As millions in equipment lined the streets of the Farm Progress Show this week, farmers are still without answers on the possibility of a reinstatement of higher Section 179 expensing limits for the 2015 tax year.
Higher expensing levels under IRS Section 179, for the past two years, have allowed farmers and business owners to take the full depreciation deduction of items such as machinery in the current tax year, with a maximum deduction of $500,000 and a phase-out threshold of $2 million.
Without the higher levels, Section 179 is scheduled to fall to $25,000 with a $200,000 phase-out. Without action before the end of the year, it will fall to that level for the 2015 tax year.
Groups concerned about Section 179 levels – and a provision that would extend 50% bonus depreciation on equipment as well as tax credits for biodiesel – signed on to a letter sent by more than 700 organizations urging Congress to act on the issue as it returns to Washington this month.
Earlier this year, the Senate Finance Committee passed a tax extenders package covering Section 179, but it has not been considered by the full Senate. The House Ways and Means Committee passed their own provisions to approve higher Section 179 levels in February, following that closely with full House approval.
That provision, H.R. 636, America's Small Business Tax Relief Act of 2015, would make higher Section 179 levels permanent. The committee also proposed several other bills to extend tax incentives.
In the letter, the groups called for a "seamless, multiyear or permanent extension of the expired and expiring tax provisions, including appropriate enhancements."
The groups argue that the credits are critical to the economy, and failure to extend the credits amounts to a tax increase.
"It will inject instability and uncertainty into the economy and weaken confidence in the employment marketplace," the letter said. "Acting promptly on this matter will provide important predictability necessary for economic growth."
Congress passed tax extenders to cover tax year 2014 in December, leaving little time for farmers and business owners to make purchasing decisions.
A Texas think tank earlier this year said the situation was essentially too little too late. The President of the Institute for Policy Innovation Tom Giovanetti said at the time that the late decision did little to push business investment, which ultimately is the original purpose of the incentives.
"Congress must make those policies clear at the beginning of the tax year, not the very end," Giovanetti wrote in March. "While retroactive, last-minute tax reductions are better than no reductions at all, they won’t achieve their desired aim."