President Obama signed a stimulus bill into law Feb. 17 that includes more than $300 billion in tax incentives. The bill's tax title, the "American Recovery and Reinvestment Tax Act of 2009" (ARRTA), includes numerous items that apply to companies in the hospitality industry. Hospitality businesses may benefit from the extension of bonus depreciation, which allows one-half of the cost of most depreciable personal property to be expensed. It also allows an expansion of the target group eligible for the Work Opportunity Tax Credit to include many veterans.
Another ARRTA provision removes a significant impediment to rationalizing debt loads within the hospitality industry. Previously, taxable income had to be recognized immediately if a taxpayer was relieved of debt by purchasing its outstanding debt at a discount or renegotiating the balance due. This could be avoided only to the extent the taxpayer was insolvent and then only at the price of foregoing an equal amount of tax attributes. For purchases and renegotiations of outstanding debt in 2009 and 2010, ARRTA defers this income until 2014, then spreads it over five years, and does not require the reduction of tax attributes.
This gives hospitality companies an avenue to reduce their debt loads and improve their balance sheets.
For this year's filing season, the ARRTA provision allows small businesses a five-year carryback period for net operating losses (NOLs) incurred in 2008. However, its use is restricted to entities with less than $15 million in annual receipts, which limits its applicability.
Grant Thornton LLP's National Tax Office has prepared a chart containing the details of all the tax provisions contained in the legislation. Click here to view the entire chart.
With the March 15 corporate tax filing deadline right around the corner, hospitality companies should be aware of certain IRS procedures that may allow operators to receive tax refunds quickly and defer tax payments, whether or not operators are eligible for the new five-year carryback. Grant Thornton has developed a summary document, "How to make the U.S. Treasury work for you," to make operators aware of procedures available under the Internal Revenue Code that may allow corporations to receive refunds quickly or defer payment of tax.
Grant Thornton has more information about other accounting and tax issues that impact the hospitality industry — such as lease accounting and new property tax rules — in its latest issue of Marquee, the firm's newsletter for the hospitality and real estate industries.
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