Gulf Opportunity (GO) Zone Depreciation
This next segment on bonus depreciation will address bonus depreciation in the Gulf Opportunity Zone, otherwise known as the GO Zone. A few years ago in 2005, Hurricanes Katrina, Rita and Wilma ripped through the United States Gulf Coast causing a natural catastrophe. Overall, the hurricane season of 2005 was one of the most severe and most financially damaging in nation’s history with estimated costs of well over $100 billion perhaps exceeding $200 billion. As a result of this, the government took proactive measures to aid the area in its’ economic and physical recovery by creating favorable investment opportunities in what is known as the deemed the GO Zone. Below is everything you need to know including helpful links and geographic information.
The IRS gives a detailed explanation of the GO Zone is Publication (the PDF is viewable here). In it you can find a listing of all applicable counties that qualify as a GO Zone for their respective storm. Overall, counties from the five states of Alabama, Florida, Louisiana, Mississippi, and Texas are included. For a visual map, click here.
Eligibility and Essential Info on Bonus Depreciation for Property in the Go Zone:
Gulf Opportunity Zone:
1. Placed in service on 08/28/05 through 12/31/07. Placed in service deadline is 12/31/08 for real property, unless asset is in an area where 60% + of housing was destroyed. Then the service deadline is 12/31/10.
2. Both new residential and nonresidential property qualify.
3. Qualified property is MACRS GDS of 20 years or less, off-the-shelf software, MACRS 25 year Water Utility Property and qualified leasehold improvements.
4. 50% Bonus Depreciation
5. Sect 179 deduction increased by $100,000 and Investment Limit increased by $600,000 for property placed in service on or before 12/31/07.
6 .Qualified property must meet all:
- Code Section 168(k)(2)(A)(i), MACRS 20 year or less property, three (3) year computer software, water utility property, qualified leasehold improvement property, nonresidential or residential real (section 1250) property
- 80% or more of the use of the property must be in the GO Zone area and is in the active conduct of the taxpayer’s trade or business in GO Zone area.
- Original use of the property must commence on or after 08/28/05.
- Property must be acquired by taxpayer on or after 08/28/05 and no written binding contract for the acquisition was in affect before 08/28/05.
Section 1250 Property must be placed in service by taxpayer on or before 12/31/07. 12/31/08 or 12/31/10 in the case of residential or nonresidential (section 1250) property.
For any additional information, please do not hesitate to ask us either on the questions page or under this post in the comments. We understand that the nature of this can be confusing. Also, we would like to know whether or not this particular bonus depreciation has had an effect or not. If you have made any investments in the region specifically resulting from the additional depreciation allowances, we would love to hear about it.