Discussion:Gulf Opportunity Zone Act of 2005

the following question. Can I advise my clients, even if not directly affected by Wilma, that they can take "bonus depreciation - 50%" on all qualified property placed in service after August 28, 2005??

(1) Any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises, or

(2) any gambling or animal racing property.

section explaining the rules. Thanks

I hope this helps!

Tim Doyle, TaxAlmanac Moderator

I also don't see how Section 105 of the Act guarantees that Susanrid's clients could take the depreciation. Section 105 only allows the IRS to extend the deadline that the property can be placed in service on a case-by-case basis. The precise text of that section is:

SEC. 105. SPECIAL EXTENSION OF BONUS DEPRECIATION PLACED IN SERVICE DATE FOR TAXPAYERS AFFECTED BY HURRICANES KATRINA, RITA, AND WILMA.

In applying the rule under section 168(k)(2)(A)(iv) of the Internal Revenue Code of 1986 to any property described in subparagraph (B) or (C) of section 168(k)(2) of such Code--

(1) the placement in service of which--

(A) is to be located in the GO Zone (as defined in section 1400M(1) of such Code), the Rita GO Zone (as defined in section 1400M(3) of such Code), or the Wilma GO Zone (as defined in section 1400M(5) of such Code), and

(B) is to be made by any taxpayer affected by Hurricane Katrina, Rita, or Wilma, or

(2) which is manufactured in such Zone by any person affected by Hurricane Katrina, Rita, or Wilma, the Secretary of the Treasury may, on a taxpayer by taxpayer basis, extend the required date of the placement in service of such property under such section by such period of time as is determined necessary by the Secretary but not to exceed 1 year. For purposes of the preceding sentence, the determination shall be made by only taking into account the effect of one or more hurricanes on the date of such placement by the taxpayer.

This provision for bonus depreciation will not be codified in the Internal Revenue Code. However, it will be found in Sec. 105 of the Act. The general extension of 168(k) is very limited in its scope. It applies only to certain specified types of property, and it merely extends the placed-in-service deadline (not the date of acquisition deadline).

Corrections to my prior comments. The property described in Act Sec. 105 must either be manufactured by a person affected by one of the hurricanes specified in the Act, or the property must be placed in service by such a person. Also, the prohibition against property used in property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises, or any gambling or animal racing property applies only to Gulf Opportunity Zone property. It does not apply to property described in Act Sec. 105.

GO Zone Act Revisited

Almost exactly one year before the enactment of the TRAHCA '06, President Bush signed into law the Gulf Opportunity Zone Act of 2005 (GO Zone Act). It provided tax relief to businesses to encourage redevelopment and capital expansion within the Gulf region affected by Hurricanes Rita, Wilma and Katrina. One of the most popular and widely applicable incentives was a provision for additional first-year depreciation of 50% of the adjusted basis of qualified GO Zone property.