Q: I think I’ve heard of this…is this the same thing as Section 179?
A: Yes - More specifically, this bill is known as H.R. 4457 or America’s Small Business Tax Relief Act of 2014.
Quick summary of the bill: Taxpayers will be able to expense up to $500,000 of investments in new equipment and property per year, with the deduction phased out for investments exceeding $2,000,000 (see example below). The bill also restores and makes permanent rules allowing computer software and certain investments in real property to qualify for section 179 expensing, subject to the overall expensing limit. Finally, the bill will allow investments in air conditioning and heating units to qualify for section 179 expensing. The bill is effective for tax years beginning after 2013.
Q: Doesn't the Section 179 tax incentive already exist?
A: Yes, but it's set to expire at the end of 2014 where the expensing limit will drop from $500,000.00 to $25,000.00 if this new bill is not passed (which is dependent on the Senate). Wouldn't be much of an incentive at the lower limit.
Q: Does this bill include Bonus Depreciation?
A: NO. The bill to extend the bonus depreciation incentive has not been sent to the floor for a House vote yet. We'll provide an update on our Blog and LinkedIn page once that is scheduled.
Q: Ok, well does The House approval vote on 6/12/2014 guarantee the bill to be put into law?
A: NO. Although it’s a step in the right direction, The House approval doesn't guarantee anything. It is then up to the Senate to do one of three things:
- Act and pass the bill
- Propose changes to the bill
- Ignore the bill entirely
If the Senate passes the bill it is then sent to the Oval Office for final approval and sign off.
Q: What happens if the Senate ignores the bill?
A: If it's ignored and doesn't pass the Senate before the end of the 113th congress (January 2015) then the bill will be thrown out (we start from scratch) and under Section 179, the maximum deduction a taxpayer may elect to expense will be reduced to $25,000.
For perspective, let's look at a business who purchases or leases $750,000.00 of qualifying equipment in 2015:
If the bill were to pass:
That's $175,000.00 in tax savings that can be used for:
- Hiring additional employees, (good for the economy)
- Investing in revenue generating opportunities & creating taxable income, (good for the economy)
- Investing in additional equipment - driving revenue for the suppliers of the equipment, the resellers of the equipment, and service providers of the equipment, while creating jobs and taxable income across the board, ensuring the growth and health of a business ecosystem, (good for the economy)
- Subscribing to value added services - driving revenues for the service providers and their supplier network, creating jobs and taxable income, ensuring the growth and health of a business ecosystem, (good for the economy)
If the bill does NOT pass:
That's $8,750.00 (or $166,250.00 less) in tax savings that will eliminate each bullet point above and could have a broad negative rippling affect. (NOT good for the economy)
Q: What can I do to help ensure the bill get's passed?
A: Great question!
Sign the petition below - we need over 5,000 signatures for it to be sent. Once we have critical mass, the petition along with a letter will be sent to the U.S. Senate Committee on Finance, the Chairman Ron Wyden, the Ranking Member Orrin Hatch, along with each individual State Senator in the states where we've confirmed support from you!
Spread the word - share the petition and blog post with as many people as possible! (share button below)
Let us know of any questions