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House Backs Two Permanent US Tax Extenders

by Mike Godfrey,, Washington

17 June 2014

On June 12, the Republican-led United States House of Representatives passed two bills to make permanent certain tax breaks for small businesses and S corporations, which were part of the pending "tax extenders" provisions that expired at the end of 2013.

The first bill, the America's Small Business Tax Relief Act, introduced by 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 Subcommittee on Trade and Health, would permanently reinstate tax provisions that allow small businesses to immediately deduct the cost of investments in property and qualifying equipment.

On its expiry, the threshold for so-called Section 179 tax relief fell from USD500,000 to USD25,000. The bill passed by the House would reinstate the higher limit, with the deduction being 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.

The second bill, the S Corporation Permanent Tax Relief Act, introduced by Dave Reichert (R – Washington), Chairman of the Ways and Means Subcommittee on Human Resources, would make permanent the shortening of the built-in gains tax-holding period for S corps from ten years to five years to give shareholders quicker access to capital at a reduced tax cost, and also contains a fix to ensure that S corps receive the same treatment as partnerships when it comes to charitable donations.

House Ways and Means Committee Chairman Dave Camp (R – Michigan) welcomed the passage of the two bills. He has been selecting those tax extenders for permanent renewal that, he believes, could provide a boost to businesses, such as the research and development tax credit, approved by the House last month. This is in direct contrast with the agenda of the Democrat-led Senate, which has pushed for a renewal of virtually all of the tax extenders, but for only two years.

"By supporting permanent policies," he said, "Washington can promote certainty for American businesses and generate additional economic growth." He added that "short-term tax policies aren't helping businesses hire new workers or grow the economy. It is time for some permanency and stability in the tax code."

To Democrat accusations that his measures would represent a direct addition to the US fiscal deficit, as he has elected not consider their funding, Camp's reply was that the tax extenders have been extended without funding for many years, and that "short-term tax policies aren't helping businesses hire new workers or grow the economy."

However, Sander Levin (D – Michigan), Ranking Member of the Ways and Means Committee, noted that President Barack Obama "has indicated he will veto the approach – [of] permanent, unpaid-for tax cuts – taken in the Republican bills."

"The measures in front of us today add up to USD75bn in deficit increases [over the ten years to 2024]," he said. "When you add in the R&D credit that passed the House last month, and the eight other provisions that have moved through Ways and Means, it adds up to USD614bn – unpaid-for and permanent."

However, business associations have been enthusiastic in their support of the permanent incentives. The National Association of Manufacturers pointed out that "having certainty over the tax treatment of critical investments will make planning for future investment significantly easier. Capital investment is key to economic growth, job creation and competitiveness," it said, while the Small Business & Entrepreneurship Council added that, "to maximize their innovative capacity and hard work, entrepreneurs need certainty with respect to the tax system as it relates to business investment."

TAGS: individuals | tax | investment | small business | business | tax incentives | United States | tax breaks | individual income tax | business investment | Other | Tax

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