Stimulus: What's in it for businesses
The final bill doesn't contain nearly as much as large businesses had hoped for. But there are still provisions that can help, at least at the margins.
NEW YORK (CNNMoney.com) -- The $787 billion economic recovery package President Obama will sign on Tuesday contains more than $290 billion in tax provisions, according to estimates from the Joint Committee on Taxation.
Of that amount, $23 billion are breaks to encourage companies to invest in equipment or renewable energy initiatives, or to help them secure a cash cushion to get through the downturn and minimize layoffs.
But in some cases, the final business breaks are shadows of their former selves as originally conceived in earlier versions of the bill. The biggest example is the net-operating loss carryback extension -- a provision that broadens businesses' ability to make hay of their losses.
The provision was "gutted," according to Anne Mathias, policy director of research at the Stanford Group, a policy research firm. "As they say in Africa, in the battle of the elephants, it is the grass that gets trampled. And so it is for corporate America and the economic stimulus," she said.
That said, the bill contains numerous tax breaks that businesses will appreciate. In a statement late last week, Bruce Josten, the U.S. Chamber of Commerce's executive vice president of government affairs, said "the Chamber is disappointed that the net operating loss provision is not expansive enough to apply to all businesses, but we're pleased that the current bill will provide some help to smaller Main Street businesses."
Josten also noted that the Chamber supports another key provision that makes it easier for companies to buy back their own debt without getting hammered with a big tax bill.
"We support the cancellation of indebtedness tax provisions that will encourage businesses to restructure and reduce debt, enabling them to preserve jobs, renew investment, and begin to grow once again," he said.
Here's a rundown of some of the biggest business-related tax breaks and what they will cost the government in lost tax revenue.
Credits for renewable energy production: The bill extends a credit that businesses may take for electricity produced by wind energy through 2012 and for electricity produced by other renewable resources through 2013. The credit typically benefits those who fund wind farms and other renewable energy production sites. Estimated cost: $13 billion.
There is also a new credit created by the legislation for companies that produce the equipment used to generate renewable energy, such as wind turbines. Estimated cost: $1.6 billion.
Bonus depreciation: The bill extends for one year a special allowance that was in place last year. It accelerates how quickly companies can write off expenses by letting them deduct half the cost of new capital equipment purchases made in 2009 if the equipment is also put into service this year. The other half of the cost would have to be written off over time according to a fixed depreciation schedule. Estimated cost: $5.1 billion.
Delayed recognition of cancelled debt: The bill allows certain businesses that buy back their own debt at a discount in 2009 and 2010 to defer paying the income tax owed on the difference over 10 years. The companies may defer tax payments for the first four or five years and then pay the income tax due over the next five years. By repurchasing its own debt at a discount, a company can boost earnings. Estimated cost: $1.62 billion.
Small businesses loss write-offs: The bill temporarily broadens the "net-operating loss carryback" to five years, up from two years currently, for businesses with gross revenue of $15 million or less. Eligible companies could apply their 2008 losses to past and future tax bills so they can get money back on taxes they've already paid or would otherwise have to pay. Estimated cost: $947 million
That's a considerably reduced break from earlier versions of the stimulus bill, which had allocated $17 billion to make the NOL provision available to all businesses for two years of losses -- both 2008 and 2009.
"Our best estimate is that taxpayers with less than $15 million of gross receipts are 98% of all corporations, but only 5% of taxable income. So, they have covered most corporations, but not the ones who account for 95% of corporate activity," said Clint Stretch, managing principal of tax policy at Deloitte.