Tax
How to Save Taxes and Avoid ADA Lawsuits
July 26, 2016
Practice Area: Tax

In several states across the country, including Arizona, plaintiffs’ lawyers are bringing lawsuits against businesses for alleged violations of the Americans with Disabilities Act (the “ADA”). Businesses can easily avoid the headache and expense of such a lawsuit by ensuring that their facilities comply with the ADA before a lawsuit is filed. The federal government encourages voluntary compliance by providing financial assistance to small businesses that make required changes to older facilities.
Under Section 44 of the Internal Revenue Code (the “Code”) a business generating one million dollars or less in annual gross receipts or having less than 30 or fewer full-time (30 hours per week) employees and that spends at least $250.00 in eligible expenses may qualify for a credit against its income tax liability. The credit is allowed for 50% of eligible expenses in excess of $250.00 up to a maximum of $10,000.00 that are incurred to comply with the ADA. The credit is available in each taxable year that the business makes eligible expenditures. This means that a small business can get a credit against federal income tax of up to $5,000.00 in each year it spends more than $250.00 on eligible expenses. That can go a long way toward paying for improvements that make a facility more accessible and that avoid a potential lawsuit. A business can take advantage of the credit by filing either form 3800 or 8826 with its federal income tax return. Note that any amount with respect to which the credit is claimed cannot be included in the owner’s basis in the re-mediated property.
Eligible expenditures must be (i) related to alterations of existing facilities that are placed in service before November 5, 1990 (as opposed to new construction), (ii) reasonable in amount, and (iii) meet established ADA standards. Examples of eligible expenditures include removing physical or transportation barriers that limit accessibility to disabled persons, providing equipment to assist visually impaired persons, and providing interpreters or similar equipment for hearing impaired persons.
As an alternative, a business may take a deduction of up to $15,000 per year under Internal Revenue Code section 190 for expenditures to remove architectural and transportation barriers that are expensed rather than capitalized. However, to the extent that a business applies this deduction, it will not be eligible for the credit under Code section 44.
Jennings Strouss & Salmon has in the past year defended more than one hundred fifty ADA lawsuits regarding facilities compliance. Our attorneys can provide guidance concerning how to defend these lawsuits, comply with the ADA and take advantage of available tax credits and deductions.
About the Author

Otto S. Shill III
About Jennings, Strouss & Salmon, P.L.C.
Jennings, Strouss & Salmon, P.L.C., has been providing legal counsel for 75 years through its offices in Phoenix and Peoria, Arizona; and Washington, D.C. The firm’s primary areas of practice include advertising and media law; agribusiness; automobile dealership law; bankruptcy, reorganization and creditors’ rights; construction; corporate and securities; employee benefits and pensions; energy; family law and domestic relations; health care; intellectual property; labor and employment; legal ethics; litigation; professional liability defense; real estate; surety and fidelity; tax; and trust and estates. For additional information please visit and follow us on LinkedIn, Facebook, and Twitter.
Please note that this client alert has been prepared by Jennings, Strouss & Salmon, P.L.C. for informational purposes only. These materials do not constitute, and should not be considered, legal advice, and you are urged to consult with an attorney on your own specific legal matters. Transmission of the information contained in this client alert is not intended to create, and receipt by the reader does not constitute, an attorney-client relationship with Jennings, Strouss & Salmon or any of its individual attorneys.
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