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Tax changes may help business grow

January 17, 2011
By JOHN PEPIN Journal Staff Writer

SHELTER BAY - A Shelter Bay man who's developing a commercial tomato greenhouse project in Alger County says the new Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act passed by Congress recently could help get his enterprise off the ground.

John Hust of the Shelter Bay Tomato Company said one of the measures of the legislation -which includes several provisions for tax relief and worker investments designed to create jobs and accelerate economic growth- allows a temporary bonus depreciation provision for investments in new business equipment.

Businesses are allowed to recover the cost of capital expenditures over time, according to a depreciation schedule. From Jan. 1, 2008 through Dec. 31, 2009, Congress allowed an additional depreciation allowance equal to 50 percent of the cost of the depreciable property placed in service in those years.

Article Photos

John Hust of Shelter Bay has big plans for a tomato greenhouse in Alger County. The enterprise could grow about 25 pounds of tomatoes per square foot in the 72,450 square-foot facility. New tax laws may help his business grow. (Journal photo by John Pepin)

Under another law, that bonus depreciation was extended through December 2010. Under the new law just passed, businesses are able to expense 100 percent of their investments placed in service after Sept. 8, 2010 and through Dec. 31, 2011.

The Obama Administration, in a White House press release, said the provision could potentially generate more than $50 billion in additional investment in 2011, which would fuel job creation.

Hust said the provision could be helpful to his company because two local banks have offered to finance the business through a small business administration loan. However, the banks won't loan money for negative cash flow-equipment and other things needed to start up the greenhouse before income is generated.

The new tax law would allow those contributing money to the business to expense all of their investment. This could help the project start sooner, as Hust and chief operating officer John Shauver are working to raise $1 million to start the project. But because the business is not a public company, Hust cannot solicit funds for the greenhouse.

The idea of the business is to provide fresh local food for the area, cutting down the average 1,500 miles distance food travels to reach Marquette stores, which in turn, would cut down costs.

The greenhouse, which would be located on a 50-acre parcel owned by the city of Munising west of Munising, would employ roughly 35 workers. An original design of the greenhouse was for 72,000 square feet, but Hust has scaled back the design by half to start.

"It's a long-term plan to grow and employ," Hust said.

The operation would have the ability to produce 25 pounds of tomatoes per square foot.

In addition to the depreciation boost, the new tax law has numerous additional provisions. The White House release detailed several of them including:

- An employee side payroll tax cut of approximately 2 percent: The cut would affect over 155 million workers providing tax relief of about $112 billion next year.

- Extension of emergency unemployment benefits at their current level for 13 months, preventing an estimated 7 million workers from losing their benefits over the next year as they search for jobs.

- The $3,000 refundability threshold established in the Recovery Act for the Child Tax Credit will be extended under the agreement, ensuring an ongoing tax cut to 10.5 million lower-income families with 18 million children.

- The agreement continues a Recovery Act expansion of the Earned Income Tax Credit worth, on average, $600 for families with 3 or more children, and reduces the "marriage penalty" faced by working married families. Together, these enhancements to the EITC will help 6.5 million working parents with 15 million children.

- The new American Opportunity Tax Credit - a partially refundable tax credit that helps more than 8 million students and their families afford the cost of college would be continued under the law.

- The agreement extends the 1603 renewable energy grant program, which is helping to support tens of thousands of jobs in the wind and solar industries.

In Michigan, the White House said the new provisions will result in 5.1 million residents receiving bigger paychecks. Last year, 319,000 families in the state got help from the American Opportunity Tax Credit and 299,590 Michigan residents will have their unemployment benefits extended.

For more information on the tax law, visit: www.whitehouse.gov/issues/taxes/tax-cuts.

John Pepin can be reached at 906-228-2500, ext. 206. His e-mail address is jpepin@miningjournal.net.

 
 

 

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