An ad-hoc coalition of 77 national and state associations last week called on Congress to extend tax provisions designed to encourage business investment and economic recovery.
In a letter coordinated by Associated Equipment Distributors and the National Association of Manufacturers, the coalition urged House and Senate leaders to extend 100-percent bonus depreciation and higher small business expensing allowances for at least one year.
Under the current bonus depreciation law, businesses of all sizes can write off 100 percent of the cost of new capital assets (machinery and equipment) purchased and placed in service in 2011. Additionally, under Internal Revenue Code Sec. 179, small companies can expense used, as well as new, equipment purchases up to $500,000, provided that total purchases this year do not exceed $2 million. On Jan. 1, 2012, the depreciation bonus will fall to 50 percent and the Sec. 179 expensing level will fall to $125,000 with a $500,000 phase-out cap.
“These historic capital investment incentives, which enjoy bipartisan support, have had a positive impact and incentivized business purchasing and job creation,” the letter said. “However, due to continuing economic uncertainty and slow recovery in certain sectors (e.g., construction), many businesses have not been able to take advantage of these laws.”
President Obama included 100-percent depreciation bonus extension in his jobs plan and House GOP leaders have cited it as one possible area for bipartisan cooperation.
“With depreciation bonus, everybody wins,” AED vice president of government affairs Christian Klein said. “Businesses can reduce their tax bills in the year they make a purchase, which frees up cash and encourages economic activity and hiring; Congress wins because the tax incentive has very little impact on tax receipts over a multi-year period.”
A copy of the letter is available at: www.potomac-law.com/files/DepreciationBonusAssociationCoalitionLetter-20111012.pdf.
More information about the capital investment incentives is at www.depreciationbonus.org.