Permanent Section 179 Fix


by Chris Clayton DTN Ag Policy Editor

OMAHA (DTN) — The Section 179 deduction level would be permanently set at $500,000 for small businesses under a bill passed by the House of Representatives Friday.

Farmers are among the biggest users of the tax break, which helps smaller businesses immediately offset higher equipment costs on tax returns.

Despite a veto threat from President Barack Obama, the vote Friday on the bill was 272-142, just shy of the two-thirds majority needed to override a presidential veto. Thirty-three Democrats joined 239 Republicans to back the bill. Eighteen congressmen did not vote on the bill.

The bill will move to the Senate where Democratic opposition will be tested.

The official bill is H.R. 636, America's Small Business Tax Relief Act. The bill specifically sets permanent the write-off of business equipment costing up to $500,000 for companies that make $2 million or less in total equipment purchases. The bill would also include a rate of inflation change for the deduction.

Over the past several years, Congress has repeatedly set the equipment deduction at $500,000, but each year Congress has fumbled in the timing. Congress didn't pass a bill setting the $500,000 deduction for 2014 until late in December. The equipment deduction then again fell to $25,000 for 2015.

American Farm Bureau President Bob Stallman was one of several leaders of agricultural groups who praised Friday's vote. “Farmers and ranchers are continually upgrading and adapting to make their businesses more efficient and profitable,” Stallman stated in a news release. “Thanks to the immediate expensing that Section 179 allows, farmers and ranchers can put money right back to work by purchasing new equipment and technology with cash instead of taking on unnecessary debt and expenses.”

Stallman added, “Temporary fixes and extensions to the tax code are just not enough. Setting the maximum deduction at $500,000, rather than the current rate of $25,000, would give small businesses the certainty they need to invest in the future.”

The White House Office of Management and Budget came out earlier this week stating the administration supports permanent expensing for businesses, but only if there are offsets in the tax code elsewhere. The president's advisers recommended the president veto the bill. The legislation doesn't provide any offsets and would add $79 billion to the budget deficit over 10 years. The White House said if Congress took that approach with all the annual tax extenders, it would translate into a $500 billion higher budget deficit over 10 years.

Earlier this week, more than 30 agricultural groups representing nearly every sector all signed on to a letter to House leaders calling on them to support the legislation.

“Section 179 small business expensing provides agricultural producers with a way to maximize business purchases in years when they have positive cash flow,” the groups wrote. “Under the expired law the maximum amount that a small business can immediately expense when purchasing business assets instead of depreciating them over time is $25,000 adjusted for inflation. We strongly encourage you to restore the maximum amount of expensing under Section 179 to $500,000 as it was previously set for 2014. We are concerned that the failure to make permanent Section 179 expensing will place additional burdens on farm and ranch families who are asset-rich and cash poor and already face an unpredictable tax code that encourages the breakup of multigenerational farm and ranch operations.”

An IRS report looking at C Corporations in 2011 showed agriculture as the second-highest industry for using Section 179 deductions. Agriculture accounted for more than 17{18648621dc58566f60964eb5074c58f5f97501fe95033d5d25ee4862e704a74a} of Section 179 deductions, behind only wholesalers and retailers. That analysis came from the National Association of Home Builders.…



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