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CONGRESS VOTES TO INCREASE THE SMALL BUSINESS EXPENSING LIMIT

Date: December 17, 2014

On December 3, 2014, the U.S. House of Representatives passed H.R. 5771 by a vote of 378-46. The U.S. Senate passed H.R. 5771 76-16 on December 16, 2014.

While H.R. 5771 is not ideal, the legislation contains numerous provisions important to small businesses, including provisions that increase small business expensing, reduce the BIG holding period to 5 years, allow for the deduction of state and local sales taxes, and provide depreciation relief for restaurant, retail, and leasehold improvements. These provisions apply to tax year 2014.

NFIB is greatly concerned over reports that bipartisan, bicameral compromise legislation that would have made permanent a number of these expired tax provisions important to small businesses, as well as extending other important provisions for two years, was scuttled by a veto threat from the President.  Because of this failure to reach an agreement on the tax extenders package, and because there was very little time left before Congress adjourns for the year, and a failure to pass H.R. 5771 would result in a substantial tax increase on American small businesses in 2015.

KEY VOTE: The U.S. House voted Thursday, June 12, to make permanent small-business expensing levels of $500,000. The bill passed by a vote of 272-144, with several dozen Democrats joining Republicans to support the measure. It is now up to the Senate to take up this legislation.

Business expensing (Section 179 in the tax code) allows small businesses to immediately deduct the full value of investments in equipment in the year that the investment is made, instead of depreciating the investments over time. This simplifies accounting and frees up cash to be reinvested in the business. There are limits, however, on the amount you can deduct in a year and on the types of property that qualify. 

On Jan. 1 of this year, the increased expensing limits under the American Taxpayer Relief Act of 2012 expired. This caused the Section 179 expensing amount to drop to $25,000, without the ability to expense certain real property. 

To help small businesses, higher limits and the inclusion of real property improvements should be made permanent. This will allow small businesses to plan for the future and expense additional investments, and therefore, enable those businesses to expand and create new jobs. 



Small Business Expensing

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