The House passed a tax relief bill which extends the Section 179 expensing at 2014 levels, a high priority for agricultural groups. However, the President has already issued a veto threat on H.R. 636 and it faces an uncertain future in the Senate.
The America’s Small Business Tax Relief Act of 2015 which passed 272-142 would permanently extend a number of business tax provisions, including Section 179, which allows agricultural producers to write off capital expenditures in the year that purchases are made rather than depreciate them over time. It would also let taxpayers expense, for taxable years beginning after 2014, $500,000 of the cost of qualifying property placed in service for the taxable year. That amount would be reduced by the amount the cost of the property exceeds $2 million. Both amounts would be indexed for inflation after the 2015 tax year.
Agriculture requires large investments in machinery, equipment and other depreciable assets. Section 179 allows farmers and ranchers to write off capital expenditures in the year that purchases are made rather than depreciate them over time.
Moreover, H.R. 636: restores and makes permanent rules allowing computer software and certain investments in real property to qualify for section 179 expensing; allows investments in air conditioning and heating units to qualify for section 179 expensing; and makes permanent the five-year recognition period during which an S corporation is subject to an entity-level tax at the highest corporate rate on certain built-in gain of property that it held while operating a C corporation. Finally, the bill makes permanent the basis-adjustment rule for S corporation shareholders, providing consistent treatment of charitable contributions between S corporation shareholders and partners in a partnership.
Ahead of the vote, 34 groups sent a letter to the Speaker of the House Rep. John Boehner (R., Ohio) urging the permanency of Sec. 179 of the tax code.
"Section 179 small business expensing provides agricultural producers with a way to maximize business purchases in years when they have positive cash flow," the letter explained. The groups express concern 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."
American Farm Bureau Federation president Bob Stallman also added that the temporary fixes and extensions to the tax code over recent years don’t give small businesses the certainty they need to invest in the future.
“Farmers and ranchers are continually upgrading and adapting to make their businesses more efficient and profitable. 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 said.
National Cattlemen’s Beef Assn. president Philip Ellis urged the Senate to take up similar legislation and “continue working toward a comprehensive tax reform that provides a stable business environment.”