Today the President signed into law the Small Business Jobs Act of 2010, which extends first-year bonus depreciation deductions to projects placed in service in 2010, including projects placed in service before the legislation was passed.

Under the bonus depreciation rule, an owner of qualifying property is entitled to deduct 50% of the adjusted basis of the property in 2010. The remaining 50% of the adjusted basis of the property is depreciated over the applicable tax depreciation schedule. Coupled with short-term MACRS depreciation deductions (e.g., five years), bonus depreciation can cause a project to generate significant tax losses in the early years that can be extremely valuable, particularly if the owner or investor can use the losses to offset other sources of taxable income.