Mid-South farmers and their accountants will be relieved to know that the Senate Finance Committee has introduced a tax bill that would extend the Section 179 small-business expensing and bonus depreciation through 2016.
Section 179 allows farmers to expense and depreciate property they have purchased or repaired for their operations. Last December, lawmakers restored the maximum Section 179 expensing to 2013 levels. That meant farmers could again claim $500,000 on capital investments for 2014, which had dropped to $25,000 at the beginning of the year. The package also reinstated a 50 percent bonus depreciation for the purchase of new capital assets, including farm equipment.
During floor debate last December, North Dakota Sen. John Hoeven said Section 179 “is important to (producers) so that they don’t see a tax increase, but it also keeps our economy going. Without it, small business will buy and repair less equipment, slowing down our manufacturing base and slowing down our economy. Quite simply, that means fewer jobs. It is not only because small business’s costs are increased, but it is also because of the uncertainty that is created when they don’t know the rules of the road. That is why this fix needs to be done on a permanent basis.”
At the time, Andrew Grobmyer, executive vice president of the Agriculture Council of Arkansas, called for more than a one-year fix. “A one year fix is acceptable but we’d hoped it would be for longer. Hopefully, Congress can get the tax provisions figured out earlier next year and provide more long-term answers on the tax code.”
While the Senate Finance Committee bill wouldn’t make Section 179 a permanent part of tax law, the legislation helps allay fears that a debate on the extension would push up against year’s end.
“Section 179 and bonus depreciation lend stability and help minimize risk in an unpredictable industry,” Bob Stallman, American Farm Bureau Federation President said in a statement. “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.”
Another cheerleader for the tax extenders package is Roger Johnson, National Farmers Union (NFU) President. “Producers and rural residents deserve certainty when it comes the tax needs of their individual businesses,” said Johnson in a letter to the Senate Finance Committee. “NFU applauds the Finance Committee in advancing a two year extenders package well ahead of the end of the year.”
Johnson nodded towards the consequences of lawmakers waiting to make such tax extensions until the legislative session in nearing an end. “The last minute extensions (made at the end of 2014), some of which were retrospective in nature, left producers scrambling during the last few weeks of the year to make purchases. There was very little confidence that Congress would extend the credits until it actually passed. As a result, long-term planning was impossible.”
The NFU provided the following bullet points to explain its support for the tax credits:
- Charitable contributions of real property for the purpose of conservation.
- Extension of bonus depreciation.
- Charitable deduction for contributions of food inventory.
- Extension of increased expensing limitations and treatment of certain real property as section 179 property.
- Extension of the Renewable Electricity Production Credit.
- All extensions that benefit the renewable fuel sector at both the production and consumption levels.
- Deductions for energy efficiency upgrades made to buildings.