Under the federal Modified Accelerated
Cost-Recovery System (MACRS), businesses may recover investments in
certain property through depreciation deductions. The MACRS
establishes a set of class lives for various types of property,
ranging from three to 50 years, over which the property may be
depreciated. ARRA extended the five-year bonus depreciation schedule
through 2010 and includes CHP, thereby allowing 50 percent of the
depreciation value to be taken in the first year and the remainder
over the following four years.
To qualify for bonus depreciation, a
project must satisfy these criteria:
- The property must have a
recovery period of 20 years or less under normal federal tax
- The original use of the
property must commence with the taxpayer claiming the deduction.
- The property generally must
have been acquired during 2009 or 2010.
- The property must have been
placed in service during 2009 or 2010.
The bonus depreciation rules do not
override the depreciation limit applicable to projects qualifying
for the federal business energy tax credit. Before calculating
depreciation for such a project, including any bonus depreciation,
the adjusted basis of the project must be reduced by one-half of the
amount of the energy credit for which the project qualifies.