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January/February 2015 Newsletter

 

Northeastern Economic Development Company

2014 Review and 2015 Outlook

Stephen Ursich, Executive Director, of Northeastern Economic Development Company (NEDCO) is pleased to announce that NEDCO has recently completed a very successful 2014 calendar year. In 2014, NEDCO saw an increased volume and ultimately had 8 loans approved by the SBA totaling $9.4 million. That increases NEDCO’s portfolio to include 36 loans totaling $23.2 million, an increase of $11.2 million since the beginning of 2014. In addition, at the end of 2014, NEDCO had four loans pending SBA approval, which total $2.7 million. These projects helped to create 131 new direct jobs and the retaining of 105 jobs in the local economy. “Access to capital at a fair interest rate and the jobs that these small businesses create are key to what we do at NEDCO,” said Mr. Ursich. “Without the use of the SBA 504 program, some of these projects may not have occurred”.

In 2015, Mr. Ursich continues to see NEDCO having solid growth in their 504 loan volume.  Mr. Ursich states: “We continue to receive a great deal of interest in utilizing the 504 Loan program to assist companies in their projects.  We continue to work with a diverse group of small businesses that are looking to see how they might best start and expand their businesses. We expect NEDCO to see real strong growth in 2015 in this area.”  Have a loan or want more information? Call NEDCO today (570-457-6726) or visit our website.  Remember, here at NEDCO, we make it happen.


R.C. Moore

RCMoore2 RC Moore

Success Story

Northeastern Economic Development Company (NEDCO) is pleased to have partnered with People’s United Bank headquartered in Bridgeport, CT for granting an SBA 504 loan to R.C. Moore of Pittston, PA. R.C. Moore is an interstate motor carrier headquartered in Scarborough, Maine. R.C. Moore purchased a 289,277 square foot building that is being utilized as a truck terminal and warehouse facility for its various business processes in the region. This facility will allow R.C. Moore to provide better and faster services to their customers located throughout the United States.

Shawn Moore, CEO of R.C. Moore, Inc., was pleased with his experience of the SBA 504 process: “The use of the SBA 504 loan product allowed us to only need to put a 10% down payment into the project, which allowed R.C. Moore to keep valuable working capital in the company.” R.C. Moore currently employs 46 individuals at the facility and looks to add nearly 30 more jobs in the coming years.

NEDCO is committed to promoting development and cultivating lasting relationships with small businesses in our area. Call NEDCO (570-457-6726) to receive more information on how we can assist in matching you with an SBA program to service your small business needs. Remember, here at NEDCO, we make it happen.


Meet Our New Associate

In November, NEDCO was proud to welcome aboard Rebecca Wharton. Rebecca joined NEDCO through the University of Scranton’s Small Business Internship Initiative. Rebecca has earned her A.A.S in Court Reporting/Captioning in 2009 and A.S. in Accounting in 2013 from Luzerne County Community College. Rebecca is currently a senior at Keystone College, where she is working to obtain her B.S. in Accounting. She is a Notary Public for the Commonwealth of Pennsylvania. She also obtained a Microsoft Office Specialist certification for Excel 2010. Here at NEDCO, Rebecca has been picking up various tasks in the process of loan originations and servicing.


Code Section 179 Expense Election

Have you ever wondered about the annual election to claim immediate deductions, instead of deductions in later years, for business property?  Generally, the cost of property placed in service in a trade or business can’t be deducted in the year it’s placed in service if the property will be useful beyond the year.  Instead, the cost is “capitalized” and depreciation deductions are allowed for most property (other than land), but are spread out over a period of years.  Capitalization delays the tax benefits of business expenditures.  For example, you may spend $50,000 on a new computer system today, but must spread your depreciation deductions over several years.  That’s why the election to take immediate deductions is valuable.

The expense election is made available, on a tax year by tax year basis, under Section 179 of the Internal Revenue Code (the “Code”), and is often referred to as the “Section 179 election” or the “Code Section 179 election.”

Subject to a dollar limit, the election allows you to deduct, in the tax year for which the election is made, the cost of qualifying property (described below) placed in service during the tax year. The immediate deductions allowed are in lieu of capitalization and later depreciation deductions.  The annual deduction limit for 2014 was $500,000, and in the absence of extending legislation is scheduled to decrease to $25,000 for tax years beginning after calendar year 2014.  As discussed below, the deduction is phased out (i.e., gradually reduced) if more than a specified amount of qualifying property is placed in service during the tax year.  The amount is $2,000,000, but again, in the absence of extending legislation is scheduled to decrease to $200,000 for tax years beginning after calendar year 2014.

Qualifying property.  To qualify for the election, the property must be “tangible personal” property.  This means that real estate (buildings and their structural components) does not qualify, nor do intangibles such as patent rights.  However, the following types of property, placed in service in tax years beginning before 2015, also qualify: (1) up to $250,000 of real property consisting of certain leasehold improvements, retail improvements or restaurant property, and (2) off-the-shelf computer software.  Also, to qualify, property must be “purchased.”  Thus, if, for example, you acquired the property in a tax-free exchange, by gift or inheritance, or from an individual or entity to which you bear a close relationship specified in the Code, the property does not qualify.

Dollar limit.  The dollar limit doesn’t mean the election can’t be made for property costing more than that amount.  For example, if you buy a machine for $600,000 in a tax year beginning before 2015, you can elect to immediately deduct $500,000 of its cost for that year.  Also, you can make the election for two or more separate assets, as long as the total cost covered by the election doesn’t exceed the dollar limit for that year. As mentioned above, if the total cost of qualifying property that you place in service during a tax year beginning before 2015 is over $2,000,000 (the “phase-out” amount), the immediate deduction limit is reduced by that extra amount.  For example, if you place in service $2,200,000 of qualifying property in a tax year beginning in 2014, you can make the election for no more than $300,000 of property ($500,000 minus $200,000 [excess of $2,200,000 over $2,000,000]).

Taxable income limit.  If your taxable income from all of your trades or businesses is less than the dollar limit for that year, the amount for which you can make the election is limited to that taxable income.  However, for most types of property, any amount you can’t immediately deduct because of the taxable income limitation is carried forward and can be deducted in later years (to the extent that the applicable dollar limit, the phase-out rule, and the taxable income limit permit).

Recapture.  If you dispose of the property, or stop using it in a trade or business, before the end of the cost recovery period that would have applied to the property had you not made the election for the property, all or part of the amount of the deduction you claimed under the election must be taken back into income (“recaptured”).  Exactly how much will depend on the type of property and how long you used the property in a trade or business. The above information covers the essential elements of the Code Section 179 election.  Clearly, many considerations go into each decision to acquire business assets, and many involve non-tax factors.  However, the election should play a role; accelerated tax benefits may enable you to obtain the property you need earlier and at reduced after-tax costs.  Therefore, you should always consult your tax advisor for a more in depth discussion of this area or for assistance in analyzing the tax aspects of property acquisitions.

-William Giovagnoli, Vice President, NEDCO & Principal at Rainey & Rainey, CPAs

 

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