Depreciation Kills

My annual huge busy-season project is almost complete: a 900-page, 40-state tax return. It's actually not too bad thanks to the wonders of tax software. I have no idea how they did stuff like this before computers. I personally have no desire to learn the intricacies of taxation in Georgia or New Jersey. Usually, I just have to trust that the tax program knows what it is doing and I only have to go through and work out the kinks.

What makes this process painful is depreciation. Federal tax depreciation, at its core, is pretty easy if you enjoy working with tables - the IRS has a prescribed depreciation system, MACRS (Modified Accelerated Cost Recovery System), which everyone must follow. It tells you how long you can depreciate property based on its type and use, and what percentage you can take each year. It is a little bit of a pain to maintain two sets of schedules - a GAAP set for your regular books, as well as the MACRS set - but pretty manageable, especially with computer software.

But there are the wrinkles, such as the Section 179 deduction, which allows businesses an immediate depreciation deduction in the year of purchase. Back when I wsa first getting into tax preparation, the total allowed was $25,000 per year. And the deduction became phased out for businesses that exceeded $100,000 of capital investment for the year, so it was pretty much geared towards small businesses.

What makes my life interesting is when Congress started fooling around with mega-accelerated depreciation in the early part of last decade.

And I guess we have the terrorists to thank for what happened next. The government invented a little jewel known as 30% bonus depreciation. This allowed businesses to take an immediate 30% depreciation deduction in the year of purchase, for new (not used) equipment purchases, in hopes of stimulating the post-9/11 economy.

A couple of years later, the 30% became 50%. And the Section 179 deduction was increased to $100,000, and the maximum investment to $400,000. Suddenly the tax depreciation schedules weren't quite as tidy.

Especially considering that a few of the states were not feeling quite so generous as the federal government and opted not to adopt these new provisions of the Internal Revenue Code. At the time, this didn't really affect me at all, because I had not yet been exposed to the wonderful world of multi-state tax returns.

Bonus depreciation went away after 2004, and Section 179 saw only modest increases from $100,000 to $102,000 to $105,000 to $108,000 to $125,000.

And then the economy took another nosedive. Once again, Congress turned to the tax system in hopes of stimulating capital expenditures. For 2008, 50% bonus depreciation was re instituted, and Section 179 was doubled to $250,000, with a maximum capital investment of $800,000.

A few more states, notably Alabama and Arkansas, decided they could not stomach the bite out of their tax revenue and "decoupled" from federal tax depreciation.

And now it did affect me, because 2008 was the first year I prepared this company's tax return.

Last fall, they jacked it up again. Section 179 again doubled again to $500,000, with the investment limit soaring to an obscene $2 million. And get this. . . they instituted 100% bonus depreciation for new assets purchased after September 2010, which is akin to saying "Screw it. Let's just let 'em expense everything."

I mentioned before that having two sets of schedules was manageable. Well, if you have a company that does business throughout the United States, suddenly the number of sets you need to maintain grows to 25 or 30, because very few of the states are some. Some of them decoupled immediately, some decoupled in 2008, some in 2010. Some allow Section 179 but no bonus. Some have set their own amount of Section 179 that they allow. Some didn't allow it the first time around, but now they do. Some don't really say either way.

You would think there would be a good resource out there to tell you what each state allows. Nope. After many searches, I found one website that does a decent job state-by-state on bonus depreciation, but there is nothing similar for Section 179. Our own depreciation software will throw up some add-back schedules for bonus depreciation that I don't trust at all. They, too, are more focused on the bonus than 179 and I think some of their information is incorrect. I would be curious to see how well our tax software would do at calculating the adjustments, but that is a ton of data entry and that ship already sailed two years ago. So I'm left with a myriad of Excel spreadsheets, calculating my adjustments which may or may not be correct.

In conclusion, I salute the following states for their conformity to the federal provisions: Colorado, New Mexico, Utah, Idaho, Montana, North Dakota, Nebraska, West Virginia, Missouri, I love you all!

I mile-high salute Washington, Wyoming, Nevada, and South Dakota for not imposing an income tax on corporations.

I do not salute Ohio and Minnesota, but I respect them for easy-to-follow add-back methods which don't require a separate depreciation schedule.

I grudgingly respect California and those states which got off board immediately and have stuck with it ever since - at least we know where you stand.

I can not, and will not, respect states who don't really seem to know what they want you to do or how they want you to do it. Cough. North. Cough. Carolina.

I disrespect states such as Pennsylvania and some of its Northeasterly brethren, whose attitude seems to be "We know this is complex and hard to understand. That's why we will do everything we can to make it even more so."

Amen.

Show Me That Smile Again

Hey, thanks, Warner Bros. It's about dang time you got this out on the market.

FIVE YEARS after the first season was released on DVD, the second season will finally be released on April 26, 2011. At this rate, we will have all seven seasons of Growing Pains on DVD in the spring of 2036, when DVDs will be obsolete and I will be planning my retirement.

I have a lot of these episodes taped off Denver's 2 and Albuquerque's 14 from back in 1991, but I would rather have them on DVD .

Season 2 introduces the name of Boner Stabone's father in episode 12 - Sylvester. Wait for it. . .

It also features perhaps the best episode title of the series - Jimmy Durante Died for Your Sins. Never made sense until I looked up who Jimmy Durante was.

And there are many episodes that I haven't seen for many years. I'm pretty excited. They don't make shows like this anymore.

Reflections on Band Pt.II

In later years, one of the things that became commonplace amongst my band peers was to drop out of band for a semester, for a break or to take something else instead. They'd usually come back, but only after missing a semester's worth of activities. Not me. I don't remember ever even considering it.

Not only that, I was also a full participant in choir. We didn't technically have a separate choir class until I think my last year, when they broke up the band hour into a M W F Band section and a T T Choir section. It didn't really matter to me, I was pretty much in on everything music-related at CHS.

As a band student, you do surrender a few opportunites explore other interests or talents. Between junior high and high school, band took a period of my class schedule every day for six years.

On one hand, I look back at what I missed out on in junior high, and it wasn't that much. Most of the electives I did take were stinkers anyways - Fly Tying, Science Fiction Reading, Drawing. My non-band friends were taking stuff like that and then filling in the extra spaces with study hall sessions. So it was probably just as well that I was in band.

But on the other hand, I look back at high school and see some stuff I might have missed out on. I could have taken another semester of accounting or another business or computer class that would have served me well in college. I could have taken journalism and perhaps the yearbook my class produced would have turned out a little better. I could have put a little more time into FBLA. These were all things that I would have enjoyed and probably would have done more for me later in life than band did. But there just wasn't room in the schedule.

And now I think back and wonder - why? Why did I do it?

I think I stayed in band all those years because I needed a thing. Everybody needs a thing in high school. I wasn't good enough at either cross country or track for either of those to be my thing. FBLA could have been my thing, but I didn't join until 11th grade and even then didn't really ever put in the time to be any good in the competitions. So I was left with music as my thing, so of course I wasn't going to quit or take a break. It's good to feel like you're an integral part of something - even though I was probably just as replaceable as anyone else. All it takes to convert a trumpet into a baritone is to find someone willing to do it and give him a horn. The learning curve is pretty minimal.

So did I get anything out of it, other than a self-esteem boost?

There was a self-esteem boost - I made the IML Honor Band twice, and the Western State All-Colorado Honor Band once. I strung together a few good scores at Solo & Ensemble at ASC. During the last semester of my senior year, I switched over to the tuba and became just as accomplished with that as I did with the other things I did during that semester - track (too lazy to go out) and the AP Calculus exam (failed it). But it did make me feel versatile.

Being a band senior at the last concert turned out to be sort of anticlimactic. I think I did get special mention at that last concert for my years of continuous participation - along with a bunch of other seniors. But there was no standing ovation from the audience and no middle schoolers asked for my autograph. So that wasn't the payoff.

I didn't study music or pursue a career in music and I haven't picked up a baritone in 17 years. I don't think anyone ever looked at a college application or a resume of mine and thought - "That's the clincher, right there. Look at all that band that guy did."

It's possible that it made me a better pianist, which is a skill I still use from time to time. And I suppose it was good practice for getting up in front of people and doing stuff.

I guess in the end, what I got out of it was the good times and the memories, which sounds a little shallow. But they are the reasons I can look back and not have any serious regrets about all the time I put in. Here are just a few:

(1) The warm fall afternoons we spent standing on the football field doing nothing as Mrs. Ruybal tried to solve some unsolveable problem with our marching formation. (The problem was us - we sucked at it and no one cared.)

(2) Trips to Pueblo for band competitions where we could go around the Pueblo Mall and think we were in the big city. And getting stuck on La Veta Pass for an hour or two on the way home because of a jacknifed semi.

(3) All the halftimes of all the home basketball games for five years. Seeing how loud we could play "Great Balls of Fire" every time. I'm sure there was never a night when anybody said, "That band really sounds good tonight," as it was mostly a competition between low brass and the drums to see who could make more noise.

(4) Faking my way through an entire day at the Western State Honor Band. I was in way over my head. I couldn't even read most of the music as it was in bass clef and I had never bothered to learn reading any baritone music that wasn't written in treble clef. I'm still not exactly sure how I got picked for that one, because my audition tape was pretty bad as well. Must have been a statewide baritone shortage that year.

(5a) Traveling all the way to Manitou Springs my sophomore year so that the pep band could play at what was Centauri's first state playoff game in football in forever. It was so cold that all of our horns froze and we never played a note. Instead, we just stood there and froze and watched Centauri lose 7-6. I'm sure if we had been able to play, the music would have made the difference.

(5b) Also my sophomore year, the pep band showing up at Standley Lake HS for a first-round state playoff game - our girls were #1 ranked and the odds-on favorite to win the title. Only the band was told we could not play during the game because classes were in session. So we watched as our heavily favorite team lost by two. Again, our our rendition of "Great Balls of Fire" could have been the difference.

(6) Spending down time in the bandroom my freshman year with my friend Jesse rewinding a walkman and alternately trying to memorize the lyrics to "U Can't Touch This" and "Ice Ice Baby".

(7) One of the numbers on our repertoire was "Tequila" - remember Pee Wee's Big Adventure? Anyways, there was a point in the middle where we all stopped playing to shout Tequila!, and Partnership for Drug-Free Colorado had an issue with the band doing this at the games. We had a band conference on this issue and decided that we would still play it but instead shout Centauri! However, some of the bad kids at the game could still be heard to shout Tequila! anyways.

(8a) Anytime the phrase "Centauri hosting Regional Basketball Final" was used, what we heard was "it's time to make confetti." The first time was my sophomore year, the aforementioned 1992 Lady Falcons v. Las Animas, also the last varsity basketball game ever played in the old CHS gym. We made a small bag of confetti and hid it inside the bell of my baritone, scattering it when victory was assured.

(8b) A couple of years later, the same scenario played out except it was Battle Mountain coming to town and it was played in the shiny new CMS gym. This time, we spent the week beforehand producing a larger quantity of confetti. We raided the dumpster of a print shop and then cut up as much as we could with scissors. A good cross-cut shredder would have been useful then. By that time, we all had our super-awesome and super-bulky Starter jackets which we could use to sneak in confetti. Again, we won, and again, the band section became littered with confetti. I'm so glad our confetti efforts never went for naught. An angry custodian told us we had to clean it up, but Mrs. Ruybal said that in fact we did not. Hooray!

(9) On occassion, we played at home football games, which could get a little on the boring side. We engaged in a gum-chewing contest to see how many sticks of gum we could fit in our mouth. The answer is between 75 and 100 - depending on your resolve, how much money you have to spend at concessions, and whether or not you used Big Red as your chewing gum of choice.

(10) The annual Christmas Concert at CHS. Everyone would get all spiffed up, and there was always sort of a general feeling in the air that we were about to participate in something that was truly bigger than all of us.

(11) Twice we were able to take our horn-blasting act on the road to the state tournament. I'm sure crowds at McNichols Arena and the Denver Coliseum felt blessed to have heard us do "Rockin' Robin" like that.

False Information

I may not have been correct in my March 8 post. Although my solution technically works, it kind of doesn't make sense. What do you call the reclassified income? It can't be some sort of gain on acquisition, since the AOCI was part of the purchase price. It can't be income from subsidiary, since all of that has to be eliminated in consolidation.

I asked for an opinion on this paltry accounting dilemma and what we came up with was putting a separate line on the statement of stockholders' equity that takes it out of AOCI and into retained earnings and calling it acquisition of other comprehensive income. So from now on, we should have a nice, clean eliminating entry that actually makes sense.

Reflections on Band Pt.I

So my oldest is going to middle school next year. Recently, he had to fill out his registration forms for sixth grade. He had a host of elective class options to choose from, one of which was sixth grade band. His parents were former band students, so the potential was certainly there for us to apply pressure on him to participate. But we left it up to him. And there were some other classes he found interesting, so he chose not to join band, which is fine, because I'm certain he will still have opportunities to participate down the road if he has a change of heart.

The whole thing led me to reflect on my band career: Why did I participate? What did I gain from it? What did I give up in order to be a part of band for so long?

Band for us started in fifth grade. A lot of kids joined, probably two-thirds of the class, because frankly, there wasn't a whole lot going on in my town in 1986 extracurricular-wise. I played the trumpet both years of elementary school, and while we didn't officially have "chairs" let's not kid ourselves. I was first chair. We moved on to junior high, where I was ostensibly the second chair trumpet in the seventh grade band, although I don't think that we did the chair system there either.

In eighth grade, I made the switch from trumpet to baritone. I had this terrible baritone that had been salvaged from the junk room at the high school. The little screw that held the bell of the horn in place was faulty, so the bell was prone to fall off at random times. So in order to keep it in place, it had to be attached with some heavy duty tape. It was sort of a lose-lose situation. Either your instrument fell apart at inopportune times, or you looked like you bought your instrument from a dumpster diver. Plus, I had to practice at home on weekends and frankly, it sucked having to pack that huge thing on a schoolbus jammed full of rowdy kids.

A couple of times a year, we would have a joint concert with the junior high and high school bands. I don't know about anyone else, but for me personally, I thought the high school band kids were the coolest (again, late 80s/early 90s San Luis Valley - the bar wasn't set real high in terms of cool) and that they sounded awesome. And then during the spring concert, they would honor the graduating band seniors. And it was then that I decided that I would some day be one of those cool band seniors.

By the time we reached high school, a lot of the kids who had started out in fifth grade had dropped out, opting to seek out their own paths to coolness. I upgraded to a better baritone, which wasn't exactly new, but at least stayed in one piece. After being the only baritone in the eighth grade band, I joined a quartet of baritones for my freshman year of high school, some of whom were prone to profanity-laced opinions of the musical abilities of the trumpet section. (One thing about the low brass section during my era: we had a tendency to think that in terms of musical acumen, there was us, and then there was the rest of the band.)

But I had arrived. I was in the high school band. I could look at those eighth graders and say, "Yeah, that was me you heard ripping it up on Kris Kringle's Jingle at the Christmas concert." And I'm sure they were looking at me thinking, "Someday that will be me up there doing Rockin' Robin like that at halftime of Buena Vista v. Centauri."

(Because this is getting lengthy and I'm not close to making my point, I'm going to have to make this a two-parter. Aren't you excited?)

Learn Something New Everyday

When consolidating a subsidiary with accumulated other comprehensive income (loss)from a prior year, you have to eliminate the amount of current year unrealized holding gain (loss) by reclassifying it from other comprehensive income up into net income. Otherwise you're not going to be able to eliminate it through retained earnings, and you'll end up with a funky amount in your consolidated stockholders equity for accumulated OCI which is not technically correct. If only I had taken the time to figure this out last year. . .

Also, I learned what a Section 382 limitation is. When there is an ownership change in a corporation, the amout of net operating loss existing at that date that can be carried forward to offset taxable income in any particular future year is limited. The limitation is calculated as the value of the company at the date of acquisition times the long-term tax-exempt rate.

So I'm that much closer to knowing everything about accounting and tax. Which is still pretty far.

Don't Mean to Get All Churchy on Ya

I do try to read a little scripture every day, although it's usually the low-quality type of study we are encouraged not to do. There is a little bit of excitement whenever a short chapter comes up in my scriptural queue. Something like say, Mosiah 6, which is all of seven verses. If most people were asked what is in Mosiah 6, they wouldn't be able to tell you. Me included, before this time. I decided to read the seven verses keeping an eye out for what is significant about the chapter.

I found the first two verses to be interesting:

And now, king Benjamin thought it was expedient, after having finished speaking to the people, that he should take the names of all those who had entered into a covenant with God to keep his commandments.

And it came to pass that there was not one soul, except it were little children, but who had entered into the covenant and had taken upon them the name of Christ.

So the whole bit about everyone entering into a covenant with God to keep his commandments (save little children) - it sounds a lot like baptism. In fact, if you go back and look at Mosiah 5, it is basically a discussion of the people entering into a covenant and what the covenant meant - phrases such as "born of him" and "called by the name of Christ" are used. It sounds pretty much like the baptismal covenant which is more famously laid out a few pages later in Mosiah 18.

The interesting thing about Mosiah 5 and 6 - although it talks a lot about the covenant, words such as "baptism" and "water" are never used.

So my question is - when did the Nephites begin practicing baptism by immersion as the accompanying ordinance to the baptismal covenant?

Any mentions of baptism before Mosiah 18 seem to be either prophetic references or commandments to be baptized - there are no firsthand accounts. And even the Mosiah 18 story is a bit unusual. Upon performing his first baptism, Alma also immerses himself in the water. It isn't made clear why he does this - whether it's the fact that he had never been baptized himself or if it was some sort of do-over for his years as one of the wicked priests under King Noah. Either way, Alma apparently had the priesthood authority to perform baptism.

Post Mosiah 18, we read more frequent accounts of baptism. So either Alma pioneered the doctrine of baptism among the Nephites, or it was practiced all along but never explicitly mentioned. I'm not sure. I guess I'm still in the "pondering" phrase of study. I haven't prayed about it because the answer wouldn't seem to have any impact on my own salvation - it's basically just a curious matter, kind of like when back in the day groups of missionaries would sit around and try to trace the line of priesthood authority among the Nephites.

Wasn't Going to Happen Anyways

Just so I'm not the last person in the universe to have an opinion on the BYU Honor Code situation, here goes:

It kind of sucks to be that guy. The best BYU basketball team in at least 30 years, and it just went out the window. But as it has been said - it's not like he didn't know the rules.

It's been interesting to hear the opinions of some of the local sports media the past couple of days. I always listen to Vic and Gary in the morning. Vic Lombardi is a sportscaster for CBS4. He attended Notre Dame and admitted that while Notre Dame had an honor code, it wasn't quite as strict as the one at BYU. However, he praised BYU for having values and sticking to them.

Mark Kiszla had a column in the Denver Post this morning about it. He basically said that BYU had done the kid wrong by booting him off the team, but at the same time he seemed to praise BYU for sticking to their guns. That's pretty high praise considering Kiszla is probably the most negative person in the Denver sports media.

Obviously, being a BYU graduate, I don't disagree with the decision and certainly wouldn't expect anything less. When I was a student there, I remember them holding star running back Luke Staley out of a football game because he had dropped a class and wound up under the minimum credit hours. So BYU benched him to keep on the right side of the NCAA law.

While BYU does love their sports, they do take a back seat and you'll never see them sell their souls to the devil for a chance at a national championship the way many other programs around the country do.

As for the notion that the suspension cost BYU a chance at the Final Four - let's be serious, folks. The Cougs were probably not going to the Final Four, with or without Brandon Davies. This is a program that hasn't made the Sweet Sixteen of the NCAA tournament since 1981. Regardless of whether or not they would have received a #1 or #2 seed, they probably would have been out in Round 2 just like every other year. How's that for pessimism?

While I think it is really cool that BYU was 27-2 and ranked #3 in the country just six days ago, I'm not a rabid Cougar fan the way many other alumni are. I'm glad to see when they do well, but I don't walk around sporting BYU gear and I'm too indifferent to even drive to Colorado Springs or Fort Collins to see them play. And I don't have the right TV package, so I can't even watch any BYU games on TV if I wanted to, because I don't get that Mtn. channel.

It would have been interesting to see what would have happened if BYU had made a run at the Final Four, given that the semifinal games are played during the Priesthood session of General Conference, and the final is played on Monday night - smack in the middle of Family Home Evening time. BYU doesn't play football on the Saturday of fall conference and back when I was a student they didn't play basketball on Monday nights unless it started after 10.

And now we'll never get to find out how they would have handled it. Maybe it's a good thing we had this controversy first. It kind of preempts the controversy which was to come.