Federal Tax Incentives: Disabled Access Credit
Background
The Disabled Access Credit is designed to help businesses comply with the Americans with Disabilities Act (ADA). It is available to eligible small businesses whose gross receipts did not exceed $1,000,000 for the preceding taxable year or who employed no more that 30 full-time employees during the preceding year. The tax credit is equal to 50% of the "eligible access expenditures" that exceed $250 but do not exceed $10,250 for a taxable year. See I.R.C. § 44(a).
Eligible Access Expenditures include expenditures for:
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Removing barriers that prevent a business from being accessible to or usable by individuals with disabilities;
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Providing qualified interpreters or other effective methods of making audio materials available to individuals with hearing impairments;
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Providing qualified readers, taped texts, and other methods of making visual materials available to individuals with visual impairments; or
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Acquiring or modifying equipment or devices for individuals with disabilities.
All expenditures must be reasonable and necessary and must meet the standards issued by the Secretary of the Treasury in concurrence with the Architectural and Transportation Barriers Compliance Board. Expenses incurred for new construction are not eligible. Eligible expenditures do not include those to remove barriers that prevent a business from being accessible to or usable by individuals with disabilities that are paid or incurred in connection with any facility first placed in service after November 5, 1990. Other terms and conditions may also apply as outlined below.
For the purposes of this tax credit, disability is defined exactly as in the ADA. A full-time employee is defined as one who is employed at least 30 hours per week for 20 or more calendar weeks in the taxable year. In general, all members of a controlled group of corporations are treated as one person for purposes of credit eligibility, and the dollar limitation among the members of any group will be apportioned by regulation. In the case of a partnership, the expenditure limitation requirements will apply to the partnership and to each partner. Similar rules will apply to S corporations (see Internal Revenue Code sections 1361 through 1379, Subchapter S of Chapter 1) and their shareholders.
The Disabled Access Credit provides a non-refundable credit for small businesses that incur expenditures for the purpose of providing access to persons with disabilities. An eligible small business is one that earned $1 million or less or had no more than 30 full time employees in the previous year; they may take the credit each and every year they incur access expenditures.
Credit Calculation Authority and Additional Details:
I.R.C. § 44(b) Eligible Small Business
For purposes of the credit, an eligible small business is any business or person that:
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(1) Had gross receipts (including that of any predecessor, see I.R.C. § 44(d)(6)) for the preceding tax year that did not exceed $1 million (I.R.C. § 44(b)(1)(A)) or had no more than 30 full-time employees during the preceding tax year (I.R.C. § 44(b)(1)(B)), and
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Gross receipts are reduced by returns and allowances made during the tax year (I.R.C. § 44(d)(5))
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Employee(s) shall be considered full-time if such employee(s) is employed at least 30 hours per week for 20 or more calendar weeks in the taxable year.
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(2) Elects (by filing Form 8826) to claim the disabled access credit for the tax year (I.R.C. § 44(b)(2)).
Eligible Access Expenditures
I.R.C. § 44(c)(1). In General — The term “eligible access expenditures” means amounts paid or incurred (I.R.C. § 44(c)(2)) by an eligible small business for the purpose of enabling such eligible small business to comply with applicable requirements under the Americans With Disabilities Act of 1990 (as in effect on the date of the enactment of this section).
Eligible Access Expenditures Include Amounts Paid or Incurred:
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1. I.R.C. § 44(c)(2)(A) — for the purpose of removing architectural, communication, physical, or transportation barriers which prevent a business from being accessible to, or usable by, individuals with disabilities;
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I.R.C. § 44(c)(4) Expenses In Connection With New Construction Are Not Eligible — The term “eligible access expenditures” shall not include amounts described in paragraph I.R.C. § 44(c)(2)(A) which are paid or incurred in connection with any facility first placed in service after the date of the enactment of this section (after November 5, 1990).
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2. I.R.C. § 44(c)(2)(B) — to provide qualified interpreters or other effective methods of making aurally delivered materials available to individuals with hearing impairments;
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3. I.R.C. § 44(c)(2)(C) — to provide qualified readers, taped texts, and other effective methods of making visually delivered materials available to individuals with visual impairments,; or
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4. I.R.C. § 44(c)(2)(D) — to acquire or modify equipment or devices for individuals with disabilities, or;
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5. I.R.C. § 44(c)(2)(E) — to provide other similar services, modifications, materials, or equipment.
The expenditures must be reasonable and necessary and shall not include expenditures which are unnecessary to accomplish such purposes pursuant to I.R.C. § 44(c)(3).
Eligible access expenditures must meet those standards issued by the Secretary of the Treasury as agreed to by the Architectural and Transportation Barriers Compliance Board and set forth in regulations. Specifically, I.R.C. § 44(c)(5) states the term “eligible access expenditures” shall not include any amount unless the taxpayer establishes, to the satisfaction of the Secretary, that the resulting removal of any barrier (or the provision of any services, modifications, materials, or equipment) meets the standards promulgated by the Secretary with the concurrence of the Architectural and Transportation Barriers Compliance Board and set forth in regulations prescribed by the Secretary.
Disability Definition
I.R.C. § 44(d)(1) provides the term “disability” has the same meaning as when used in the Americans With Disabilities Act of 1990 (as in effect on the date of the enactment of this section). See 42 U.S. Code § 12102. In general, for an individual, this means:
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(1) A physical or mental impairment that substantially limits one or more major life activities,
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In general, major life activities include, but are not limited to, caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working.
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Major life activities may also include the operation of a major bodily function, including but not limited to, functions of the immune system, normal cell growth, digestive, bowel, bladder, neurological, brain, respiratory, circulatory, endocrine, and reproductive functions.
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(2) A record of such an impairment, or
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(3) Being regarded as having such an impairment.
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42 U.S. Code § 12102(c)(3) provides an individual meets the requirement of "being regarded as having such an impairment"
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if the individual establishes that he or she has been subjected to an action prohibited under this chapter because of an actual or perceived physical or mental impairment whether or not the impairment limits or is perceived to limit a major life activity.
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However, this shall not apply to impairments that are transitory and minor. A transitory impairment is an impairment with an actual or expected duration of 6 months or less.
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