A recent piece of legislature has been passed as a stimulus for larger capital investment opportunities. The overall summary is that manufacturing companies can fully depreciate all of the CAPEX spent in 2011 during the 2011 calendar year.

1.
Tax Relief for Purchasers of Automation Products and Systems
Congress Allows 100% Expensing in 2011
Summary: Companies that put new automation equipment or systems into service in
the US during 2011 will be allowed to deduct the full cost of their investment on their
US tax returns covering 2011.
What’s Different: In enacting the 2010 Tax Relief Act, the President and Congress seek to stimulate
capital investment to jumpstart economic growth. The new law overrides the usual rule that capital
investments are “capitalized” and depreciated over a period of years. Instead, the full cost of the
investment can be deducted in 2011.
What Are The Benefits: Companies can reduce their taxes in 2011 rather than over a period of years,
saving on cash taxes paid to the US government. Essentially, the benefit is the time value of money due
to getting the benefit up front rather than over many years. Tax planners place a high value on
immediate deductibility opportunities.
What This Means: This tax change reduces the net cost of ownership of automation equipment and
systems.
Window of Opportunity: To qualify, the capital investment must be “placed in service” by Dec. 31, 2011.
What Investments Are Included: Almost all automation machinery, equipment and computer hardware
and software are included. Companies should check with their tax advisors to be sure.
What About 2012: Congress extended half of this benefit into 2012. Capital investments placed in
service in 2012 will be eligible for 50% first‐year depreciation.
Example:
Assume an investment in an asset with a cost of $1,000,000
 For a company with a combined federal and state tax rate of 40%, depreciating the asset will
save the company $400,000 of taxes.
 With 100% expensing (2011), the $400,000 in tax savings occurs in the first year.
 Without 100% expensing (other years), the tax savings are the same but are spread over many
years of depreciable life – usually 5 or 7 years.
 The difference is more cash in the bank because taxes are immediately avoided.
 Effectively, this reduces the net cost of investing in the asset.