Congress Considers Permanent Deduction for Investments in Equipment Like Production Equipment and Test Equipment

Earlier this year, MARPA 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 seeks to make permanent the higher thresholds for section 179 expensing.  This is the tax law that allows a small business 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 like production equipment and test equipment.  This allows small manufacturing companies to better invest in modern production and test equipment.

This issue was discussed at the Annual Conference in October.

The section 179 expensing provision has been an important tax issue for many years. Because it has been around for many years, many manufacturing companies rely on the deduction provision as the basis for their own investment decisions.

The section 179 expensing provision has not yet been extended for 2015.  This means that your 2015 limits on section 179 expensing are $25,000 (not $500,000) and the ability to use the provision begins to phase-out when the business invests $200,000 and fully phases out at $225,000.  If it were extended as proposed, then it would apply to up to $500,000 in equipment investment, and would not phase out until the annual investment amount exceeded $2,000,000.

There is a very good chance that permanent Section 179 expensing at $500,000 could be included in the year-end tax extenders package, which Congress expects to debate and pass very soon. This would be 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.

If this is an important issue to your business, then you may wish to send letters or emails to your own members of Congress (House and Senate) expressing your opinion on the permanent extension of Section 179 expensing at $500,000.