Tiberi Bill on Permanent Extension of Small Business Expensing

April 22, 2014

Congressman Patrick Tiberi (R-OH), a House Ways and Means member, recently introduced a bill (H.R. 4457, “America’s Small Business Tax Relief Act of 2014”) that would restore Section 179 to 2013 levels and make the law permanent.

In 2013, Section 179 allowed businesses to write-off the full cost of certain capital investments the year in which they were made. Each qualifying capital investment was limited to $500,000 and the total value of all Section 179 investments a business was allowed to deduct was limited to $2 million. After that point, the value of the deduction was phased-out by one dollar for every dollar that the business’s total write-offs exceeded $2 million.

As of January 1 of this year, the amount businesses are allowed to expense under Section 179 was reduced to $25,000, with a $200,000 limitation.

Congressman Tiberi’s law would restore the 2013 levels, adjust these levels for inflation each year, and make the changes retroactive for all of 2014.

Raising the Section 179 expensing limits to 2013 levels and making them permanent is a positive move. An ideal tax code would allow all businesses of any size the unlimited ability to write off the full cost of a capital investment the year in which they were made. In addition, the uncertainty created by having a temporary tax law that needs to be renewed periodically reduces its effectiveness in promoting business investment and economic growth. In the absence of full expensing for all businesses, a permanent Section 179 is a second-best option.

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