On September 27, 2010, President Obama signed the Small Business Jobs Act of 2010 (H.R. 5297) (the Act), which would extend additional first year bonus depreciation through 2010. Prior bonus depreciation provisions expired at the end of 2009.
Pursuant to the Act, property placed in service by a taxpayer before January 1, 2011, or in the case of certain longer production period property, before January 1, 2012, is eligible for a bonus depreciation deduction of 50 percent of the property’s costs in the year it is placed in service. In addition, property acquired by a taxpayer in 2010 may be eligible for bonus depreciation. Eligible property must have a recovery period of 20 years or less for depreciation purposes.
The extension of bonus depreciation is of particular interest to renewable energy projects placed in service this year as it applies retroactively to January 1, 2010. Renewable energy projects are generally depreciable over a 5 year recovery period and are, therefore, eligible property under the bonus depreciation rules.