Bonus Write-Offs, New and Old
The new bill provides an additional first-year depreciation deduction equal to 50 percent of the adjusted basis of qualified property. Qualified property is defined in the same manner as it was for the 30-percent additional first-year depreciation deduction created by the Job Creation and Workers Assistance Act of 2002.

The bonus allowance is only available for new property which is depreciable under MACRS and that has a recovery period of 20 years or less. While, again, excluding buildings, the bonus depreciation is available for most equipment, computer software and even leasehold improvements.

In general, in order to qualify for the new 50-percent additional depreciation deduction, the property must be acquired after May 5, 2003, and before January 1, 2005. Naturally, property for which the 50-percent additional first-year depreciation deduction is claimed is not eligible for the 30-percent additional first-year depreciation deduction.

Dividends Defined Favorably
Under the new tax law, dividends received by an individual shareholder from either domestic or qualified foreign corporations generally are taxed at the same rates that apply to capital gains. According to our tax rules, the term "dividend" applies to any distribution made by any corporation to its shareholders out of earnings and profits -- either accumulated over its years in business or its profits for the current tax year. Many of the distributions made by an incorporated sign business fall within that definition.

This unique provision reduces the top tax rate on both dividends and capital gains. Under this legislation, the top tax rate on both dividends and capital gains will fall to 15 percent this year. Any sign professional who is considered to be a low-income taxpayer, will pay five percent, falling to zero in 2008. Barring further congressional action, the current higher rates will return in 2009.

Of course, distributions of cash or property by a sign business operating as an S corporation will still be taxed according to a priority system that depends upon whether the S corporation has earnings and profits. Since the S corporation is, in essence, a corporation that has chosen to be treated as a partnership, it passes all of its income, deductions, credits, profits and losses to its shareholders.

Thus, an S corporation can have no earnings and profits unless these are attributable to tax years when the business was not an S corporation (or to S corporation years beginning before 1983). An S corporation may also succeed to the earnings and profits of an acquired or merged corporation.

Growing Into The Alternative Minimum Tax
The alternative minimum tax (AMT) rules were designed to ensure that at least a minimum amount of tax is paid by both high-income and corporate taxpayers who reap large tax savings by making generous use of certain tax deductions and exemptions. Without the AMT, some of these taxpayers might be able to escape income taxation entirely.

In essence, the AMT functions as a recapture mechanism, reclaiming some of the tax breaks primarily available to high-income taxpayers and represents an attempt by our lawmakers to maintain tax equality. Unfortunately, more and more taxpayers each year find themselves elevated to the ranks of "high-income" taxpayers.

The Tax Relief and Reconciliation Act of 2001 increased the amounts exempt from the AMT for individuals for the years 2001 through 2004. The new law increases those exemption amounts, raising the $49,000 exemption amount for married individuals filing a joint return to $58,000 for 2003 and 2004. The former $35,750 exemption for single taxpayers has been temporarily increased to $40,250 for tax years 2003 and 2004.

Benefit From The New Rules While You Can
The so-called "Jobs And Growth Tax Relief Reconciliation Act of 2003," tax cuts were less than half the $726 billion in tax reductions through 2013 that President Bush proposed in January as a tonic for the swooning economy. Of the bills $350 billion price tag, $210 billion -- or 60 percent -- will occur this year and next. Almost half of the bill's cost was devoted to accelerating income tax reductions enacted in the tax cut of 2001.

Tax cuts include the reduced taxes for married couples, the expansion of the lowest tax bracket and the measures that will prevent more taxpayers from paying the alternative tax. Many of the tax breaks earmarked for individuals will significantly impact on the personal tax bills of sign business owners as well.

On the business front, two new, temporary tax breaks were designed to encourage investment in the sign business. Small sign businesses can expense up to $100,000 in new equipment investments through 2005, as well as depreciate more of their assets through 2004. Today, however, is the time to let this new tax law help stimulate the economy of you and your business.