TAX LAW PROVIDES SUBSIDY FOR ASSISTIVE TECHNOLOGY Steve Mendelsohn, Esq. November 21, 1994 When people with disabilities seek employment or public accommodations, it is important that they, their prospective employers and advocates and businesses generally know that several important Internal Revenue Code provisions can significantly reduce the costs of assistive technology to the firms in question. These provisions operate by providing tax credits or tax deductions for some or all of the costs that businesses incur in meeting disability-related costs; including the costs of assistive technology. When a business gets a tax deduction, its income, for tax purposes, is reduced by the amount of that deduction. When a business gets a tax credit, the amount of tax it owes for that year is reduced by the amount of the credit. In general, businesses are eligible for various tax deductions, credits, or other beneficial treatment in connection with the costs they incur in the conduct of their activities. A business gets to deduct the cost of equipment it buys for use by its employees in the fulfillment of their job duties. Likewise, it gets to deduct the costs of assistive technology and devices purchased for that purpose. But beyond this, the law accords some additional advantages for the purchase of assistive technology that may not be available for other kinds of equipment. The first provision worth noting here is the Disabled Access Credit (Internal Revenue Code Sec. 44) which establishes a 50% credit for the first $10,000 (over $250 threshold) of expenses incurred each year by a small businesses in order to comply with the Americans with Disabilities Act (ADA). A small business is defined as one that either had gross revenues of $1,000,000 or less in the previous year or that has fewer than 30 full time employees. What the credit therefore does is allow a small business which spends $5,000 for assistive technology to reduce its tax by that exact amount (minus the $250 exclusion). The credit is available for what are called "eligible access expenditures" made by the business. Assistive technology devices and assistive technology services are not specifically mentioned in any of the four broad categories of such expenses. However, they are clearly included under, "acquisition or modification of equipment or devices for people with disabilities," as well as under, "other similar services, modifications, materials, or equipment." The small businesses need not be under any compulsion of law or be accused of an ADA violation in order to claim the credit. No business is too small to benefit from the credit. Even though the ADA applies only to firms with 15 or more employees, the credit is to limited to firms of this size. No firm is even too poor to benefit from the credit. In years where it has no income the business may be able to carry over the credit to prior or future years in which it does. (IRC Sec. 38) Claiming the credit is not difficult. It only requires the addition of a simple form to the tax return, and most accountants should be quite familiar with it once its applicability is brought to their attention. Another incentive to employment and to the accessibility of public accommodations, is the Architectural and Transportation Barriers Removal Deduction (IRC Sec. 190). Normally, this means structural modifications made to a business. The cost is not fully deductible in the year when the expense is incurred; it must instead by divided over a number of years in the future. The Architectural Barrier Removal Deduction permits up to a $15,000 per year deduction in the same year when the money was spent. It allows this when the expense meets the criteria for the removal of architectural or transportation barriers to "the handicapped" or "the elderly." Many of the expenses covered by this deduction, (e.g. grading of sidewalks, widening of doorways) would not typically be thought of as involving assistive technology, while other covered barrier removal activities would. These include installation of ramps, making pay phones accessible, modifying elevators or installing appropriate identification signs. Unlike the access credit, the barrier removal deduction is available to large and small businesses alike. Businesses must comply with certain design specifications in order for a barrier removal effort to qualify for the deduction. However, architects and many real estate professionals, building owners and managers should be familiar with these American National Standards Institute (ANSI) Standards. Of course, there are cases under the ADA where the law requires that physical and architectural barriers to access be removed, and facilities that have been built or renovated since 1990 should be accessible. The tax code is relevant for situations where the barrier is created at an earlier time and where no substantial renovation or re-modeling has taken place or is planned. This document was produced by the Assistive Technology Funding and Systems Change Project, funded under Contract #HN940400 from the National Institute on Disability and Rehabilitation Research, U.S. Department of Education, to United Cerebral Palsy Associations, Inc., and its subcontractors. The opinions expressed herein do not necessarily reflect the position or the policy of the U.S. Department of Education, and no official endorsement by the U.S. Department of Education of the opinions expressed herein should be inferred. For information, contact: The Assistive Technology Funding & Systems Change Project 1660 L Street, NW, Suite 700 Washington, DC 20036 Tels: (202) 776-0406, (800) 833-8272 (TDD) Fax: (202) 776-0414 E-mail: atfscp@aol.com For individualized technical assistance on AT funding issues, contact: (800) 827-0093 (voice) or (800) 833-8272 (TDD)