Hoeven: Senate Passes Tax Increase Prevention Act

Measure Extends Section 179 Expensing, Bonus Depreciation to Help Farmers, Ranchers, Small Businesses

WASHINGTON – Senator John Hoeven today announced that Congress has passed the Tax Increase Prevention Act, legislation that will extend through the end of 2014, certain tax credits and deductions that expired at the end of 2013 or during 2014. Of particular importance to North Dakotans, the measure extends Section 179, a part of the tax code that allows farmers, ranchers and other small businesses to expense the purchase of equipment they need to run their operations. Passage means they can now expense purchases made in 2014.

The bill also includes the Achieving a Better Life Experience (ABLE) Act, a measure cosponsored by Hoeven that allows states to establish tax-free savings accounts for individuals with disabilities for health care related expenses.

Hoeven and other lawmakers were working to make many of the expired tax provisions permanent. President Obama, however, threatened to veto the bill, resulting in a temporary one-year extension. The senator said he will work to make the extensions permanent in the new Congress.

The Tax Increase Prevention Act passed the House last week by a vote of 378-46, and the Senate 76 to 16. It will now go to the president’s desk for signature.

“These extensions, and especially the Section 179 expensing and depreciation provision, will provide immediate tax relief and greater certainty to individuals, farmers, ranchers and small businesses for the current tax year,” Hoeven said. “That makes more cash available to reinvest in the business, which is good not only for small businesses, but also for the economy because it helps businesses grow and hire. Now, we need to work toward comprehensive tax reform, which would make these provisions permanent.”

The Tax Increase Prevention Act includes the following provisions:

  • The Section 179 small business expensing and depreciation limitation, which allows expensing and depreciating expenses for purchases and repairs up to $500,000 of acquired business property.
  • The 50 percent bonus depreciation to property acquired and placed in service during 2014 or 2015 for certain property with a longer production period.
  • Eight provisions for individuals, including the deductibility of state and local sales taxes, the deduction of certain expenses for elementary and secondary school teachers, extension of the “above the line” deduction for qualified tuition and the extension of tax-free distributions from individual retirement plans for charitable purposes.
  • A total of 30 business-related provisions in addition to Section 179 and the bonus depreciation provisions. These include the extension of the research credit and the subpart F exception for active financing income.
  • A research and development (R&D) tax credit that allows companies a 20 percent credit for incremental qualified research expenses or a 14 percent alternative simplified credit for R&D performed in the U.S. For example, Microsoft is on pace to spend over $12 billion on R&D this year, primarily on U.S. jobs.  Other countries are competing for the company’s R&D investments and have lower corporate income tax rates, stable R&D incentives and plentiful R&D talent.  A consistent and stable U.S. R&D tax credit gives businesses like Microsoft an incentive to invest in R&D in the U.S.

Hoeven has been working hard to pass the legislation and reading letters on the Senate floor from North Dakota farmers, ranchers, CPAs, manufacturers and other small business owners documenting the harmful impact failure to pass the bill would have on them.