3 New Tax Changes


The recently passed tax extender legislation is particularly exciting for manufacturing and distributions companies. Congress left the industry a few big presents under the tree this holiday season with the generous tax extender package.

  1. The Work Opportunity Tax Credit (WOTC)— Code section 51

This is one of the most expensive tax extenders, which Congress renewed for five years, costing the Fed $1.4 billion in revenues over a 10-year budget window.

The WOTC is a wage credit that intends to increase job opportunities for certain categories of disadvantaged individuals like welfare recipients, ex-felons and veterans.

  1. Section 179 Expensing Limitations — Code section 179

Section 179 is a tool that smaller companies can use to make investment cost deductions immediately. They no longer have to wait for them to depreciate over time. While there was a bit of controversy over whether or not this stimulus was necessary to keep around, it was supported in the end. Small businesses can expect permanent higher thresholds at $500,000 and $2 million

  1. .Research and Development Credit (R&D Credit) — Code section 41

The R&D credit tax provision allows income tax credit for a certain amount by which qualified research expenses exceed a base amount. It was widely agreed upon that the benefit of discovering a new or improved product, process, computer software technique or formula is worth the hefty price tag. Companies will now be able to plan for lengthy research projects without having to worry about funding.

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