House to Vote on Several Permanent Tax ExtendersFebruary 11, 2015
Later this week, the House will vote on several bills that would permanently extend now-expired tax provisions including those to increase the section 179 expensing limits of small businesses, promote charitable giving, and offer tax relief to S corporations. Last week, these measures passed through the House Ways and Means Committee along party lines. All the bills are identical to measures passed by the House during the 113th Congress but were never considered by the then Democratic-controlled Senate.
The America’s Small Business Tax Relief Act of 2015 (H.R. 636)—introduced by Reps. Pat Tiberi (R-Ohio) and Ron Kind (D-Wis.)—would make permanent the now-expired enhanced small business expensing limit of $500,000 and phase-out threshold of $2 million under section 179. These amounts would be adjusted for inflation. Unlike assets that are acquired for the production of income (such as investment property), Section 179 of the tax code gives an owner the option to deduct the costs of assets acquired for business use as expenses in the year they purchased the assets, instead of requiring them to be capitalized and depreciated.
The legislation would be effective for taxable years beginning after Dec. 31, 2014. The Joint Committee on Taxation (JCT) has estimated that it would reduce federal revenues by $77.1 billion over 10 years.
The current Tiberi-Kind bill replicates measures that passed in the House in 2014, first as a stand-alone bill with a vote of 272-144 and again as part of the larger jobs package, the Jobs for America Act (H.R. 4) by a vote of 253-163. Unfortunately, neither of the bills was considered by the Senate.
The House will also vote on the Permanent IRA Charitable Contribution Act of 2015 (H.R. 637) which would permanently extend the exclusion from gross income for qualified charitable distributions from an individual retirement account for individuals age 70-1/2 and older, effective for distributions in taxable years beginning after Dec. 31, 2014. The JCT estimates it would decrease revenues by $8.83 billion over 10 years.
Also under consideration, are two measures benefiting S corporations:
The Permanent S Corporation Built-in Gains Recognition Period Act of 2015 (H.R. 629) which would make permanent the five-year recognition period for built-in-gains tax for S corporations. As well as the Permanent S Corporation Charitable Contribution Act of 2015 (S. 630) which would permanently extend the basis adjustment for stock of an S corporation making charitable contributions of property. Both bills would be effective for taxable years beginning after Dec. 31, 2014, and would reduce federal revenues by a combined total of $1.87 billion over 10 years.
If the upcoming bills are approved without offsets in the House, they may face some procedural hurdles by Democrats in the Senate, and could prevent the measures from advancing in that chamber. Although the Obama administration has not yet issued an official statement on the Ways and Means-approved bills, the president in the past has threatened to veto unpaid-for extenders legislation and there have been no indications that his position has changed. Moreover, Congressional Republicans are unlikely to have the necessary two-thirds majority that would be required in each chamber to override a presidential veto.
NSBA encourages small-businesses owners to contact their representatives and urge them to support the Tiberi-Kind bill when it is considered on the House floor.