For qualified property (defined below) placed in service during the tax year, you may be able to take an additional 50% special depreciation allowance. The special depreciation allowance applies only for the first year the property is placed in service. The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under the modified accelerated cost recovery system (MACRS).
Qualified property. You can take the special depreciation allowance for qualified second generation biofuel plant property, certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2015, and qualified reuse and recycling property.
Qualified second generation biofuel plant property. Qualified second generation biofuel plant property is property used in the United States solely to produce second generation biofuel (as defined in section 40(b)(6)(E)).
The 50% special depreciation allowance applies to qualified second generation biofuel plant property. The property must also meet the following requirements.
The original use of the property must begin with you after December 20, 2006.
You must have acquired the property by purchase after December 20, 2006. If a binding contract to acquire the property existed before December 21, 2006, the property does not qualify.
Qualified second generation biofuel plant property must be placed in service for use in your trade or business or for the production of income after January 2, 2013, and before January 1, 2015.
For property you sold and leased back or for self-constructed property, special rules apply. See section 168(l) (4).
Certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2015. Certain qualified property (defined below) acquired after December 31, 2007, is eligible for a 50% special depreciation allowance. If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify.
Qualified property is:
Tangible property depreciated under MACRS with a recovery period of 20 years or less.
Water utility property (see 25-year property, later).
Computer software defined in and depreciated under section 167(f)(1).
Qualified leasehold improvement property.
Qualified property must also be placed in service before September 9, 2010, or after December 31, 2011, and before January 1, 2015 (or before September 9, 2010, or after December 31, 2012, and before January 1, 2016, for certain property with a long production period and for certain aircraft). The original use of the property must begin with you after December 31, 2007.
See Pub. 946 for more information.
Qualified reuse and recycling property. Certain qualified reuse and recycling property (defined below) placed in service after August 31, 2008, is eligible for a 50% special depreciation allowance.
Qualified reuse and recycling property includes any machinery and equipment (not including buildings or real estate), along with any appurtenance, that is used exclusively to collect, distribute, or recycle qualified reuse and recyclable materials. This includes software necessary to operate such equipment. See section 168(m)(3) for more information.
Qualified reuse and recycling property must also meet all of the following tests.
The property must be depreciated under MACRS.
The property must have a useful life of at least 5 years.
You must have acquired the property by purchase after August 31, 2008. If a binding contract to acquire the property existed before September 1, 2008, the property does not qualify.
The property must be placed in service after August 31, 2008.
The original use of the property must begin with you after August 31, 2008.
For self-constructed property, special rules apply. See section 168(m)(2)(C).
Qualified reuse and recycling property does not include rolling stock or other equipment used to transport reuse and recyclable materials or any property to which section 168(g) or (k) applies.
Election to accelerate minimum tax credit in lieu of special depreciation allowance. An election to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance made by a corporation for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, continues to apply to round 3 extension property (as defined in section 168(k)(4)(J)), unless the corporation made an election not to apply the section 168(k)(4) election to round 3 extension property for its first tax year ending after December 31, 2012. For 2014, round 3 extension property generally is long production period property and noncommercial aircraft if acquired after March 31, 2008, and placed in service after December 31, 2013, but before January 1, 2015.
An election to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance made by a corporation for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, its first tax year ending after December 31, 2010, or for its first tax year ending after December 31, 2012, continues to apply to round 4 extension property (as defined in section 168(k)(4)(K)), unless the corporation makes an election not to apply the section 168(k)(4) election to round 4 extension property for its first year ending after December 31, 2013. If a corporation did not make a section 168(k)(4) election for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, its first tax year ending after December 31, 2010, or its first tax year ending after December 31, 2012, the corporation may elect for its first tax year ending after December 31, 2013, to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for only round 4 extension property.
If you make an election to accelerate this credit in lieu of claiming the special depreciation allowance for qualified property, you must not take the 50% special depreciation allowance for the property and must depreciate the basis in the property under MACRS using the straight line method. See Lines 19a Through 19i, later, for more information.
Once made, this election cannot be revoked without IRS consent.
For more information on making this election, see Form 8827, Credit for Prior Year Minimum Tax—Corporations; and related instructions.
The IRS will release guidance concerning round 4 extension property. The guidance will be published in the Internal Revenue Bulletin.
Exceptions. Qualified property does not include:
Listed property used 50% or less in a qualified business use (as defined in the instructions for lines 26 and 27);
Any property required to be depreciated under the alternative depreciation system (ADS) (that is, not property for which you elected to use ADS);
Property placed in service and disposed of in the same tax year;
Property converted from business or income-producing use to personal use in the same tax year it is acquired;
Property for which you elected not to claim any special depreciation allowance;
Any qualified restaurant property (as defined in section 168(e)(7)) that is not qualified leasehold improvement property (as defined in sections 168(e)(6) and 168(k)(3)); or
Any qualified retail improvement property (as defined in section 168(e) (8)) that is not qualified leasehold improvement property (as defined in sections 168(e)(6) and 168(k)(3)).
In addition, qualified second generation biofuel plant property does not include the following:
Any tax-exempt bond financed property under section 103.
Any property for which a deduction was taken under section 179C for certain qualified refinery property.
Other bonus depreciation property to which section 168(k) applies.
See sections 168(k), 168(l), and 168(m) for additional information. Also, see Pub. 946.
How to figure the allowance. Figure the special depreciation allowance by multiplying the depreciable basis of the property by 50%.
To figure the depreciable basis, subtract from the business/investment portion of the cost or other basis of the property any credits and deductions allocable to the property. The following are examples of some credits and deductions that reduce the depreciable basis.
Section 179 expense deduction.
Deduction for removal of barriers to the disabled and the elderly.
Disabled access credit.
Enhanced oil recovery credit.
Credit for employer-provided childcare facilities and services.
Basis adjustment to investment credit property under section 50(c). For additional credits and deductions that affect the depreciable basis, see section 1016. Also, see Pub. 946.
Note. If you acquired qualified property through a like-kind exchange or involuntary conversion, the carryover basis and any excess basis of the acquired property is eligible for the special depreciation allowance. See Regulations section 1.168(k)-1(f) (5).
If you take the 50% special depreciation allowance, you must reduce the amount on which you figure your regular depreciation or amortization deduction by the amount deducted. Also, you will not have any AMT adjustment for the property if the depreciable basis of the property for the AMT is the same as for the regular tax.
Election out. You can elect, for any class of property, to not deduct any special depreciation allowance for all such property in such class placed in service during the tax year.
To make an election, attach a statement to your timely filed return (including extensions) indicating the class of property for which you are making the election and that, for such class you are not to claim any special depreciation allowance.
The election must be made separately by each person owning qualified property (for example, by the partnership, by the S corporation, or by the common parent of a consolidated group).
If you timely filed your return without making an election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Write "Filed pursuant to section 301.9100-2" on the amended return.
Once made, the election cannot be revoked without IRS consent.
Note. If you elect not to have any special depreciation allowance apply, the property may be subject to an AMT adjustment for depreciation.
Recapture. When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance you deducted. If qualified GO Zone property (including specified GO Zone property) ceases to be qualified GO Zone property, if qualified Recovery Assistance property ceases to be qualified Recovery Assistance property, if qualified cellulosic biomass ethanol plant property ceases to be qualified cellulosic biomass ethanol plant property, if
CAUTION ! qualified second generation biofuel plant property ceases to be qualified second generation biofuel plant property, or if qualified disaster assistance property ceases to be qualified disaster assistance property in any year after the year you claim the special depreciation allowance, the excess benefit you received from claiming the special depreciation allowance must be recaptured as ordinary income. For information on depreciation recapture, see Pub. 946. Also, see Notice 2008-25, 2008-9 I.R.B. 484, available at www.irs.gov/ irb/2008-09_irb/ar10.html for additional guidance on recapture of qualified GO Zone property.
Line 15
Report on this line depreciation for property that you elect to depreciate under the unit-of-production method or any other method not based on a term of years (other than the retirement-replacement-betterment method).
Attach a separate sheet showing:
A description of the property and the depreciation method you elect that excludes the property from MACRS or the Accelerated Cost Recovery System (ACRS); and
The depreciable basis (cost or other basis reduced, if applicable, by salvage value, any section 179 expense deduction, deduction for removal of barriers to the disabled and the elderly, disabled access credit, enhanced oil recovery credit, credit for employer-provided childcare facilities and services, any special depreciation allowance, and any other applicable deduction or credit).
For additional credits and deductions that may affect the depreciable basis, see section 1016. Also, see section 50(c) to determine the basis adjustment for investment credit property.
Line 16
Enter the total depreciation you are claiming for the following types of property (except listed property and property subject to a section 168(f)(1) election).
ACRS property (pre-1987 rules). See Pub. 534.
Property placed in service before 1981.