There's added incentive to purchase new equipment this year. Photo courtesy of Schramm Inc.

New Equipment Purchase Incentive

The Jobs and Growth Act can help purchasers of new equipment reduce their tax liability - if they act by the end of this year. The folks at the Associated Equipment Distributors and the Association of Equipment Manufacturers have an obvious interest in this issue and laid out the basics for us:

Because you now can write off more of the cost of new equipment during the first year, the depreciation bonus can substantially reduce your tax liability for the year in which you buy the equipment. That can improve your near-term cash flow. Let's say you purchase a new piece of equipment that costs $100,000. Under the old rules, you could only write off 20 percent of the cost the first year. Now you can write off 50 percent immediately and you also can write off the 20 percent of the remaining 50 percent of undepreciated value that you were entitled to deduct under pre-2003 rules. For a $100,000 machine with a six-year depreciation life, that means you can depreciate $60,000 in the first year for a tax savings of $16,000. You'll still ultimately pay the same amount in taxes, but your tax liability for the first year is reduced and your cash flow will be improved. To qualify for the depreciation bonus, you must make the purchase before Jan.1, 2005.

Some people will always buy new equipment, citing warranties, lower operation costs, less maintenance and lower interest rates as viable reasons. Others are in a position that buying used makes the most sense for their operations so that's what they do. But for those who weigh the decision case-by-case, this nine-month window before the tax law changes might tip the scales to the buy-new strategy. That, in turn, will put more used equipment on the market, which could be coming at a good time. While there was indeed a glut in the used equipment market, most of the good stuff was snatched up pretty quickly.

For more information about the depreciation bonus, visit www.depreciationbonus.org.

Atlas Copco Purchases I-R's Drilling Solutions

The Drilling Solutions business, which dates to Ingersoll-Rand's origins in 1871, manufactures drilling equipment and accessories for the worldwide construction, mining, quarrying and water-well drilling industries. It had 2003 revenues of approximately $300 million and employs approximately 950 people.

The transaction will include production facilities in Garland, Texas; Roanoke, Va.; Yokohama, Japan; and Xuan Hua, China; and Ingersoll-Rand Equipment Stores in Knoxville and Nashville, Tenn.; and Clarks Summit, Pa. The transaction does not include Ingersoll-Rand's France-based Montabert business unit, which manufactures hydraulic rock-breaking equipment.

“Drilling Solutions is a perfect strategic fit, since Atlas Copco is a global market leader in underground drilling, while Ingersoll-Rand is strong in surface drilling, especially in the United States,” says Björn Rosengren, senior executive vice president, Atlas Copco Construction and Mining Technique. “The acquisition will give Atlas Copco a more complete product range, stronger aftermarket organization and better geographical coverage, allowing us to meet the needs of the global mining and construction companies better. What's more, Drilling Solutions employees have a great deal of valuable knowledge and experience, which complements that of our own people.”

A new division will be created within the Construction and Mining Technique business area, with the name Atlas Copco Drilling Solutions. Initially, customers will continue to see the Ingersoll-Rand brand name on Drilling Solutions' products.

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