sec. 179 Expensing Increase - The Small Business Jobs Act enacted in September significantly increased Sec. 179 "small business" expensing for new and used equipment in 2010 and 2011. During those tax years, companies can expense the first $500,000 of new and used investments up to $2 million in total purchases, where it begins to phase out dollar for dollar. Please visit section179.org.

These depreciation provisions should spur customers to increase their capital investments over the next 2 years, helping to enhance efficiency and increase competitiveness.

R&D Tax Credit Extension - The new law also reinstates the R&D tax credit for 2010 and extends it through 2011.

Please give us a call if you have any questions and as always be sure to consult with your tax advisor regarding how these new laws can help you specifically.