Survive the Economic Tsunami – Part I – Start Taking Advantage of Economic Stimulus Dollars and Tax Incentives for ERP and CRM Purchases

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For over 25 years, we’ve successfully survived many tough business cycles in Michigan.  But the current economy is different – it is way beyond tough – and it is not a cycle.  Michigan and the rest of the country have experienced an economic tsunami and have embarked down a long road of major restructuring.    

As a leading Microsoft Dynamics partner specializing in ERP and CRM solutions, The TM Group has worked closely with organizations of various sizes and industries, and we have seen first-hand how the right technology can automate business processes and significantly improve efficiencies.  For most companies, using innovative technology to find new customers and increase profit margins is no longer on the future “wish list” – it is on the “get it done yesterday” list.

To help companies get ahead through the restructuring, we have been investigating the options concerning tax incentives and the American Recovery and Reinvestment Act of 2009 when considering the purchase of Microsoft Dynamics GP, Microsoft Dynamics SL, or Microsoft Dynamics CRM.  There seems to be some hope.  Organizations may be able to take advantage of parts of the economic stimulus offer, allowing them to invest in the technologies that will help them produce high quality goods and services with fewer people and less resources, despite fierce demands to stay both competitive and profitable in a global economy.

We recently met Amy Banninga, the Economic Recovery Coordinator of the Michigan Economic Development Corporation.    Here's some information compiled by Amy Banninga and shared with us:

Using Tax Incentives for new Business Software, Hardware and Services:

There is a bright spot for purchasers of software--bonus depreciation and expensing of purchases. 

Section 1201 of the 2009 American Recovery and Reinvestment Act (ARRA) allows additional first-year depreciation of 50 percent of purchase cost by extending for one year the depreciation bonus created by the 2008 Economic Stimulus Act.

Computer software can be depreciated if it meets all of the following tests:

·   It is readily available for purchase by the general public.

·   It is subject to a nonexclusive license.

·   It has not been substantially modified.

If the software meets the tests above, it may also qualify for the section 179 deduction using the straight line method over a useful life of 36 months.

Under bonus depreciation, a company purchasing qualifying software could take a write-off of 66.6% of the cost in the first year.

Under Section 1202 of the ARRA, companies can expense up to $250,000 in purchases as long as they don't spend more than $800,000.  Expensing is phased-out for each dollar that purchases exceed $800,000 and is eliminated for companies with total purchases of $1,050,000.  New and used equipment is eligible for expensing.

Companies should consult their tax advisors before making these investments, as individual circumstances could determine applicability.

Using Federal Stimulus Money for Technology Training:

There are lots of training funds available to build transferrable skills for workers.  For example, dislocated workers might be trained on how to use a certain CAD/CAM software in general industry use.  However funds are generally not available to train on proprietary company software.

Most public training programs are provided by community colleges and other public educational institutions.  If a private training provider is used, it's generally because the community college does not have an in house resource to supply that training, and so they sub contract with an outside contractor.  However, there are some exceptions, so this is not an absolute rule.

There are several different training models, but these are the basic ways training is requested:

Employer demand training - this is company specific training for new job creation or retraining of existing employees for a new project.  The training may be customized for the employer's needs, but if public dollars are used, the employer must be willing to make their training materials and curriculum public and use the trainer from the community college or other approved institution.  In this case, most employers choose more generic software training to avoid disclosing proprietary information.  The employer is the one asking for the training, on software they have chosen.  As long as that software is used be multiple employers, it generally qualifies.

Dislocated worker training - this is more at the individual's discretion.  There are funds available to support the retraining of these dislocated workers through multiple sources.  These funds are managed through the Department of Labor and Economic Growth and the local Michigan Works!  offices. 

We’d love to hear from you if you have more ideas and specific details about the Federal Economic Stimulus package and how it can benefit companies who need to upgrade their business software and infrastructure.  In Part II of this blog, we’ll cover Microsoft’s latest announcement about a special stimulus package for NonProfits.

The TM Group, with offices in Michigan, is a leading Gold Certified Microsoft Dynamics GP, Dynamics SL and Dynamics CRM partner.

3 thoughts on “Survive the Economic Tsunami – Part I – Start Taking Advantage of Economic Stimulus Dollars and Tax Incentives for ERP and CRM Purchases”

  1. Peter, All the items related to the project including labor and hardware should be able to be applied with this approach, but a company should definitely consult their tax advisors before making such an investment to discuss how it impacts the taxes and balance sheet.

  2. Ken, very interesting post. I am wondering if the approach is for the software only or if can be applied to the other items related to a successful roll-out, which would be hardware, implementation and support?

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