Logicalis to CIOs: Want a 100% Tax Deduction for IT Capital Expenses in Tax Year 2011?

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Solution Provider Encourages CIOs, CFOs to Quickly Discuss Benefits of “Bonus Depreciation” Allowance Before December 31st Expiration

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The point of the Bonus Depreciation allowance is to incentivize business leaders to invest now for their future competitiveness.

The “Bonus Depreciation” tax allowance is being heralded by many as a “once in a lifetime” opportunity to make smart business investments. In an effort to stimulate the sluggish U.S. economy, Congress is offering unprecedented tax benefits to encourage IT and other business-related capital investments by December 31, 2011. Logicalis, an international provider of integrated information and communications technology (ICT) solutions and services (http://www.us.logicalis.com), is helping generate awareness and is encouraging IT professionals to understand how this year’s Bonus Depreciation tax benefits allow their company to write off 100 percent of qualified IT investments against their 2011 income taxes instead of spreading the tax deduction over a traditionally longer five-year term.

“The point of the Bonus Depreciation allowance is to incentivize business leaders to invest now for their future competitiveness,” says Greg Baker, Logicalis’ CFO. “Essentially, the government is offering an interest-free cash advance to help spur even more investment activity, particularly in the technology arena. On a macro level, the congressional goal is to create more demand through the supply chain and more jobs downstream. The tax and resulting cash flow benefits are quite compelling and it’s something IT pros should talk to finance colleagues about as the December 31, 2011, deadline approaches.”

What might this look like in practice?

Imagine a scenario where a company makes a $1 million investment in new IT hardware assets just prior to December 31, 2011, and pays a 35 percent income tax rate. The Bonus Depreciation allowance lets the company immediately write off 100 percent of this $1 million investment against 2011 taxable income saving $350,000 in federal tax payments. That money is retained by the business to help it grow, but this optimal outcome is only achieved by intelligently leveraging the tax benefit while it lasts.

Starting in 2012, the Bonus Depreciation allowance begins phasing out and falls to just 50 percent of the qualified investment, so time is clearly of the essence on investment decisions. While Logicalis does not offer tax advice, it is promoting awareness and suggesting IT pros talk with their finance colleagues about how this may benefit their company. The fact is, if a company has a technology investment under consideration right now, the IRS is offering an enormous incentive to accelerate that decision.

What do businesses need to know?

  •     This Bonus Depreciation tax benefit originates from the Small Business Jobs & Credit Act passed in 2010 and starts phasing out in 2012.
  •     The Bonus Depreciation allowance offers a 100 percent write off on qualifying new capital investments during calendar year 2011.
  •     The tax rules are fairly straightforward with no limits on the amount of qualifying investments and with most new IT-related investments qualifying.

Logicalis is a technology firm, not a tax advisor. This information is being provided to encourage discussion between IT professionals and their own CFOs, finance departments and tax advisors. Logicalis assumes no responsibility for the application of this or any other tax allowance to any specific company or organization.

Want to learn more?
Read about the Bonus Depreciation tax allowance, starting on page 5.

About Logicalis
Logicalis is an international provider of integrated information and communications technology (ICT) solutions and services founded on a superior breadth of knowledge and expertise in communications & collaboration, data center, and cloud computing and managed services.

Logicalis Group employs nearly 2,500 people worldwide, including highly trained service specialists who design, specify, deploy and manage complex ICT infrastructures to meet the needs of over 6,000 corporate and public sector customers. To achieve this, Logicalis maintains strong partnerships with technology leaders such as Cisco, HP, IBM and Microsoft.

The Logicalis Group has annualized revenues of over $1 billion, from operations in the UK, US, Germany, South America and Asia Pacific, and is fast establishing itself as one of the leading IT and Communications solution integrators, specializing in the areas of advanced technologies and services.

The Logicalis Group is a division of Datatec Limited, listed on the Johannesburg and London AIM Stock Exchanges, with revenues of approximately $5 billion.

For more information, visit http://www.us.logicalis.com .

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