Both committees who oversee tax policy on Capitol Hill have made steps to update the tax code, starting first with tax extenders which expired last December to address both Section 179 and bonus depreciation.
The Senate Finance Committee announced it will be marking up a tax extenders bill on July 21. Chairman Orrin Hatch (R., Utah) said this is the first time in 20 years where a new Congress has started with extenders legislation having already expired.
“Given that these provisions are meant to be incentives, we need to advance a package as soon as possible. This package is a result of strong bipartisan work, and I look forward to working with the full Committee to ensure members are able to work their will and examine these provisions carefully,” Hatch said.
The Senate’s version will extend 50% bonus depreciation to qualified property purchased and placed in service before January 1, 2017 (before January 1, 2018 for certain longer-lived and transportation assets). The bonus depreciation has been used within the agricultural community for equipment and new buildings.
The Senate’s version also allows for taxable years beginning in 2015 and thereafter, a taxpayer may immediately expense up to $25,000 of Section 179 property annually, with a dollar for dollar phase-out of the maximum deductible amount for purchases in excess of $200,000. The Senate proposal would increase the maximum amount and phase-out threshold in 2015 and 2016 to the levels in effect in 2010 through 2014 ($500,000 and $2 million respectively).
Sen. Ron Wyden (D., Ore.) said, “We need to extend these tax provisions now in order to provide greater certainty and predictability for middle class families and businesses alike. However as we look beyond next week, it’s critical we all recognize and take action to end this stop and go approach to tax policy through extenders.”
However, updating the tax code becomes more difficult heading into an election year. It may be 2017 before any extensive overhaul on the tax code becomes reality as legislators failed to make the move in 2015.
Earlier this month an update from the House Ways and Means Committee said action on key provisions could occur by this fall, ahead of the last-minute December deal which has become the norm over recent years.
In February, the House Ways and Means Committee passed several pieces of legislation to bring more tax certainty to families and small businesses including H.R. 636, America’s Small Business Tax Relief Act of 2015 sponsored by Rep. Pat Tiberi (R., Ohio) which permanently increases small business expensing in the Section 179 of the tax code.
The committee also passed H.R. 641, the Conservation Easement Incentive Act of 2015, which permanently extends the higher deduction limits and potential 15-year carry forward of conservation easement gifts.