Expired Tax Provisions Could Hurt Equipment Sales

Of the more than 50 tax provisions which expired with the closing of 2013, one thought to be critical to farmers, ranchers and small manufacturers is related to small business expensing. Under the expired Section 179, small business expensing provision, the maximum amount that a small business can immediately expense when purchasing business assets instead of depreciating them over time was $500,000. Unless and until Congress acts that maximum drops to $25,000.

“If the maximum is allowed to drop to $25,000, farmers and ranchers will lose a valuable income averaging tool that could result in higher taxes,” said Pat Wolff, American Farm Bureau Federation tax specialist.

The House Ways and Means Committee has recommended a $250,000 expensing limit. The Senate Finance Committee proposed a one-year extension of the $500,000 limit followed by a $1 million limit. Both the House and Senate levels are permanent and would be indexed for inflation.

Another cash flow-related tax provision which has expired is bonus depreciation, which can be used immediately when new equipment is purchased.

For manufacturers the work opportunity tax credit and the credit for research and development expenses have also expired.

A number of expiring provisions are related to farmer-supported renewable fuels, such as cellulosic fuels and biodiesel. These tax incentives, like those for biodiesel produced from biomass, electricity produced from wind and alternative fuel refueling property, are designed to boost renewable technologies and support development of the necessary market infrastructure.

While lawmakers can reinstate tax extenders retroactively, the unknown status makes it difficult for farmers, ranchers and other small businesses to make important equipment purchasing decisions.

This would be a good time to remind your elected representatives of the importance you, your employees and customers attach to the expired tax provisions.