Recent events have created instability for financial markets, both in the United States and throughout the world.  In response to the growing global economic crisis, Congress moved to enact a "bailout plan" for Wall Street, initially conceived to include a direct cash infusion by the federal government of up to $700 Billion.  Despite disagreements over how the terms of a $700 Billion aid package would help shore up the financial markets, and whether the aid package should focus narrowly on troubled financial institutions or include relief to individual taxpayers and homeowners, Congress enacted the Emergency Economic Stabilization Act of 2008 (the "Emergency Act") on October 3rd. 
 
Much of the public analysis has been focused on whether the Emergency Act does enough, soon enough, to contain an economic meltdown here and abroad.  What is often lost in that discussion is the fact that the Emergency Act is a tax bill, containing hundreds of federal tax law changes affecting most businesses, regardless of their size.  Here is a snapshot of some of the highlights affecting qualifying property:

1.   15-year Depreciation Rule for Leasehold Improvements and Restaurants Extended and Expanded.
 
Historically, the Internal Revenue Code provided a means for recovering the cost of certain commercial real estate improvements over 39 years.  The Emergency Act extends for 2008 and 2009 the favorable 15-year straight-line depreciation method for qualified leasehold and restaurant building improvements first enacted in 2002 and increased in 2003 to stimulate the weak economy.  In addition, restaurant buildings themselves can now be eligible for the 15-year depreciation rule (for qualified buildings placed in service in 2009).

2.   New 15-year Depreciation Rule for Retail Space Improvements.

The favorable 15-year straight-line depreciation method noted above is now allowed for qualified retail improvements placed in service in 2009.  This new rule only applies to improvements put in use more than three (3) years after the building itself was placed in service, however.  This new rule does not apply to improvements related to a) building expansions, b) elevators or escalators, c) structural components that benefit common areas, or d) structural framework of the building.

3.   Deduction for Making Commercial Buildings Energy-Efficient Extended.
 
Historically, the Internal Revenue Code requires most improvements to real estate to be capitalized, thereby extending the cost recovery period for the taxpayer.  The Emergency Act extends for five (5) years the existing provision allowing immediate deduction (rather than capitalization when capitalization would otherwise be required) for the cost of qualifying energy-saving improvements to commercial buildings.  The right to deduct the cost of these improvements in the year in which they are made is now extended through 2013.

4.   50% First-Year Bonus Depreciation Allowed.
 
The Emergency Act allows a 50% first-year depreciation deduction for new real and personal property placed in service after 2007 due to disasters that occur before 2010 in federally-declared disaster areas after 2007 (in other words, 2008 and 2009 disasters).

5.   Enhanced Section 179 Deduction Rule.

The Emergency Act extends the enhanced Section 179 method for cost recovery of qualifying property placed in service after 2007 due to disasters that occur before 2010 in federally-declared disaster areas after 2007 (in other words, 2008 and 2009 disasters).

6.   New Five-year Depreciation for Farming Equipment.
 
The Emergency Act now allows for a five-year depreciation of qualifying assets used in farming operations.  These assets were formerly allowed only a seven-year cost recovery.  This new rule applies only to new assets placed in service in 2009 (new being defined as new from the original manufacturer and not new to the farmer but used previously by the seller).  The rule does not apply to a) grain bins, b) cotton ginning assets or c) fencing and other similar land improvements.