Frequently Asked Questions

Guidelines for Citing BEA Information | ID: 999 | Created: May-26-2011

Why does the capital consumption adjustment for domestic business decline so much in the first quarter of 2012? /1/

The large decrease in the first-quarter capital consumption adjustment primarily reflects an increase in “bonus depreciation” offsets for qualified purchases made during 2010 and 2011 under the Tax Relief, Unemployment Insurance and Job Creation Act of 2010 (TRUIRJCA) and a decrease in the percent of bonus depreciation that businesses are allowed to claim under the act for qualified investments in 2012. TRUIRJCA provides for 50 percent bonus depreciation for qualified investments placed in service during 2012, compared with 100 percent bonus depreciation allowed under the act during 2011.

The capital consumption adjustment (CCAdj) for domestic business declined significantly in the first quarter of 2012 because of a large decrease in capital consumption allowances (CCA) without a corresponding decrease in consumption of fixed capital (CFC). CCAdj converts depreciation that is reported on tax returns on a historical-cost (or “book-value”) tax basis –- CCA -- to depreciation that is on a current-cost basis –– CFC –- and is derived as the difference between CCA and CFC. Special legislative acts, such as TRUIRJCA, include provisions for bonus depreciation that are reflected in the CCA over the time period covered by the acts, but they do not affect CFC. As the acts expire, bonus depreciation that is claimed must be offset as deductions in CCA in future periods.

Source data used to estimate the value of bonus depreciation is from the Treasury Department’s Office of Tax Analysis (OTA) and is subject to periodic revision.
For information on how previous economic stimulus acts affected depreciation and the capital consumption adjustment estimates, please see FAQ number 1002, "How do the economic stimulus acts impact NIPA Corporate Profits?"

/1/ These estimates are presented in NIPA Table 1.7.5.

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