TAX BREAK

President Bush Signs the American Jobs Creation Act of 2004

 

President Bush signed the American Jobs Creation Act of 2004 on October 22, 2004. Following is a summary of some of the Act’s major provisions.

 

·          For property placed into service after October 22, 2004, the Act limits the amount of the cost of a heavy SUV that may be expensed to $25,000.

·          The Act treats qualified leasehold improvements and restaurant property placed into service after October 22, 2004 and before 2006 as 15-year   recovery property depreciated using the straight-line method.

 

·          Provisions of the Act increase the number of permissible S corporation shareholders from 75 to 100. The new provisions also treat all members of a family as one shareholder.

·          The new law also makes important changes to deferred compensation plans. Generally, amounts deferred under a nonqualified deferred compensation plan will be subject to immediate taxation if certain requirements are not met.

·          For options exercised after October 22, 2004, the Act excludes certain stock options and stock purchase plans from employee wages for payroll tax and income tax withholding purposes.

·          The Act encourages companies to reinvest foreign earnings in the U.S. by temporarily making certain dividends received by a U.S. corporation from controlled foreign corporations eligible for an 85% dividends-received deduction.

·          For a judgment or settlement occurring after October 22, 2004, the Act allows an above-the-line deduction for attorney’s fees and court costs incurred in connection with an unlawful discrimination claim.

·          For tax years ending after October 22, 2004, the Act allows the tax credits for alcohol fuels and for the production of electricity to be applied against the Alternative Minimum Tax.

 

The effective dates of the new tax cuts and revenue provisions contained in the Act vary greatly. Some are retroactive, while others start January 1, 2005, or later. Articles in the next issue of Tax Break will discuss in more detail some of the important provisions of the American Jobs Creation Act of 2004.

 

 

 

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