Tax Provisions of the Americans with Disabilities Act
Bullock, Reginald, Jr., The CPA Journal
Employers should be aware of three tax incentives for helping persons with disabilities, which are as follows: 1) a deduction for the costs of removing architectural or transportation barriers, 2) a credit for costs incurred after November 5, 1990, to provide access to the work place for disabled individuals, and 3) a credit for hiring members of certain targeted groups, which includes individuals having a physical or mental disability.
Election to Deduct Architectural and Transportation Barrier Removal Expenses. A special deduction was created pursuant to IRC Sec. 190, to encourage individual and corporate employers to remove architectural and transportational barriers to the mobility of handicapped and elderly persons. Under IRC See 190, an employer may elect to deduct certain amounts paid or incurred by him for qualified architectural and transportation barrier removal expenses. The election applies to expenditures paid or incurred during the taxable year which, but for the election, are chargeable to the business' capital account.
The deduction for tax years beginning before November 6, 1990, was more favorable than the new law's provision. Up to $35,000 of the expenses paid or incurred to make a facility owned or leased by the employer for use in his trade or business, more accessible to the handicapped and elderly were deductible. The maximum deduction is reduced to $15,000 for tax years beginning after November 5, 1990. Expenditures paid or incurred in a taxable year that are in excess of the amount deductible under IRC Sec. 190 for such taxable year, are capital expenditures and constitute additions to the depreciable base of a company's fixed assets.
An IRC Sec. 190 election is made by claiming the deduction as a separate item on the employer's income tax return for the taxable year in which such election is to apply. The return for that year must be filed no later than the time required by law including extension--for filing a return for the taxable year to which the election applies.
The employer must have available for the period in which the election was taken, all records and documentation, including architectural plans, blue prints, contracts, and any building permits, constituting all the facts necessary for a determination as to the amount of any deduction to which the employer is entitled by reason of the election, as well as the amount of any adjustment to basis made for expenditures in excess of the amount deductible under IRC Sec. 190. In sum, any employer claiming or intending to claim this deduction must keep detailed records from which the amount deductible under IRC Sec. 190 may be computed.
Finally, to qualify for this expense deduction, the remodeling done by or for the employer must bring his facility into conformity with the standards established by the Secretary of the Treasury on the advice of the United States Architectural and Transportational Barriers Compliance Board (See IRS publication 907 for description of such standards). And, for purposes of this deduction, "elderly" refers to persons aged 65 or older, and "handicapped" refers to individuals who are blind or deaf or have difficulty walking or using their hands.
The Disabled Access Credit. The disabled access credit, provided through IRC Sec. 44 is a nonrefundable credit for an eligible small business that pays or incurs expenses after November 5, 1990, to make the business more accessible to persons with disabilities. An eligible small business is one that, for the preceding year, had gross annual revenues of no more than $1,000,000, or employed no more than 30 full time employees. An employee employed at least 30 hours per week for 20 or more calendar weeks in the tax year is considered full time. …