What's
New
Jobs
and Growth Tax Relief Reconciliation Act of 2003
On May 28th, 2003 President Bush officially signed
the aforementioned Bill into Law providing incentives for business
investment via capital acquisitions. Of particular importance
to our prospective customers are the following provisions:
IRS
Code Section 179 – Expensing Depreciable Business Assets
Under
Code Section 179 of the Internal Revenue Code, businesses can
now deduct up to $100,000 of the cost of the qualified property
(defined as depreciable tangible personal property that is purchased
for use in the active conduct of a trade or business) during
the year that it is purchased (but not necessarily paid for)
but placed in service after May 5, 2003 and on or before January
1, 2005.
This
is an increase from $25,000.00 and also raised the phase-out
threshold from $200,000 to $400,000. Additionally, “off
the shelf” computer software was reclassified as qualifying
property from non-qualifying property. JETEC’s
IMS™ Software and software upgrades may qualify
as “off the shelf computer software.
This
provides businesses the opportunity to acquire computer controlled
ink jet and laser marking equipment and “off the shelf”
software that the company needs at substantial tax savings from
the vendor of choice. The balance of the equipment and “off
the shelf” software acquisition cost, if any, would be
“capitalized” and “depreciated” during its
remaining useful life.
Companies
may elect not to take the depreciation bonus. This may be the
right move for businesses that expect to be in an unusually
low tax bracket in the year they are buying the equipment because,
for example, business was slow. If your business expects to
be in a higher tax bracket the year following the purchase,
then waiving the special first-year depreciation may be beneficial.
There
are some important exceptions to the qualification rules, as
generally the case with most new tax laws. JETEC strongly
encourages businesses to consult with their accountants and
attorneys for the exact depreciation calculations, and to verify
that the desired JETEC equipment meets the act’s
requirements.
IRS Code Section 168K – Bonus Depreciation
Businesses
can also utilize a 50% Bonus Depreciation allowance for NEW
qualifying property that is acquired after May 5, 2003 and before
January 1, 2005. This is an increase from 30% and is net of
any Code Section 179 previously deducted.
Example:
On December 1, 2003, a manufacturer of aerospace parts acquires
and places into service a JETEC LMS Series™ Ink Jet
Marking System, complete with 2D code printing and verification
option, optional safety light curtain, hand held readers and
host interface software. The total cost of the hardware and
software purchased is $150,000.00. The following is the potential
tax savings from this acquisition:
|
Cost
of JETEC LMS Series™ Marking System:
Code Section 179 Allowance:
Reduced Basis for Depreciation:
Code Section 168K Allowance:
Reduced Basis for Depreciation:
Regular First Year Depreciation (5-Year MACRS):
|
$150,000.00
<100,000.00>
50,000.00
< 25,000.00>
25,000.00
< 5,000.00>
|
Upon
the application of the aforementioned IRS Code Sections 179
and 168K, the aerospace manufacturing company would be able
to deduct $130,000 in 2003 depreciation.
|
Your
Company May Elect to Utilize These Tax Savings to LEASE
EQUIPMENT vs. PURCHASE
|
JETEC
Corporation, through its partnership with American Packaging
Capital, Inc. can structure an Equipment Lease with either a
$1.00 or another "pre-determined fixed amount" residual
to qualify the transaction for both the Code Section 179 and
Code Section 168K benefits. The potential tax savings for acquiring
JETEC's Industrial Ink Jet or Laser Marking Systems under
this Bill are substantial. For more information contact your
corporate finance representative or your JETEC Corporate
Sales Executive.
JETEC
Corporation has pioneered non-contact, direct marking technology
for a wide range of industries. JETEC specializes in
the design and manufacture of computer-controlled, interactive
product making systems for bar and 2D coding, custom software,
and international product identification. JETEC's approach
to product marking systems offers an unprecedented reduction
in manufacturing costs and cycle times while improving product
quality. JETEC's customer have utilized laser and
inkjet marking solutions in industries such as printed circuit
board manufacturing, semiconductor, electronics, automotive,
medical, aerospace, appliance and industrial manufacturing.
To learn more about JETEC Corporation's products, please
Tel: (949) 477-6161
Fax: (949) 477-6167
