The economic stimulus package puts money on the table for businesses in the form of bonus depreciation. But will companies be agile enough to grab it?

The economic stimulus package that's about to put $300 or more into the pockets of individual taxpayers also contains a nice boost for businesses, in the form of bonus depreciation provisions. The legislation increases the first-year deduction for depreciation on capital equipment purchased in 2008 to 50 percent of the purchase cost.

"If you're going to make a decision to invest in a large piece of capital equipment soon and you know about this 50 percent bonus depreciation that exists in 2008 and may not exist in the future, that's a large part of your decision-making," notes Thomas Wischmeyer, partner with professional services firm McGladrey & Pullen.

While most companies will welcome the opportunity to recoup some of the costs of infrastructure investments for this year, the rule change will likely add to the strain on their tax department and their property, plant, and equipment (PP&E) accounting processes. PP&E is typically one of the biggest line items on a company's financials, and it's among the most complex, requiring a large number of data elements, reports, and process steps.

And it's not always well managed. Many organizations rely on their ERP tools for PP&E work, for example, even though these core transaction systems lack integration with U.S. GAAP and must be proactively configured to produce and capture tax data. Thirty-eight percent of respondents in a March Business Finance online poll reported that their organization uses an ERP system to help calculate depreciation for tax purposes.

That result was a surprise, says Steve Martucci, managing director with Levyti Consulting, "given the complexity of the reporting requirements and the flexibility that's required to manage the effort for tax. My guess is that [ERP is used] for federal U.S. income tax only."

Flexibility is key, because PP&E processes often have to adjust rapidly to events that cause big changes in the company's fixed asset holdings -- mergers, acquisitions, and divestitures, for example. Sixty-one percent of respondents in the Business Finance poll said their organization completes one or two such transactions annually. Nearly 20 percent complete three to five, and 19 percent completed 11 or more such transactions per year.

PP&E accounting around M&A is complex, and companies are sometimes tempted to cut corners. For buyers, "what you want to do is allocate as much [of the purchase price] as you can to the equipment and inventory because you get a faster write-off," says Wischmeyer. "And then you've got to keep track of it. Typically, keeping track of fixed assets is one of those tasks that aren't really high on peoples' list. It's a discipline, and you need to spend the time and energy to do it, but often you get a good return for it."

Failure to put in that effort can have serious results down the line. "If you've got equipment on your fixed asset books that isn't actually there -- say somebody disposed of it three years ago and the people in the plant didn't communicate with accounting, and accounting thinks it's still there --you could eventually be paying personal property tax on something you don't have," says Wischmeyer. "You need to spend the time and energy to do a full-fledged fixed asset inventory to make sure that what you really have in the plant and out in your different locations is what you actually have on your books."

Companies that want to come to grips with these complexities will need to adopt technologies beyond ERP, according to Martucci. "With the tax rules changing for depreciation -- the bonus depreciation -- and the complex tax accounting associated with M&A activity, managing the PP&E process for tax will only become more burdensome unless a global system is adopted," he says.