On October 3, President Bush signed into law a $850 billion financial markets rescue package. The rescue plan —called the Emergency Economic Stabilization Act of 2008 —is designed to restore liquidity to the financial markets. At the same time, it includes some valuable individual and business tax incentives that also will serve to help revive our economy.

The business tax incentives in the Emergency Economic Stabilization Act of 2008 cover a wide range of activities and industries. As with most tax incentives, however, they can be realized only if you take the time and effort to plan for them. In this letter, we highlight some of the key incentives and invite you to discuss them with us in more detail.

Research Tax Credit.

The rescue package extends the research tax credit to amounts paid or incurred in 2008 and 2009. It also increases the alternative simplified research credit to 14 percent starting next year, a tremendous incentive now for smaller firms to finally use the research credit to grow their businesses.

Leasehold improvements.

Many businesses remodel or otherwise make improvements to their facilities on a regular schedule. Under the new law, qualifying restaurant improvements and leasehold improvements will be eligible for 15-year cost recovery rather than a 39-year period for two more years, through December 31, 2009. Similarly, Congress authorized a 15-year recovery period for depreciation of certain improvements to retail space. This treatment is extended through December 31, 2009. It applies to both owner-occupied businesses and restaurants, as well as leased establishments.

Energy conservation.

The new law extends a host of energy tax incentives, some targeted to consumers (including businesses) and others to producers and manufacturers. Many of the extensions go beyond the one or two year periods that Congress authorized for non-energy extenders. Most notable are the extension of the special deduction for energy efficient commercial buildings, through December 31, 2013; and the substantial, long-term tax breaks given to businesses that develop or use solar energy. For businesses in urban areas, a $20/month transportation fringe benefit may be set up for employees who bicycle to work.

Charitable contributions.

The Tax Code gives businesses enhanced deductions for contributions of food to charitable organizations, as well as contributions of books and computer equipment to qualifying schools. The new law extends these tax breaks through December 31, 2009. Additionally, Congress extended the temporary suspension of limitations on charitable contributions in the case of a qualified farmer or rancher contributing food before January 1, 2009.

S corporation shareholders are also eligible for special tax treatment when making charitable contributions of qualifying property. The new law extends, through December 31, 2009, the special rule allowing S corp shareholders to take into account their pro-rata share of charitable deductions even if such deductions would exceed such shareholder's adjusted basis in his or her S corporation.

New Markets Tax Credit.

The new law extends the New Markets Tax Credit through December 31, 2009. The New Markets Tax Credit is one of the few incentives in the Tax Code to encourage taxpayers to invest in or make loans to small businesses in economically distressed areas. In today's credit crunch, extension of the New Markets Tax Credit may help small businesses secure financing that otherwise would not be available.

Disaster relief.

The new law provides temporary, but significant, tax relief to victims of the recent severe storms, tornadoes, and flooding that hit the Midwest and, to a somewhat lesser extent, victims of Hurricane Ike in Texas. Additionally, Congress authorized national relief for locations declared disaster areas by the president in tax years beginning after December 31, 2007. Exceptions do apply, so we are advising affected clients to contact our offices for further assistance.

Other business extenders.

The rescue package also targets a whole host of extended, enhanced and expanded tax breaks to certain specific businesses. If your operations touch upon one of these areas, please contact our offices for further details. These targeted tax breaks includes: