WASHINGTON, D.C. — Farmers hoping to see progress by Congress in making certain tax provisions permanent may once again have to wait until late in the year for a resolution.
Legislation regarding Section 179 expensing and bonus depreciation has made some headway during the 114th session of Congress, but nothing appears close to becoming law, said Pat Wolff, tax specialist with the American Farm Bureau Federation.
"My message to every farmer is to pick up the phone, send an email or go see your representative when they’re back in the district," she said. "Tell them it’s nearly impossible to run a business when you don’t know what the tax laws are. Certainty is needed now, not in December."
In December 2014, Section 179, bonus depreciation and other tax provisions were approved by Congress to be retroactive for 2014, but not extended for future years. That scenario could be repeated this year, Wolff said.
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 February, the House approved H.R. 636, America’s Small Business Relief Act. The measure would make Section 179 expensing permanent and set the deduction limit at $500,000. In September, the House Ways and Means Committee passed the Bonus Depreciation Permanency Act (H.R. 2510), which would make 50 percent bonus depreciation permanent.
The Senate Finance Committee, meanwhile, passed legislation in July that extended the tax provisions, including bonus depreciation and Section 179, through 2016.
"The House and Senate negotiating positions are established and that hasn’t changed," Wolff explained. "The issue is how do you make progress, and that’s where they’re stuck."
Movement on these bills isn’t imminent, she said. "With each passing day, it looks more likely something may come in December. I have a high level of confidence there will be legislation before the end of the year, but past that, it’s very difficult to predict."
The House will be slowed by the recent change in its leadership, she said. Last week, Wisconsin GOP Rep. Paul Ryan was elected Speaker, replacing Rep. John Boehner (R-Ohio), who announced his retirement in September. Ryan was previously chair of the House Ways and Means Committee, which will now need to select a new leader.
"I believe everybody wants to get something done, but the House is in complete chaos right now," Wolff said. "Until the House gets itself organized, little will get done."
An attempt to reach Ryan or his staff to discuss a possible extension of the tax provisions and a timeline to name a new committee chair was unsuccessful.
Last-minute extensions, such as those announced in December, "left producers scrambling to make purchases during the last few weeks of the calendar year," said Roger Johnson, president of the National Farmers Union. He wrote to then-Ways and Means chair Ryan and Ranking Committee Member Sander Levin (D-Mich.) in September.
"There was very little confidence that Congress would extend the credits until they were actually passed," he noted. "As a result, long-term planning has been severely impaired."
The National Cattlemen’s Beef Assoc. hopes to see the tax provisions made permanent, but its associate director of Legislative Affairs isn’t expecting that this year. "We’re probably going to see more of the same, where they’ll pass a retroactive tax package later in the year," Kent Bacus said.
Making the provisions retroactive doesn’t help those making equipment purchases because to be eligible for Section 179 expensing, a piece of equipment must be bought and in use during the calendar year, he noted.
"If you don’t have predictable tax codes, you can’t make sound investments," Bacus explained. "I know some who have already made a purchase (of new equipment) in 2015. A half-million-dollar gamble is a huge gamble, no matter who you are."
In addition to bonus depreciation and Section 179, 50 other tax provisions expired at the end of last year. Included are charitable provisions for donating food or conservation easements and renewable energy incentives such as those for biodiesel and electricity from wind. There are also credits for research and development.
