WASHINGTON, D.C. — Despite the need for certainty in federal tax legislation, it’s doubtful the Senate will come to agreement on Section 179 expensing even though a bill making the provision permanent was passed by the House last month, according to the president of the National Farmers Union (NFU).
Representatives of other agriculture-related organizations expressed varying degrees of confidence the Senate would pass a similar bill.
"The likelihood of Section 179 becoming permanent is very close to zero," said Roger Johnson, NFU president. "The one caveat to that is if there’s major comprehensive tax reform. But there are no signs that comprehensive tax reform is under way or that it has any likelihood of passing this session."
Section 179 of the federal tax code refers to the deduction of business expenses for investments such as property and equipment. From 2010-13, small businesses were able to immediately deduct up to $500,000, but last year, that amount was $25,000.
In December, Section 179 and other tax extenders were approved by Congress to be retroactive for 2014, but not for future years.
A bill sponsored by U.S. Rep. Patrick Tiberi (R-Ohio) making Section 179 permanent passed in the House Feb. 13. House Resolution 636, America’s Small Business Tax Relief Act, sets the deduction limit at $500,000. The bill passed 272-142.
The Senate is focused on tax reform and has asked for recommendations by the end of May from its various working groups, said Pat Wolff, tax specialist with the American Farm Bureau Federation.
"The individual provisions (such as Section 179) will have to wait," she said. "We’ve asked them to move before then but there doesn’t seem to be any action. The likely outcome will be another short-term extension."
The passage of the House bill so early in the year makes Wolff hopeful the Senate won’t wait until the end of 2015 to act. "It increases the likelihood something may happen sooner rather than later. No one wants a repeat of last year. But it takes the House, the Senate and the President to come to an agreement. We need to get the deduction across the finish line."
President Barack Obama has said he’d veto the bill as passed by the House because it doesn’t include spending offsets in other areas to pay for it, Wolff noted.
"Knowing that the President has issued a veto threat paints a different canvas in the Senate. This sometimes does seem like the movie ‘Groundhog Day;’ we have the same thing happening over and over."
No companion legislation to the House bill has been introduced in the Senate, Johnson noted. "Usually, if they want to get something done, you’ll have some companion legislation. A lot of people would like to see comprehensive tax reform. We certainly would," he said.
In November, Johnson said he spoke to a farmer with a sizeable operation who wanted to know what Johnson thought would happen with Section 179. Referring to a potential equipment purchase, the farmer told him, "If 179 is passed, it’s a no-brainer, I buy it. But if not, it’s a no-brainer, I lease it."
The frustration farmers and other small businesses have is also felt on Capitol Hill, Johnson said. "It’s just become very dysfunctional. It’s very difficult to get anything done. The overwhelming political agenda tends to squish out a bunch of things."
The president of the American Soybean Assoc. (ASA) is remaining positive Section 179 will become permanent. "I think it’ll get through the Senate and it will be signed (by the President)," Wade Cowan said. "(Section 179) is one of the very best things we can have for cyclical businesses.
"There’s a little bit of realist there and a little bit of optimist. When it comes down to it, the President knows we need an improving economy. You can be pessimistic, but that’s not the message I want to get out."
ASA members and other farmers should be vocal about the situation, he said. They should contact their legislators and let them know how a permanent Section 179 would improve the economy.
"Every constituent wants a better economy," he explained. "We all want a better life for our families. It’s not just for us in the agricultural community, but for people in urban areas."
Kent Bacus, associate director of legislative affairs for the National Cattlemen’s Beef Assoc., is also hopeful about the chances for permanent legislation. "Tax reform has very strong support in the Senate," he noted. "And the vote (for H.R. 636) was pretty overwhelming in the House. I’m cautiously optimistic, but optimistic, we’ll see some progress."
It’s difficult for farmers and other small business owners to plan and make long-term investments without permanent tax provisions, Bacus said.
"Permanence is important to provide some long-term certainty," he explained. "When the government changes things so often, it creates uncertainty and with uncertainty, it’s harder to get financing."
It’s encouraging that the precedent has already been set for the $500,000 limit, Bacus said. The amount was approved by the House, Senate and Obama last year. "I don’t think the Senate will wait until the very end," he said. "It would just show business as usual and not a lot of action under the Republican leadership in the Senate."
Tiberi was pleased his House colleagues understood the importance of Section 179 to small business owners.
"The predictability of making the increased levels of Section 179 of the tax code permanent would help reduce compliance costs for small businesses, reduce the cost of capital and improve cash flow allowing employers to invest, expand and create jobs," he said.
The Congressman is hopeful the Senate will pass similar legislation, said Breann González, Tiberi’s communications director.
"I’d encourage people to talk with their senators and tell them your story," she said. "Give them concrete examples of how it affects them. You have to have certainty in order to plan."
