Tax law favors expansion

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The accelerated child tax credit and reductions in dividend and capital gains taxes garnered most of the attention, but the new tax cut legislation signed by President Bush in late May makes two changes that can significantly benefit trucking companies in several respects.

First, the law allows for a 50 percent depreciation bonus on certain property placed into service from May 6, 2003, through Jan. 1, 2005. That’s an expansion of the growth incentive Congress adopted following the 2001 terrorist attacks. That provision already allowed a 30 percent bonus on certain property acquired from Sept. 11, 2001, until Sept. 11, 2004.

Second, the tax law increases the expensing allowance for small businesses from the current $25,000 to $100,000 for years 2003 through 2005. In addition, the phaseout limit is doubled to $400,000 during the same period. The scope is expanded to include off-the-shelf computer software placed in service in 2003 through 2005.

The provisions benefit can benefit trucking companies directly by providing attractive tax treatment for growth. In addition, if the same incentives encourage growth in other sectors, such as manufacturing, carriers can reap benefits in the form of increased tonnage. The same can happen if individual taxpayers use their reduced taxes – including a partial child tax credit refund to be paid this summer – to purchase retail goods.