WASHINGTON — The U.S. Congress has passed and President Barack Obama has signed into law a tax-cut package bill that would make several small business tax credits permanent rather than extending them for one or two years, often retroactively, according to several trade associations that supported the bill.
The package of tax cuts, collectively known as Protecting Americans from Tax Hikes (PATH) Act of 2015, passed in the House of Representatives Dec. 16 by a 318-109 vote, and the Senate passed it two days later as part of the larger Omnibus Appropriations Act by a vote of 65 to 33.
President Obama signed the bill that same day, Dec. 18.
Among the provisions in the bill:
- Permanently extend the research and development (R&D) tax credit.
- Permanently extend the Section 179 deduction limits allowing smaller companies to write off capital investments up to $500,000 in the year the purchases were made with a $2 million cap on annual investments, and indexed for inflation.
- Permanently allow businesses to deduct the cost of investments made to leased property and retail space over 15 years in an equal amount each year.
- Extend through 2016 the 7-year recovery period for motorsports entertainment complexes.
- Renew but gradually decrease the bonus depreciation for investments in capital equipment made through 2019. The bill extends the 50-percent bonus depreciation through year-end 2017, after which the rates would fall to 40 perecnt in 2018 and 30 percent in 2019.
The National Federation of Independent Business (NFIB) claims extending these tax credits could lead to tens of thousands of new jobs and billions of dollars in higher economic productivity.
“Reducing the cost of business investment leads to more business investment,” said NFIB CEO and President Dan Danner. “If there's a good argument to be made against that result I'd like to hear it.”
The legislation would permanently restore the $500,000 threshold, the NFIB noted, which fell all the way down to $25,000 last year.
“That would encourage more businesses to make bigger investments, which would generate a lot more economic activity,” Mr. Danner said.
“Businesses that know they can recoup the cost of big-ticket investments, like new machinery or vehicles or farming equipment, are a lot likelier to make the commitment. It's good for the purchaser, of course, but it's also good for the firms that manufacture and market the products because they've got more buyers. It's a way to spur the economy and get things moving for businesses on both sides of the transaction.”
Likewise, National Small Business Association (NSBA) President and CEO Todd McCracken applauded the bill's passage, saying “there is no single item in the tax code more crucial to incentivizing small business investment than Section 179 expensing.
“But for years, small-business owners' ability to plan for these investments has been held hostage by a dysfunctional Congress that has time and again failed to address these critical tax provisions in a timely or long-term manner, forcing many to hold off on growing their business.
“The importance of this agreement to small business is significant and something NSBA has been urging for years. I congratulate Congressional negotiators for striking this very important growth-oriented agreement.
“Today, more small businesses cite administrative burdens as their number one issue with the federal tax code than do the actual financial cost. A major factor in the growing complexity is various sunsets, expiring, and extended tax laws passed by Congress.”
Shaun Donovan, director of the Office of Management and Budget, said, “While no deal is perfect, this agreement achieves the three key conditions set forward by the president and Congressional Democrats: undoing the harmful cuts known as sequestration, investing equally in both national security and economic growth, and avoiding ideological issues.”
The act also permanently extends vital tax credits benefiting 24 million families a year, the White House said, as well as key tax cuts for companies investing in innovation and small businesses, while putting hundreds of billions in business tax breaks on a real path to expiration.