CHARLOTTE, NC — In an open letter to the amusement and arcade industry, Brady Distributing vice-president Jon W. Brady noted that an upturn in orders during December has called attention to a little-publicized change in tax law passed early this year.
The Economic Stimulus Act of 2008, introduced in the House of Representatives as HR 5140 by Rep. Nancy Pelosi (D-CA) and enacted with overwhelming bipartisan support, was signed into law by the President on Feb. 13, 2008. Brady observed that, amid all the bad news being disseminated over the past few months, that law largely has been overlooked.
Starting in 2008, the new provision offers tax benefits to all companies investing in qualifying new equipment, and additional benefits to small businesses that do so. In brief, companies of all sizes may take advantage of accelerated first-year depreciation on 50% of the cost of capital equipment purchased and placed in service during 2008, then depreciate the remaining basis under the regular rules. And a small company – one buying less than $800,000 of capital assets in a year – often may “expense” (deduct currently) the first $250,000 of that investment, then use the 50% expensing allowance for an even more substantial bonus.
Brady explained that operators – most strikingly, family entertainment centers that usually do the bulk of their purchasing in the spring – began placing large orders after the fall’s trade shows (the Amusement and Music Operators Association’s in September, and the International Association of Amusement Parks and Attractions’ in November).
And they are wise to do so, Brady added. “We have to sell our industry more than ever,” he emphasized. “This is the time to shine, and to make some much-needed lemonade out of lemons.”
It would be a good idea even if there were no economic incentive, he pointed out, but there certainly is one. “Why send Uncle Sam a tax payment when you could simply buy some equipment, increase the value of your route, make your customers happy, provide sales to your distributors and help the manufacturers ship more equipment?” Brady wondered. “This is a win-win scenario for our industry.”
He underscored that equipment must be purchased and “ready for use” (installed) by Dec. 31, 2008, in order to qualify for tax benefits for the current year, so there is no time to lose. “Consult your tax advisor, as there are certain limitations and ceilings,” he recommended. “Then do your locations and customers – and your distributor – a favor by taking advantage of this incredible offer from the U.S. Government.”