Is Opportunity Knocking? (OPINION)

Business owners and the rest of America are facing a changed financial landscape as we navigate through 2013. While doing business through the recession was hard on most, choosing how to best get through the recovery is just as important as business owners choose which stimulus actions may provide the most benefit.

The American Taxpayer Relief Act of 2012 was passed on New Year’s Day to avert what the media referred to as the “fiscal cliff.” While many of the provisions in this law are considered to be “permanent” in nature — the Alternative Minimum Tax exception fix, for example — and were targeted toward individual taxpayers, there are also some provisions that have an impact on businesses that were extended only through 2013.

This means business owners need to know now about these temporary provisions so they can make an informed decision about whether their business could, or should, take advantage of the provisions before the year is up.

Arvest Bank is not in a position to offer specific tax advice to customers. However, as business advisers, we want to make sure business owners and managers are alerted to some short-term opportunities available in this legislation so they can consult with their tax advisers now to find out if these provisions may benefit them.

There are primarily two provisions that are most likely to benefit large numbers of business owners and managers.

The first of these is the extension, through 2013, of IRS Section 179 provisions that allow small-business owners and managers to deduct, rather than depreciate, the costs of new and used equipment — up to $500,000 for 2013.

The second is an extension, again through 2013, of a 50 percent accelerated “bonus” depreciation for qualifying property purchased and placed into service before Jan. 1, 2014. Accelerated depreciation is an allowance through the national tax laws that gives businesses the ability to deduct the declining value of business-related investments — primarily equipment and machinery — at a greater rate than the value of those assets usually decline, usually as a larger percentage during the first one or two years of the equipment’s usable life. That means a business owner could potentially write off the cost of an equipment investment faster than the piece actually wears out.

These two provisions may make it extremely attractive for a business owner or manager to make capital purchases in 2013. Those purchases could be new manufacturing equipment, agricultural equipment, business property, computers, office equipment or furniture and large (gross weight rating more than 6,000 pounds) vehicles used in business like passenger vans, ambulances, and cargo and delivery trucks.

It appears these extensions were included in the legislation to continue the government’s efforts of encouraging economic activity and growth. But most observers believe it is unlikely these incentives will be continued in the current form beyond this year. That is why it is so important for business owners to explore what options may work best for them right now while these extensions are available.

I want to re-emphasize that I am not a tax adviser and, as is common with tax laws, there are many nuanced details in this law and how it is applied by the IRS. Having a qualified accountant or tax attorney involved before making any purchasing decisions is of utmost importance.

The main idea is this: There are some attractive provisions in this new law for business owners and managers who need to make capital purchases, but these opportunities are likely to be short-lived and are now set to expire at the end of 2013. So get informed now and be prepared to act quickly.

Payne Brewer is executive vice president and loan manager at Arvest Bank in Fayetteville. He can be contacted at 479-575-1046.