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Passed in January 2013, the American Taxpayer Relief Act of 2012 extended the Tax Relief Act of 2010, thereby reinstating the 50% depreciation bonus through 2013. The Act also reinstated the Sec. 179 expensing levels to $500,000 through 2013 with a graduated phase-out once qualified capital expenditures exceed $2 million in the 2013 tax year. This legislation can provide potential tax savings for your business.

You can still act to take advantage of these tax savings. If you are considering a digital billboard purchase and installation before the end of this year, this white paper can help you understand how the decision to invest now can yield benefits for your business.

Visit www.depreciationbonus.org for more information. Please be sure to consult with your tax professional.

Shedding Some Light on How You Can Use the Depreciation Bonus and Sec. 179 Increases

What exactly does the American Taxpayer Relief Act of 2012 mean for my business?
By lowering your taxable income, the depreciation bonus and Sec. 179 can dramatically cut your 2013 tax bill, freeing up cash in the short term.

How does bonus depreciation work?
As it is described by the US Internal Revenue Service, "The bonus depreciation provision generally enables businesses to deduct half the cost of qualifying property in the year it is placed in service. You may be able to take an additional first year special depreciation allowance for certain qualifying property. The allowance is an additional deduction of 50 percent of the property's depreciable basis (after any section 179 deduction and before figuring your regular depreciation deduction)."*

Section 331, Extension and Modification of Bonus Depreciation, of the American Taxpayers Relief Act of 2012, extends the 50 percent depreciation deduction under Internal Revenue Code 168(k), allowing businesses to recover the cost of capital expenditures over time. This deduction, for 50% of the basis, applies to qualified property placed in service after December 31, 2012 and before January 1, 2014.

That sounds too good to be true. What's the catch?
The more depreciation you claim now, the less you will be able to claim later. In other words, your tax bill in future years will be higher because you'll have less to deduct. However, the tax savings in your pocket now means you can invest in your company now rather than having the IRS hold onto your money for a couple additional years.

Does the sign have to be new?
Yes. To be eligible for bonus depreciation, the "original use" of the digital billboard must commence with the taxpayer claiming the depreciation bonus after September 8, 2010.

How long do I have to take advantage of the depreciation bonus?
The depreciation bonus is temporary. To qualify for a 50% depreciation bonus, the digital billboard must be installed between January 1 and December 31, 2013.

Do I have to use the depreciation bonus?
No. The depreciation bonus is elective. Note that the depreciation bonus also applies for both regular and alternative minimum tax purposes.

How did the American Taxpayer Relief Act of 2012 change the Sec. 179 expensing law?
According to the IRS**:
"The American Taxpayer Relief Act of 2012 enhances the section 179 expense deduction. For tax years beginning in 2012, the maximum section 179 deduction you can elect for section 179 property placed in service during the tax year is limited to $500,000. Taxpayers must reduce this limit when the cost of the section 179 property placed in service for the year exceeds $2,000,000."

Can Sec. 179 and the depreciation bonus be combined?
Yes. Companies eligible for Sec. 179 can also combine it with the depreciation bonus for even bigger tax savings.

What else should I know about this legislation?
There are many features of this legislation that can benefit small businesses, including:

• Qualified small business stock capital gain exemption
• Limitation on listed transaction penalties
• Healthcare expense deduction for the self-employed

Watchfire Digital Outdoor developed this white paper as a public service to digital billboard buyers. It should not be construed as tax advice nor as a promise of potential tax savings or reduced tax liability. For more information about the depreciation bonus, please contact your tax professional or visit the Internal Revenue Service website at www.irs.gov.

* http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Bonus-Depreciation-and-Increased-Section-179-Deduction-under-the-American-Recoveryand-Reinvestment-Act
**http://www.irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Sale-or-Trade-of-Business,-Depreciation,- Rentals/Depreciation-&-Recapture/Depreciation-&-Recapture