American Taxpayer Relief Act of 2012, Section 331

Audio summary

A short audio walkthrough of this rule: what it says and why it matters for your study.

What it holds

Retroactively extended 50% bonus depreciation through December 31, 2013. Also extended the Section 168(k)(4) election allowing certain businesses to accelerate AMT credits instead of taking the bonus deduction.

Where this comes from

After the 100% bonus window closed at the end of 2011, the law allowed a 50% rate for property placed in service in 2012. But that 50% rate was itself set to expire. Without new legislation, bonus depreciation would have disappeared entirely after 2012.

Congress acted, but late. The American Taxpayer Relief Act of 2012 was signed on January 2, 2013, retroactively covering property already placed in service during 2012. Section 331 extended the 50% rate through December 31, 2013.

What it established

Section 331 continued the 50% additional first-year depreciation under Section 168(k) for qualified property placed in service in 2012 and 2013. The basic rules stayed the same. Property with a MACRS recovery period of 20 years or less, original-use, with the acquisition and placed-in-service requirements met.

The law also extended Section 168(k)(4), which let certain businesses elect to forego the bonus and instead claim accelerated AMT (alternative minimum tax) credits from prior years. That election was useful for businesses that preferred to avoid the bonus depreciation recapture at sale.

How it shows up in a study

For buildings placed in service during 2012 or 2013, a cost segregation study could produce a 50% first-year bonus on the reclassified components. The study identifies 5-year, 7-year, and 15-year property inside the building. Those components qualified for the bonus.

Because the law was retroactive for 2012 property, taxpayers who placed buildings in service in 2012 could still claim the bonus on their 2012 return, even though the law was not signed until January 2013. The retroactive reach is why the bonus timeline requires knowing exactly which law was in effect when your property was placed in service.

What it does not mean

This was not a permanent fix. The 50% bonus expired again after 2013, requiring another extension for 2014 property.

The retroactive extension also did not guarantee that everyone who placed property in service in 2012 took the bonus. Some taxpayers may have filed without it, not knowing Congress would act. Those situations typically involve an amended return or an accounting method change. The retroactive reach is an opportunity, but it requires action to use.

Category

Bonus depreciation & expensing

Applies to

All property types

Status

Vetted

This page explains a tax authority in plain words. It is not tax advice for your situation. The way this authority applies to your property is reviewed by a licensed tax professional. Citation is provided so you or your advisor can read the primary source.