Hoeven: Year-End Funding Legislation Permanently Extends Sec. 179 Expensing for Farmers, Ranchers, Small Businesses

Legislation Extends Bonus Depreciation for Five Years

WASHINGTON – Senator John Hoeven today announced that the year-end funding bill for Fiscal Year 2016 permanently extends Section 179 with the $500,000 limitation, a provision of the Internal Revenue Service (IRS) tax code that allows farmers, ranchers and other small businesses to expense the purchase of equipment they need to run their operations. In addition, the measure extends the bonus depreciation allowance for five years.

Section 179 allows small businesses the option of expensing the costs of qualified equipment and other property up-front, which may reduce the businesses’ administrative burden and be preferable to depreciating the items over time.

“Section 179 and bonus depreciation are important provisions that encourage our state’s small businesses, farmers and ranchers to invest in their operations and acquire the equipment they need,” Hoeven said. “Further, these sections of the tax code help ensure our small businesses have cash on hand, both for future investments and as reserves to get them through tough times. By making Section 179 permanent, we are providing greater flexibility and certainty for our businesses as they make their long-term plans.”

Hoeven has also been working to get the IRS to revise its tangible property expensing regulations. Last week, he announced that the IRS has agreed to raise the safe harbor threshold for expensing the purchase, acquisition or improvement of tangible property from $500 to $2,500 for many small businesses and family-owned farms and ranches.

The change will ease the compliance burden for taxpayers who do not maintain applicable financial statements and would have otherwise faced complex capitalization rules for many basic, common purchases, such as machinery and equipment parts, computers and smart phones. The senator has been pressing the IRS in letters and conversations since January of 2014 to revise the unfair and onerous expensing regulations. The revised threshold takes effect on January 1st, 2016.