Hoeven to IRS: Stop Onerous New Tax Rules Impacting Family Farms, Small Businesses

WASHINGTON – Senator John Hoeven today pressed Internal Revenue Service (IRS) Commissioner John Koskinen to stop unfair and onerous new tax rules that are negatively impacting family farms and other small businesses. In a letter to the head of the IRS, Hoeven called on the agency to revise the new Tangible Property Repair Regulations that force family farms and other businesses to meet unrealistic and burdensome requirements to expense the purchase of materials and supplies as well as the cost of repairs.

“We need simple, fair and easy to understand tax rules for our family farms, ranches and all of our small businesses,” said Hoeven. “Overly burdensome rules, like these new tax regulations, impose significant costs in both time and money, costs that our small businesses cannot afford and that make it harder for them to grow and expand. In their current form, these repair expensing requirements are not workable in the real world and must be revisited by the IRS.”

The new tax rules, which went into effect on January 1, 2014, make it difficult for small businesses, family farms and ranches to expense certain costs against their taxable income:

  • a $200 threshold for materials and supplies that are consumed within a year, which includes items such as fuel, hydraulic fluids for machinery, air filters for tractors and combines, tires, pest control chemicals, chemicals for animals and grain bins, and other products; and
  • a $500 threshold for repair costs, with the requirement that the owner establish a capitalization policy; or
  • a $5,000 threshold for repair costs, subject to additional, cost-prohibitive requirements, including retaining a public accounting firm and either maintaining audited financial statements or filing with the U.S. Securities and Exchange Commission.
  • Furthermore, any repair costs over the thresholds can only qualify for expensing if the owner can demonstrate that the repair was not an adaptation, a restoration or a betterment, as defined by the IRS, a complicated and burdensome legal test.

Hoeven stated that these requirements and the low thresholds do not reflect the reality faced by owners of small businesses, family farms and ranches.

A copy of the letter can be found here.