The Exuberant Accountant - Scott Heintzelman

Last week Pennsylvania’s governor put forth his 2011-2012 budget. As most governors are doing across the country, our governor proposed some difficult spending cuts. Much has been written about his proposed plan, his lack of tax increases, and his deep educational cuts. I thought I would dig a little deeper into the plan.

Governor Corbett is the first governor in over two decades to submit a budget that was lower than the prior year. I personally find this to be refreshing. This recession has impacted everyone from large business, small business, nonprofits…government is just now feeling the effect and the need to cut back as everyone else has.

What I particularly like about this budget are the areas that our governor selected to reduce and the tone he used when communicating this message. Unlike some other states (New Jersey and Wisconsin) and their governors, ours seemed to not be looking for a fight with unions and state employees. While he did propose eliminating 1,500 state jobs, 1,000 of them are currently vacant. He did speak about a pay freeze for state employees (and additional contributions for health insurance and retirement), but in the business and nonprofit world this has already been done. 

Pennsylvania recently made a significant change to the treatment of bonus depreciation, which should create a great benefit for businesses. Here is an excellent summary, which was posted on our firm’s McKonomics blog.

The federal government has provided for the acceleration of depreciation expense on qualified assets for various periods of time since 2001. The main purpose for providing the acceleration of depreciation was to encourage businesses to make investments in their company in an effort to stimulate the economy.

The initial bonus depreciation deduction provided for a 30% deduction to income of eligible assets purchased between September 10, 2001 and September 10, 2004. The bonus depreciation amount was increased from 30% to 50% for assets purchased between May 5, 2003 and January 1, 2005. The second provision of bonus depreciation provided for a 50% deduction to taxable income for assets placed in service after December 31, 2007 and before January 1, 2011. In both instances, the depreciation deduction can be taken on the remaining 50% of the assets value over the useful life of the asset.