CONGRESS PASSES EXPENSING PROVISION WHAT WILL PERMANENTLY BENEFIT DISTRIBUTORS
The Section 179 expensing provision- the tax law that allows a small business to treat certain capital investment as expenses- was passed as part of the year-end tax agreement recently approved by Congress. This is a huge victory for small businesses, and the culmination of a lot of work by many trade associations and lobbyists to raise the profile of this issue and get it addressed by Congress.
Earlier this year, ASA joined with other trade associations to express support for H.R. 636, the America’s Small Business Tax Relief Act of 2015, sponsored by Rep. Pat Tiberi.
The legislation sought to make permanent the higher thresholds for section 179 expensing. This tax law allows small businesses to treat certain capital investment as expenses (which means that it can be fully deducted in the year of the expense, instead of depreciating it over a period of years). It started at just $25,000 and over the years, has been ‘temporarily’ extended on a recurring basis at increasingly higher levels (it has been set annually at $500,000 since 2010).
Industry has come to rely on this expensing provision in order to immediately deduct investments in equipment, from racking to lift trucks. This allows small distributors to better invest in modern distribution equipment that increases efficiency.
The section 179 expensing provision has been an important tax issue for many years. Because it has been around for many years, many small aerospace companies had come to rely on the deduction provision as the basis for their own investment decisions.
The section 179 expensing provision had not previously been extended for 2015. This would have meant that your 2015 limits on section 179 expensing would have reverted to $25,000 (not $500,000) and the ability to use the provision began to phase-out when the business invested $200,000 and fully phased out at $225,000. Instead, the legislation as passed applies to up to $500,000 in equipment investment, and does not phase out until the annual investment amount exceeded $2,000,000.