The Job Creation and Worker Assistance Act of 2002

Headnote

POST-SEPTEMBER 11 TAX RELIEF

IN BRIEF

Order Out of Chaos

The job Creation and Worker Assistance Act of 2002 provides a wide range of tax relief benefits for businesses and individuals affected by the terrorist attacks of September 11, 2001. Many of the provisions focus on the area of lower Manhattan designated the Liberty Zone. The act will provide welcome and much-needed relief for many. but the specifics are necessarily complex and require careful reading. For example, many relief provisions are complicated because they were structured to prevent abuses, such as individuals or businesses doubling their benefits in ways the act does not intend.

PRESIDENT BUSH SIGNED the job Creation and Worker Assistance Act of 2002 into law on March 9, 2002. It contains tax relief for businesses both in lower Manhattan and nationwide that have been affected by the terrorist attacks of September 11, 2001, and many provisions are retroactive to that date. The act also contains various provisions affecting pensions, other employee benefits, and portions of current law that would otherwise expire. A number of controversial proposed measures were removed from the final legislation, including those dealing with health insurance and payroll taxes.

Significant Changes Affect Many Businesses

The following provisions apply to taxpayers nationwide:

Increased first-year depreciation deductions (2001 tax year; tax forms were not yet available when this article was written)

Net operating loss (NOL) carryback period increased to five years (2001 tax year)

A temporary suspension of the 90% limitation on the application of NOLs against the alternative minimum tax (AMT)

Repeal of Gitlitz v. Comm'r. As a result, cancellation of indebtedness income does not increase an S corporation shareholder's basis. (See "Taxpayers Win in Supreme Court Ruling on Excluded Discharge of Indebtedness," The CPA Journal, July 2001.)

The changes described above affecting returns already filed for 2001 may require amended returns. Businesses with substantial capital expenditures on or after the 2001 effective dates or unused NOL carrybacks may be particularly interested in the amended return procedures.

Liberty Zone Major Business-Rid Provisions

The more significant provisions of the act apply to businesses located in lower Manhattan. They include all of the above provisions, plus the following:

An increase in the maximum firstyear expense allowance under IRC section 179

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