Disabled access credit available for tax-exempt entities.

• Author: Rocheleau, Dean A.

The Revenue Reconciliation Act of 1990 added Sec. 44 to provide a credit for expenditures incurred by eligible small businesses that provide access to disabled individuals, as required by the Americans with Disabilities Act of 1990 (ADA).

Sec. 44 disabled access credit

The ADA mandates that businesses must modify their facilities to provide access for disabled persons. Although the ADA was passed in July 1990, the disabled accessibility requirements for public accommodations did not become effective until Jan. 26, 1992. For businesses with 25 or fewer employees and gross receipts of $1 million or less, the effective date was delayed until July 26, 1992; for businesses with 10 or fewer employees and gross receipts of $500,000 or less, the effective date is Jan. 26, 1993.

Many of the costs incurred in order to comply with the ADA may qualify for an income tax credit under Sec. 44. To qualify, an entity must be an "eligible small business." Under Sec. 44(b), an eligible small business is one that has either gross receipts from the preceding tax year of $1 million or less, or employed not more than 30 full-time employees during the preceding tax year. Sec. 44(b) defines a full-time employee as a person who is employed at least 30 hours per week for at least 20 calendar weeks (not necessarily consecutively) in the previous tax year. If one of the above requirements is met, Form 8826, Disabled Access Credit, is used to elect the Sec. 44 credit.

These expenditures must be reasonable and necessary (Sec. 44(c)(3)). Also, the modifications must meet the standards set forth by the Treasury Department in concurrence with the Architectural and Transportation Barriers Compliance Board (Sec. 44(c)(5)). Further, expenses incurred for handicapped accessibility for a building first placed in service after Nov. 5, 1990 (i.e., new construction) are not eligible for the credit (Sec. 44(c)(4)).

Qualifying expenditures ("eligible access expenditures") for the Sec. 44 credit include costs paid or incurred to remove architectural, communication, physical or transportation barriers. However, the credit is available for more than just construction costs (Sec. 44(c)). Expenses to provide interpreters, taped texts and other methods that effectively deliver material to visually and aurally impaired individuals also qualify.

There is an annual dollar limitation to this credit. The amount that can be claimed for any tax year is limited to 50% of the eligible access...