A 30% expense allowance has made it easier to purchase a laser system.  

America's manufacturing technology industry and its customers may have gotten the shot in the arm needed to recover from the worst market conditions since the Great Depression. After months of partisan bickering and delay in the Senate, an economic stimulus bill, which contains a new 30 percent expensing allowance for machine tools and other equipment, was passed by Congress and signed into law by President Bush last month.

The temporary tax relief applies to new equipment ordered between 9/11/01 and 9/11/04 and placed in service by 12/31/04. In addition, the new law provides that the depreciation preference will be removed from the Alternative Minimum Tax (the "bad AMT") through 2004, unemployment benefits are extended for 13 weeks, expiring tax provisions are extended for two years, a package of tax benefits for New York City was adopted, and businesses are permitted to carry 2001 and 2002 Net Operating Losses (NOLs) back five years (compared with two years under the old law).

The NOL carryback provision encourages less profitable companies to take advantage of the 30 percent expensing bonus. It allows companies that lost money in 2001 and/or 2002 and who buy equipment in 2002 (thus increasing their tax deductions), to file amended tax returns for 1997, 1998, or 1999 (when business may have been more profitable), offset profits in those years with current-year NOLs, and collect a tax refund.

"The 30-percent expensing allowance has been quite significant in helping to move people to buy now as opposed to waiting," says Jim Mack, vice president of government relations at the Association for Manufacturing Technology, which supported the passage of the bill.

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