Get your slice of stimulus pie

Tucked away in the economic stimulus bill is a section providing a 30 percent tax credit for household energy efficiency improvements, one of many examples of how businesses can tap into the massive money supply.

About a month ago, Eclipse Technologies began to get more inquiries from people interested in weatherizing their home or adding their own solar energy production. 02 Geothermal also saw an increase in interest for ground source heating after they demonstrated its advantages at the Columbia Home & Garden show.
“We just finished up the home showcase and we saw a marked increase.” Larry Seneker, vice president of Eclipse Technologies, said. Last year, Eclipse, which specializes in technological home improvements, had 10 or 12 inquiries from people interested in giving their home a green makeover. This year, the company has already had more than 50, he said.

Inquiries are one thing; closing a deal is a whole different story. The tax credits for weatherization and solar, wind and geothermal energy installations are strengthening the sales pitch.
“Usually I tell [clients] it takes 10-20 years to pay off the investment on their home,” Seneker said. “But when you knock off a few thousand dollars, that’s a game changer.”

Along with homeowners and home improvement specialists, municipalities, states and individuals all have the chance to get a slice of the $787 billion stimulus pie. So do supporters of building projects such as the Farmer’s Market Pavilion and education initiatives like Caring for Missourians, which would increase slots for training health care professionals.

The city already has $227,139 in hand for sidewalk improvement downtown, is slated to receive a little over $1 million for energy efficiency improvements, and expects to receive $8 million for the COLT railroad bridge plus $3.8 million for improvements to Stadium Boulevard.

Missouri is slated to receive an estimated $4 billion for existing state operations, but the legislature is still wrangling over just how to divvy it up. For funds that will flow through federal departments or be awarded on the basis of competitive grants, Gov. Jay Nixon has set up a Web site so businesses and non-profits can submit job-creation ideas that might be worthy of stimulus funding.

But one third of the bill is dedicated to tax breaks for businesses and individuals, and many of the provisions are little-known-changes to the tax code. Most of the country’s workers will see small decreases in their federal withholdings each paycheck, and in many cases decreases have already begun. Businesses now have more flexibility in writing off losses and new equipment expenses in 2008.

Accelerated depreciation among stimulus bill tax breaks

One of the largest programs in this portion of the bill is the Making Work Pay tax credit. Some businesses have already begun dispersing the credit, which is designed to appear in paychecks in small increments by reducing federal withholdings. The IRS set an April 1 deadline for the new withholding tables, so many people could notice a few extra dollars on their net income when they get their next paycheck. The $400 credit phases out for individuals earning more than $75,000 and the $800 credit phases out for couples earning more than $150,000.

A provision tailored more toward business owners, and a potential lifesaver, is the ability for businesses to carry back their net operating losses for up to five years rather than two. A business that experienced a loss in 2008 now has more options for which years it can apply that loss to. Applying the loss to a year in which the business had taxable income can provide cash in the form of a refund to a struggling business. This provision is only available for losses in 2008, and some businesses must choose whether to use the special carry-back by April 17.

Jeff Echelmeier, a CPA and partner with Williams-Keepers LLC, said some of the firm’s clients are using the provision to apply a loss to a more profitable year and receive a refund on previously paid taxes.

Echelmeier said a more widely used provision is bonus depreciation. Under the provision, businesses can immediately write off 50 percent of new equipment purchased last year. In addition, businesses can continue to expense up to $250,000 worth of capital expenses, subject to certain limitations related to profitability and the total amount of equipment purchases made per year. This is known as a Section 179 expense.

“The bonus depreciation and the Section 179 expense amounts will have the biggest immediate impact because they’re saving tax dollars today,” Echelmeier said. “Percentage wise, it will affect the largest number of our clients.”

Businesses owners should be aware of the higher flexibility in expensing new purchases that will be available in their 2009 tax returns. Echelmeier emphasized the new rules won’t change the overall tax deduction businesses ultimately receive, but it will accelerate when they can use the deduction, possibly making equipment and other investments more affordable.

“The planning opportunities come when you’ve got flexibility in when and how you take depreciation,” he said. “Now I have the ability to try to match up my depreciation deduction with times I think I’ll be in the highest tax bracket.”

Another change that business owners can take advantage of in the coming fiscal year is the “Work Opportunity” tax credit. In 2009 and 2010, employers can claim a 40 percent tax credit on the first $6,000 of wages paid to employees who fit certain demographics. The number of eligible groups has been expanded from ex-felons, food stamp recipients and disabled veterans to include veterans who have been unemployed for at least six months.

There are other provisions, but Echelmeier said the net operating loss and bonus depreciation rule changes would probably be the most widely used. A complete list of tax incentives for small businesses can be viewed at http://transform.mo.gov/resources/business_tax_relief.htm.

“You need to be aware of the impact in order to make any sort of planning decisions,” Echelmeier said. “If you think something might apply to you, then ask more questions.”

Homeowners can benefit from stimulus bill tax credits

A little known provision of the stimulus bill contains incentives for owners interested in weatherizing their homes or installing renewable energy sources to offset the cost of utilities.

Homeowners are eligible for a 30 percent tax credit, up to $1,500, for energy efficiency improvements on their house in 2009 and 2010. This includes everything from window tinting to reduce outside heat to energy-efficient air conditioning or heating. Check with the business installing the improvements to your home to see if they qualify for the tax credit.

The law also provides an uncapped, 30 percent credit for solar water heaters, small wind energy production or geothermal energy production.

Very few people are aware there’s a “green portion” of the stimulus package, Seneker of Eclipse Technologies said. Seneker usually has to inform clients that some of the energy efficiency work is eligible for federal tax credits.

His emphasis, solar energy outfitting for homes, is still a relatively expensive process. But he hopes the incentives within the stimulus package will increase both businesses’ and private individuals’ willingness to consider it.

“I think most people are hoping this will get solar to a price point where there’s a return on investment,” he said.

02 Geothermal, a new local firm, specializes in selling geothermal heat pump installations. The installations generally cost between $24,000 and $25,000, but with the tax break, the cost is reduced to between $19,000 and $20,000, company partner Jim Oakley said.

With the technology, homeowners can save up to 50 percent on their bills for heating, air conditioning and hot water heating, Oakley said. The tax break reduces the time it takes to recover the investment by three to four years, he said, to seven to eight years.

Window tinting can also qualify for an energy efficiency tax break. A 2007 law already had a 10 percent tax credit for Energy Star rated windows, but the stimulus bill increased the break to 30 percent, capped at $1,500.

Carl Toalson, owner of Tint by Toalson, said the problem is that not many people know about the tax credit. He has to inform many customers about the incentive, and he’s also going back and telling customers from earlier in the year they’re eligible for the increased credit.

Some window films can reduce 85 percent of heat entering through a window, he said. Usually it takes five to seven 0 years to recoup the investment cost through energy savings, but the tax break knocks off a year or two, he said.

Bruce Finley, owner of Design Built Homes, which specializes in building energy efficient homes and homes powered by renewable energy sources, said the investment payback time is still high for many of these technologies. Many of the people who are installing energy efficiency technologies are doing it because they feel it’s the right thing to do, he said, but the tax credits are moving in the right direction.

“They know the cost is more than it’s worth, but it’s getting better every year,” he said.

And for those people just looking to buy a home, the stimulus package offers a 10-percent refundable tax credit for first time homebuyers, capped at $8,000. Unlike a similar $7,500 credit enacted in 2008, this credit does not have to be repaid unless the home is sold within three years of purchase. Already, people have started to take advantage of it, Echelmeier at Williams-Keepers said.

“It either helps provide the down payment or gives them a little extra money to buy furniture or accessories,” he said.

State government divvying up stimulus funding

The General Assembly is still wrangling over how the budget stabilization portion of the funds will be spent. Missouri is slated to receive an estimated $4 billion for state operations, and the House recently agreed to use some of the funds to fully fund K-12 education and keep Missouri’s colleges’ budgets at current levels.

But House Republicans have opted not to expand Medicaid coverage, which receives an increased federal reimbursement of 72 percent under the stimulus bill. Democrats have argued for greater use of the funds, but Republicans have been hesitant to use stimulus funds to pay for expanding programs, arguing that a one-time funding influx is unwise to use as a source for expanding services.

Then, there is money for infrastructure. Columbia already has $227,139 in hand through the department of Housing and Urban Development. It plans to use the money to improve sidewalks in the east section of downtown and in East Campus. The city also expects to receive $8 million for the COLT railroad bridge over U.S. 63 north of Columbia and $3.8 million to improve Stadium Boulevard near U.S. 63. However, these may take a while to materialize.

Many of the funds not bolstering programs like Medicaid and education are dispersed directly from existing federal programs. These could amount to an increase of hundreds of millions of dollars benefiting Missourians. The Department of Labor has already provided Missouri with the cash necessary to extend unemployment benefits by $25 a week.

Keeping track of all the provisions in the American Recovery and Reinvestment Act is a challenge. To help citizens stay informed on how it’s being used, Gov. Jay Nixon’s office has set up a Web site where Missourians can track where the money allocated to the state is going. The money for budget stabilization and the money flowing from federal departments can be viewed on the site.

But about a third of all the money available through the stimulus is awarded on the basis of competitive grants. To help Missouri compete for those funds, the site also has a feature for businesses and non-profits to submit ideas for innovative ways to use the money. Over 3,500 ideas have already been submitted.

Nixon has appointed some of his senior staff to review the submissions, including former Columbia State Representative Jeff Harris. A list of funding available for particular uses can be found at http://transform.mo.gov/pdf/ARRAMissouri.pdf under the competitive grants category.

Businesses with an idea they believe would create jobs should review the areas targeted by the grants and tailor their idea to one of those uses.

Caring for Missourians may get stimulus funding

Lawmakers in the Missouri House of Representatives came up with an alternative plan for funding a program designed to reduce the shortage of nurses and other health care workers in Missouri.

Since the beginning of last year, legislators from the Columbia area have been promoting a program that would allow Missouri colleges and universities to open more slots for students who want to become medical professionals.

In his State of the State address, Gov. Jay Nixon announced his support of the Caring for Missourians program, formerly called Preparing to Care. But House Republicans have opposed allocating state money for a program that, during a period of declining revenues, would require an ongoing investment.

However, during preliminary debate over the state’s budget, there was a break in the impasse. House Budget Chairman Allen Icet, R-Wildwood, and Rep. Chris Kelly, D-Columbia, announced an agreement to provide the Caring for Missourians program with $10 million worth of federal stimulus funds.

Kelly and state Rep. Steve Hobbs, R-Mexico, said the $10 million is expected to be included in a separate state budget bill allocating the federal stimulus money.

Kelly credited a bipartisan effort and better lobbying from the higher education community in turning the tide.

“The universities did a very good job of lobbying the program with the members,” Kelly said. “And I believe there was a significant bipartisan coalition who were working together for literally months to make this happen. Vital to that was Steve Hobbs. Steve and I have been working together on this for a long time, and I’m grateful for his work on the issue.”

MU and a coalition of colleges requested $40 million in state funds for education programs that would increase the number of nurses, pharmacists and other health professionals by 20 percent.

Kelly and Hobbs both said the federal money would give the higher education community time to plan specific elements of the broader program.

“The universities agreed that it was better to start moving down the process,” Hobbs said. “Because it’s going to take awhile to put this into effect, and we can use the one-time money to do that.”

Even if the House approves funding for the program, it would still need to find approval in the Missouri Senate. And Senate Appropriations Chairman Gary Nodler, R-Joplin, said he is open to allocating stimulus money to jumpstart Caring for Missourians.

“I think that we should and will use stimulus money for higher education purposes,” Nodler said. “Whether it’s that initiative or whether we find a way to find greater capital improvement opportunities for institutions or maintenance and repair, we will use stimulus money for higher education purposes. That’s one possibility.”