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Congress takes on expired “tax extenders” among broader reform efforts

—By Kyle Cline
National Policy Advisor
Public Policy Team

More than three months following the expiration of around 50 tax credits and deductions commonly known as “tax extenders,” momentum is picking up in Congress to address the issue in the context of a broader tax reform discussion.

In early April, the Senate Finance Committee approved the Expiring Provisions Improvement Reform and Efficiency (or “EXPIRE”) Act, a bill which extends all but two of the expired tax provisions for two more years. All of the expiring provisions supported by Farm Bureau were included in the two-year extension, including Section 179, bonus depreciation, and biodiesel tax credits among others:

Section 179 small business expensing

The maximum $500,000 deduction reduced dollar for dollar when expenditures exceed $2 million. (The deduction did not expire at the end of 2013 but was reduced to $25,000.)

Bonus depreciation

An additional 50 percent bonus depreciation for the purchase of new capital assets, including agricultural equipment.

Cellulosic (second generation) biofuel producer tax credit

The $1.01 per gallon income tax credit for cellulosic biofuel sold for fuel plus the additional first-year 50 percent bonus depreciation for cellulosic biofuel production facilities.

Biodiesel

  • The $1 per gallon biodiesel and renewable diesel tax credit.
  • The 10 cents per gallon small agri-biodiesel producer credit.
  • The $1 per gallon tax credit for diesel fuel created from biomass.

Alternative fuel refueling property

The 30 percent investment tax credit for alternative vehicle refueling property.

Other

  • The production tax credit, which provides an income tax credit of 2.2 cents per kilowatt-hour for the production of electricity using wind energy.
  • The community and distributed wind investment tax credit, which gives the option to take an investment tax credit in lieu of the production tax credit.
  • Fair market test for unrelated business income tax.
  • Provision encouraging donations of conservations easements.
  • Fifty percent railroad track maintenance credit for short line railroads.
  • Enhanced deduction for donated food.
  • Deduction for state and local sales tax.
  • Deduction for tuition and fees for higher education.

In the House of Representatives, Ways & Means Committee Chairman Dave Camp, R-Michigan, recently conducted hearings on Section 179 Small Business Expensing among a few other provisions. Section 179 allows a taxpayer to deduct all or part of the cost of new or used business property rather than depreciating the cost over a longer period of time.

The immediate expensing provided by Section 179 allows farmers and ranchers to cash flow purchases that otherwise would be impossible or that would require them to incur debt expense when purchases cannot be delayed. Uncontrollable weather and unpredictable markets create huge fluctuations in farm profitability. When farmers and ranchers have good years, Section 179 helps them to maximize their income so they are able to invest more for equipment replacement. This averages out against the poor years when cash flow isn’t available to invest, making their businesses more efficient and sustainable in the long term.

In response to recent committee activities, Pat Tiberi, R-Ohio, and Ron Kind, D-Wis., have introduced legislation H.R. 4457 to make permanent a Section 179 small business expensing maximum limit of $500,000 with the dollar per dollar phase-out threshold set at $2 million. On Jan. 1, the maximum deduction shrank to $25,000. The Tiberi/Kind bill retroactively returns the deduction to last year’s level and makes it permanent. H.R. 4457 was also co-sponsored by Rep. Todd Young, R-Ind. The bill could reach the floor in early May.

Members are urged to contact their representatives to express their support for the Farm Bureau-supported provisions during committee consideration of the tax extenders and the ongoing debate of tax reform.

For more information about tax reform, or to learn how to engage on the issue, contact me at 317-692-7845 or kcline@infarmbureau.org.

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