Gulf Opportunity Zone Act
Zone Area: Certain counties in Alabama (Including Baldwin County), Mississippi and Louisiana
On December 21, 2005, President Bush signed the Gulf Zone Opportunity
Special Depreciation Allowance
You can take a special depreciation allowance for qualified Gulf Opportunity (GO) Zone property (as defined below) you place in service after August 27, 2005. The allowance is an additional deduction of 50% of the property's depreciable basis (after any section 179 deduction and before figuring your regular depreciation deduction). The special allowance applies only for the first year the property is placed in service.
The allowance is deductible for both the regular tax and the alternative minimum tax (AMT). There is no AMT adjustment required for any depreciation figured on the remaining basis of the property.
Qualified GO Zone property. Property that qualifies for the special GO Zone depreciation allowance includes the following.
- Tangible property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less.
- Water utility property.
- Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS.)
- Qualified leasehold improvement property.
- Nonresidential real property and residential rental property.
Other tests to be met. To be qualified GO Zone property, the property must also meet all of the following tests.
- You must have acquired the property, by purchase, after August 27, 2005, but only if no binding written contract for the acquisition was in effect before August 28, 2005.
- The property must be placed in service before 2008 (2009 in the case of nonresidential real property and residential rental property).
- Substantially all of the use of the property must be in the GO Zone and in the active conduct of your trade or business in the Go Zone.
- The original use of the property in the GO Zone must begin with you after August 27, 2005. Used property can be qualified GO Zone property if it has not previously been used within the GO Zone. Also, additional capital expenditures you incurred after August 27, 2005, to recondition or rebuild your property meet the original use test if the original use of the property in the GO Zone began with you.
To determine whether the Go Zone special depreciation allowance is applicable to your property and to determine the benefits available to you, please consult your tax advisor.