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US Bill Proposes Permanent Small Business Expensing

by Mike Godfrey, Tax-News.com, Washington

16 April 2014

A bipartisan bill has been introduced in the United States House of Representatives to permanently reinstate tax provisions that allow small businesses to immediately deduct the cost of investments in property and qualifying equipment, rather than having to depreciate such costs over time.

The tax relief is one of the "tax extenders" tax relief provisions that expired at the end of 2013. As a result of its expiry, the threshold for such deductions fell from USD500,000 to USD25,000.

The Chairman of the Ways and Means Subcommittee on Select Revenue Measures, Pat Tiberi (R – Ohio), and Ron Kind (D – Wisconsin), a member of the Ways and Means Subcommittees on Trade and Health, have introduced the Section 179 Permanency Act "to help create stability for small businesses leading to their growth and expansion," by providing for the permanent renewal of the tax break.

Currently, the House Ways and Means Committee is considering renewing the provision permanently at a reduced USD250,000 level, or, under proposals from the Senate Finance Committee, the tax break could be extended for two years at USD500,000. However, either renewal proposal could take some time to pass through Congress.

Tiberi said that making the tax relief provisions permanent through the Section 179 Permanency Act would give owners flexibility to reinvest in their businesses and simplify their accounting practices.

Under the Tiberi-Kind bill, taxpayers would be allowed to expense up to USD500,000 of investments in new equipment and property, with the deduction phased out after investments exceed USD2m. Other provisions in the bill include adjustments for inflation, a repeal of the exclusion of air-conditioning and heating units from qualified expenses, and an elimination of the USD250,000 limit on real property qualifying for expensing.

"While small business owners across the country take advantage of Section 179 small business expensing, the fluctuating rules surrounding the measure make it difficult to budget and plan," Tiberi noted. "Kind and I believe that by making the rules permanent, small business owners will have the stability and predictability they need to grow, expand, and create new jobs."

"Employers want and deserve stability and predictability when it comes to tax planning," Kind added. "This common-sense legislation will help small businesses meet their long-term financial goals, so they can continue to grow and hire new workers."

National Federation of Independent Business President and CEO Dan Danner said: "Section 179 expensing is very important to small businesses owners. By allowing small businesses to immediately deduct the cost of new equipment, tax compliance is simplified and capital is freed up to invest in their businesses."

In a blog post for the Heritage Foundation, David Burton pointed out that, "in principle, all business expenses, including capital expenses, should be deductible in the year that they are incurred to prevent a tax bias against investment. [The proposed bill] is an important step in the right direction that would simplify small firms' tax returns, reduce compliance costs, reduce their cost of capital, and aid their cash flow. By setting the Section 179 limit permanently at USD500,000, it also reduces the uncertainty that hinders small firms' ability to plan their investments."

TAGS: compliance | Finance | tax | small business | business | tax compliance | law | accounting | legislation | United States | tax breaks

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