Business relocations made less taxing: The Small Business Jobs act passed last September included an extension of the previously approved bonus depreciation, which allows businesses to recover qualifying capital expenditures much more quickly than ordinary depreciation schedules. But since it expires Dec. 31, companies should act quickly to take advantage of its benefits.

• Author: Kilkelly, Tim
• Position: Real Estate

Has the company thought about relocating but the financial metrics just didn't make sense? Unprecedented economic incentives seem to be making 2011 an ideal year for businesses to reconsider that relocation, expansion or consolidation.

Although intended to spur businesses to invest in machinery and equipment, the extension and subsequent increase of the first-year bonus depreciation allowance is creating a unique financial position for businesses to capitalize on real estate.

The Small Business Jobs Act passed in September 2010 included an extension of the previously approved bonus depreciation, which permits companies to immediately write off 50 percent of the cost of certain depreciable asset expenditures. Originally introduced in 2008, this bonus depreciation allows businesses to recover qualifying capital expenditures much more quickly than ordinary depreciation schedules.

Subsequently, on Dec. 17, 2010, President Barack Obama signed into law the Tax Relief Act of 2010. This act takes bonus depreciation one step further by allowing companies to deduct 100 percent of equipment expenses purchased and placed into service between Sept. 9, 2010 and Dec. 31, 2011, inclusive.

Qualifying equipment for the bonus depreciation includes many items typically associated with an expansion, consolidation or relocation: machinery, office furniture and even computer software make the list. While only certain leasehold improvements qualify for this provision, these potentially con-siderable savings on tangible assets make the prospect of buying or leasing additional real estate more financially feasible for many businesses, particularly since there is no maximum limit placed on the value of qualifying property placed in service.

While the bonus depreciation alone creates some incentives for businesses to invest, there are a few other factors that also make this year an ideal time to make a move. For starters, in most parts of the country, the real estate market still has record high vacancy rates and low sale prices. These low occupancy costs create a unique opportunity for businesses; 2011 may be one of the best times in recent years to make a real estate move.

In addition, while many state and local governments are facing budget shortfalls, most are still willing to offer incentives to businesses to help stimulate growth. These three factors combined--bonus depreciation, low occupancy costs and economic incentives--are creating an almost unparalleled...