Congressman Patrick Tiberi (R-OH), a House Ways and Means member, recently introduced a bill (H.R. 4457, “America’s Small Business TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. 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 inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. 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 expensingFull expensing allows businesses to immediately deduct the full cost of certain investments in new or improved technology, equipment, or buildings. It alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs. for all businesses, a permanent Section 179 is a second-best option.
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