Section 179 Extension Needs Quick Congressional Action

At our Fall Convention in Las Vegas, when our Dealer Panel was asked, “What can manufacturers do to help dealers with year-end sales?”, their answer was loud and clear: Contact your U.S. Senator and your Representative in Congress and tell them how critical it is to restore Section 179 of the tax code.

The Section 179 provision in previous tax years allowed farm businesses to take the full depreciation deduction of an item that meets certain specifications—in many cases, machinery—in the current tax year, with a maximum deduction of $500,000 and a phase-out threshold of $2 million.

However, that deduction level has fallen to $25,000 with a $200,000 phase-out for 2014 and will remain there unless Congress acts on tax reform, or a “tax extenders” package, before the end of the year.

The bottom line is that farmers, ranchers, and manufacturers are all in the same boat. All tend to be reluctant to invest capital in new equipment, buildings, and facilities without knowing how the new assets will be treated for tax purposes.

Below are some points we suggest you make in your calls and emails to your Senators and Representatives:

• Congress needs to act quickly to renew certain areas of the expired tax code, with specific focus on Section 179 Small Business Expensing and Bonus Depreciation. Waiting for the new Congress to act in 2015 is not an acceptable option.
   
• Agriculture requires large investments in machinery, equipment, and other depreciable assets, and because of this, farmers and ranchers place great value on tax code provisions such as Section 179 Small Business Expensing and Bonus Depreciation.
   
• The ability to write off capital expenditures in the year that purchases are made, rather than depreciate them over time, is critical to the farm equipment industry.
   
• The ability to immediately expense capital purchases provides a needed incentive for farmers and ranchers to invest in their businesses and offers the benefit of reducing the record-keeping burden associated with the depreciation.
   
• Section 179 Small Business Expensing provides agricultural producers with a way to maximize business purchases in years when they have positive cash flow. Under the expired law, the maximum amount that a small business can immediately expense when purchasing business assets, instead of depreciating them over time, is $25,000, adjusted for inflation.
   
• Strongly encourage restoring the maximum amount of expensing under Section 179 to $500,000, as it was previously set in 2013.
   
• Also encourage the reinstatement of the expired 50% Bonus Depreciation for the purchase of new capital assets, including agricultural equipment.
   
• Point out that failure to renew these expired provisions of the tax code will place additional burdens on farm and ranch families who are asset-rich and cash-poor and already face an unpredictable tax code that encourages the breakup of multi-generational farm and ranch operations.

The Association staff will be happy to assist any member by providing you with your Representatives’ and Senators’ email addresses and telephone numbers. Just call us at 314-878-2304 or email vernon@FarmEquip.org. S