While last
year was one of the worst anyone can remember, we are starting
to see signs of a recovery in economic indicators, and we are
beginning to hear positive statements from manufacturers, finishers
and equipment suppliers. (Have I said this before?)
Finishers
must be prepared to take advantage of this economic recovery.
In some cases that means having a sound strategic plan. It may
mean getting the word out that your company still has all the
capabilities necessary to serve its customers. In others, it may
mean purchasing that piece of equipment you've been holding off
from buying.
For those
of you that need new equipment, the government has passed a new
tax law that will make that purchase less of a financial burden
on your company. Before we even talk about what these changes
are, it is important to note that Congress amended the tax law
for 2001. This means that your company could financially benefit
from the changes in the next couple of months.
So what are
the changes to the tax law? There are two significant changes:
a special 30% first-year depreciation bonus for business assets;
and net operating losses can now be carried back five years.
The 30% first-year
depreciation is in addition to normal depreciation schedules.
This means many shops will be able to write off 40% of equipment
purchases in the first year and a total of 57% in the first two
years. For a $100,000 piece of equipment in the seven-year asset
class, the result is a $9,100 one-year tax savings. If you're
buying a new multi-million dollar finishing system, the new law
could save your company large amounts of money.
Also, shops
could have more money in their pockets to buy new equipment this
year with the allowance to carry back net operating losses five
years instead of two years. Some companies may have had a loss
in each of the last two years. Therefore, there may not have been
any gains to offset. However, since many companies made a profit
three, four or five years ago, some shops could file an amended
return, apply the losses to one or all of the years where a profit
was made, and receive a refund check, which could be used to help
purchase new equipment.
The point
is that the government is trying to make it worthwhile for shops
to buy equipment. When you factor in the importance of staying
or getting ahead of your competition when coming out of a recession,
now is the time to buy.
