Builders and Contractors Exchange
Weekly Bulletin: 16 March 2007
Tax Incentives Available To Businesses That Improve Accessibility For The Disabled
Title III of the Americans with Disabilities Act (“ADA”) prohibits discrimination against persons with disabilities in places of public accommodation. With a few exceptions, this legislation also affirmatively requires anyone who owns, leases, or operates a place of public accommodation to bring their structure or facility into compliance with the ADA provisions applicable to that particular structure’s physical situation. Congress was concerned with the financial impact of these ADA requirements on small businesses and, as such, developed and made available two significant tax incentives for incurring certain costs associated with improving accessibility for the disabled.
The first is a tax credit, established under Internal Revenue Code (“IRC”) § 44, that can be applied to costs related to architectural adaptations and/or the removal of architectural barriers, purchase of adaptive equipment, provisions for sign language interpreters and a variety of other “eligible access expenditures” made by “eligible small businesses” with the purpose of enabling that small business to comply with the ADA. Only those businesses with revenues of $1,000,000 or less OR 30 or fewer full-time employees may take advantage of a Section 44 tax credit. Moreover, the term “eligible access expenditures” does not include amounts paid for the purpose of removing architectural, communication, physical, or transportation barriers in connection with any new construction (read: any structures first placed in service after November 5, 1990). The amount of the tax credit is equal to 50% of the eligible access expenditures in a year, up to a maximum expenditure of $10,250. There is no credit provided for the first $250 worth of eligible access expenditures, so the maximum tax credit an eligible small business can receive under Section 44 is $5,000.
The IRS has also established a second tax incentive of which any sized business can take advantage. The tax deduction, established under Section 190 of the IRC, allows a business of any size to expense, up to a maximum of $15,000 per year, a variety of costs incurred to make a facility or public transportation vehicle, owned or leased for use in the business, more accessible to and usable by people with disabilities. In short, this deduction may be used for “qualified architectural and transportation barrier removal expenses” in association with a trade or business that complies with applicable accessibility standards promulgated under the ADA.
Finally, under IRC § 44(d)(7), if a Disabled Access Tax Credit is claimed, then no other deduction or credit can be taken for the amount of the credit under any other provision of Chapter 1 of the IRC. In addition, no increase in the adjusted basis of any property will result from the amount of this credit. However, the Barrier Removal Tax Deduction and the Disabled Access Tax Credit can be used in combination if all of the incurred expenditures qualify under both IRC Sections 44 and 190. In such a case, the deduction is equal to the difference between the total expenditures and the amount of the credit claimed. Importantly, although both the tax credit and the deduction can be used annually, a business may not carry over expenses from one year to the next in an attempt to claim a credit or deduction for a previous year’s expense.
Questions?
If you have any questions about this article or any other related matters, please contact:
This article is meant to bring awareness to this topic and is not intended to be used as legal advice.