June 2009 Business Newsletter


COBRA Extension Intended to Protect Individuals

The $24.7 billion American Recovery and Reinvestment Act (ARRA) is intended to assist recently unemployed individuals in maintaining their health insurance benefits. Individuals who earn less than $150,000 a year may qualify for a 65 percent government subsidy on a COBRA policy. COBRA allows workers who are between jobs to continue to receive health care coverage provided by their former employers. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider (former employer) through a payroll tax credit. The premium reduction applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to nine months for those eligible for COBRA during the period beginning September 1, 2008 and ending December 31, 2009 due to an involuntary termination of employment that occurred during that period.
Now, affected employers receive quarterly tax credits for paying 65 percent of the former employees' premiums and collecting an additional 35 percent from the recipients.

ARRA Increases Section 179 Expensing and Extends First-year 50% Bonus Depreciation

The above referenced ARRA increased the amount a small business can elect to expense from $133,000 to $250,000 of the cost of qualifying property under IRS Code Sec. 179. It should be noted that the existing $25,000 expensing limit still applies to sport utility vehicles. The $250,000 maximum expensing amount is reduced if the cost of all Sec. 179 placed in service exceeds $800,000 for the tax year.
Under IRS Code Sec. 168(k)(2), the ARRA also extended the 50% bonus first-year depreciation allowance that was available in 2008 for acquisitions of qualifying property.

A corporate taxpayer must make the election by the due date (including extensions) of the federal income tax return for the taxpayer's first taxable year ending after March 31, 2008. Even if the taxpayer does not place in service any eligible qualified property during its first taxable year ending after March 31, 2008, the taxpayer must make the election for that taxable year if the taxpayer wishes to apply the election to eligible qualified property placed in service in subsequent taxable years.

Health-Care Reform and its Potential Effect on Small Business and Individuals

Government-run insurance plans may soon be offered as an option in health-care reform. Legislation is expected to be presented within the U.S. Senate in the upcoming months regarding the establishment of a national health insurance exchange enabling small businesses and individuals to procure the best deal available. Issues are abounding with regards to this matter, including how to market a national insurance plan. While helpful to small business and individuals, there is an underlying fear that a government run insurance program will be able to undercut private insurers, leading to less competition in the insurance marketplace.

Emergency SBA Loans to Become Available in June

The Small Business Administration plans to begin guaranteeing emergency bridge loans for small firms in mid-June. Small businesses not able to make payments on existing non-SBA loans may be eligible for loans up to $35,000, interest-free. These loans can be used to make up to six months of payments of principal and interest on small business debt.
Terms of repayment allow for a one year grace period after the final disbursement, and then the business will have five years to repay the loans. These loans will be made through the SBA's network of private- sector lenders.

All lenders will be given the opportunity to participate in the SBA's government-guaranteed loan programs, enabling them to help borrowers who are behind on their loan payments, and turn past-due loans into loans that are current.

Small Business Tips for "Going Green"

Small choices in "going green" for small businesses have the potential to make a big difference being environmentally and financially friendly. Here is a the cost of one easy "green" initiative: conversion to high- efficiency lighting fixtures allows up to a 50 percent reduction in annual energy usage. The up-front cost is typically between $75 and $100 per fixture installed. However, small businesses are eligible for a government rebate of $35 per fixture. As an example, for a typical 2,000 square foot office space (or 32 standard fixtures), an initial investment of between $2,400 and $3,200 would be required, but with an immediate government rebate of $1,120.

Prepared by Christopher R. Poole



Chelus Herdzik Speyer & Monte PC | Main Court Bldg | 483 Main St, Tenth Floor | Buffalo | NY | 14202