by Todd Neeley DTN Staff Reporter
OMAHA (DTN) — The U.S. Senate Finance Committee passed a two-year extension of small-business expensing and bonus depreciation in Section 179 along with a number of tax measures for agriculture as part of a larger tax extenders bill, during a mark-up of the legislation Tuesday.
In addition, the committee passed an amendment to the legislation offered by Sen. Charles Grassley, R-Iowa, to limit the $1 biodiesel tax credit to domestic producers only through 2016. Industry officials have decried an influx of foreign-produced biodiesel imported into the U.S. from Argentina and other countries, saying the credit should be used only to incentivize domestic producers.
The committee passed the bill by a vote of 23 to 3. The bill now goes to the full Senate.
Though the Senate Finance Committee passed the bill with few or no amendments, several members of the committee expressed a need to make changes to the tax code that may or may not include making permanent many of the agriculture provisions.
Sen. John Thune, R-S.D., offered and then withdrew an amendment that would have made permanent a number of tax provisions, including Section 179.
“There are popular provisions Congress will pass each year,” he said. “If you assume Congress will pass provisions each year, there is no cost to the federal treasury. They are temporary in name only.”
Sen. Pat Roberts, R-Kan., offered and then withdrew an amendment to make permanent the 50{62211894bbe3543ea27fa51e74e3ab79f2baeee0f4cbac9ff4b15b5bf1d81fd0} bonus depreciation provision.
Sen. Mark Warner, D-Va., said the 50{62211894bbe3543ea27fa51e74e3ab79f2baeee0f4cbac9ff4b15b5bf1d81fd0} bonus depreciation was passed in 2008 in response to the recession. Estimates are that making the provision permanent would cost about $262 billion annually, he said.
“We have to move past discussions around extenders,” he said. “While we sit and talk about tax reform, the rest of the world is moving.”
The legislation includes a number of tax extensions relevant to U.S. farmers, including key biofuels incentives.
The two-year Section 179 extension indexes for inflation the $500,000 expensing limitation and $2 million phase-out limitation for taxable years beginning after 2014.
Section 179 small-business expensing provides agricultural producers with a way to maximize business purchases in years when they have positive cash flow. After the law expired at the end of 2013, the maximum amount that a small business could immediately expense dropped from $500,000 to $25,000 adjusted for inflation for 2014.
In addition, the bill would extend the 50{62211894bbe3543ea27fa51e74e3ab79f2baeee0f4cbac9ff4b15b5bf1d81fd0} bonus depreciation on new assets placed in service until Dec. 31, 2016.
According to an analysis by Certified Public Accountant Paul Neiffer, the Section 179 provisions would cost about $22 billion initially and would save about $18 billion in 10 years.
The 50{62211894bbe3543ea27fa51e74e3ab79f2baeee0f4cbac9ff4b15b5bf1d81fd0} bonus depreciation provisions, Neiffer said, would cost about $90 billion initially and would save about $87 billion in 10 years.
American Farm Bureau Federation President Bob Stallman said in a statement Tuesday the committee's action was important to agriculture.
“Section 179 and bonus depreciation lend stability and help minimize risk in an unpredictable industry,” he said. “Farmers and ranchers rely on tax provisions that allow them to manage their cash flow and put their money back to work for their businesses and local economies… These tax provisions are an important tool for farmers and ranchers to keep their businesses moving forward. It's time for Congress to make these provisions permanent. Farmers need more than a temporary patch on the tax code: They need the certainty that they can count on these provisions every year as they plan for the future of their businesses.”
The bill moved by the committee also includes:
– An extension of the $1.01-per-gallon second-generation biofuel producer credit through 2016. Second-generation biofuel producers also would qualify for 50{62211894bbe3543ea27fa51e74e3ab79f2baeee0f4cbac9ff4b15b5bf1d81fd0} bonus depreciation on any facilities put into service in 2015 or 2016.
– Companies that install blender pumps, or “qualified clean-fuel vehicle refueling property,” could claim a 30{62211894bbe3543ea27fa51e74e3ab79f2baeee0f4cbac9ff4b15b5bf1d81fd0} credit up to $30,000 per location, for installing blender pumps. Ethanol, biodiesel, natural gas, compressed natural gas and hydrogen pumps would be eligible for the credit for pumps put into service in 2015 and 2016.
– Deductions for local and state sales taxes.
– An extension of tax-free distributions from retirement accounts to charities.
Last year, Congress passed a number of tax extensions that immediately expired in January of this year. As a result, a number of businesses, including farms, faced challenges in completing business plans for 2015.
When it comes to the Section 179 extension, the bill provides a two-year extension that is expected to better help farmers plan ahead on farm equipment purchases.
The legislation also would extend a tax credit for wind energy through Dec. 31, 2016. Agriculture-based states like Iowa, for example, account for a significant portion of wind energy produced in the United States.
During the markup, however, a handful of senators led by Sen. Pat Toomey, R-Ariz., made it known they will continue to pursue legislation aimed at phasing out those tax credits. Sen. Dan Coats, R-Ind., said he believes lawmakers should begin to look at a phase out.
“Taxpayers are forced to write a check to wind energy to produce energy inefficiently,” Toomey said. “…We are misallocating resources.”
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