H.R. 4457

America’s Small Business Tax Relief Act of 2014

Sponsor
Rep. Pat Tiberi

Committee
Ways and Means

Date
June 12, 2014 (113th Congress, 2nd Session)

Staff Contact
Kimberly Betz

Floor Situation

On Thursday, June 12, 2014, the House will consider H.R. 4457, the America’s Small Business Tax Relief Act of 2014, under a rule.  H.R. 4457 was introduced on April 10, 2014 by Representative Pat Tiberi (R-OH). H.R. 4457 was favorably reported, as amended, by the House Committee on Ways and Means on April 29, 2014 by a vote of 21-14.[1]

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[1] http://www.gpo.gov/fdsys/pkg/CRPT-113hrpt432/pdf/CRPT-113hrpt432.pdf

Bill Summary

H.R 4457 provides that Code section 179 expensing will be made permanent at the 2013 levels. Taxpayers will be able to expense up to $500,000 of investments in new equipment and property per year, with the deduction phased out for investments exceeding $2,000,000 (with both amounts indexed for inflation).  The bill also restores and makes permanent rules allowing computer software and certain investments in real property to qualify for section 179 expensing, subject to the overall expensing limit.  Finally, the bill will allow investments in air conditioning and heating units to qualify for section 179 expensing. The bill is effective for tax years beginning after 2013.

Background

According to the Committee, under current law, “a taxpayer is allowed to recover, through annual depreciation deductions, the cost of certain property used in a trade or business for the production of income. Under Code section 179, a taxpayer may deduct immediately (expense) the cost of investment in property, equipment, and computer software rather than depreciating such costs over the recovery period of such property under the Code. From 2010 through 2013, the expensing limitation was $500,000 and the phase out threshold was $2 million. For tax years after 2013, the expensing limitation under Code section 179 drops to $25,000 and the phase out begins once investments exceed $200,000. Computer software and certain types of real property (qualifying leasehold improvements, investments in restaurant property and improvements to retail property) were eligible if placed into service before 2014. However, the amount of real property that could be expensed was limited to $250,000. Investments in air conditioning and heating units do not qualify for expensing.”[2]

Immediate expensing helps cyclical businesses, especially farms, to invest in new property and equipment in profitable years, which averages out against the leaner years when cash flow is not as available to make such investments.  Moreover, by indexing the expensing limits, H.R. 4457 will ensure that small businesses’ ability to expense new investments in property and equipment will keep pace with the cost of such investments in future years.

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[2] See Committee on Ways and Means Fact Sheet: The America’s Small Business Tax Relief Act of 2014

Cost

According to JCT, enactment of the bill would reduce revenues by $73.1 billion over the 2014-2024 time period.

Additional Information

For questions or further information contact the GOP Conference at 5-5107.

Additional Views

STATEMENT OF ADMINISTRATION POLICY
H.R. 4457 — America’s Small Business Tax Relief Act of 2014
(Rep. Tiberi, R-OH, and 17 cosponsors)

The Administration supports making permanent expanded expensing for small businesses and offsetting the cost by closing tax loopholes. Enhanced small business expensing supports small businesses in making investments and creating jobs. Small businesses employ half of the Nation’s workforce and create nearly two out of every three jobs.

However, as with other similar proposals, the Administration strongly opposes House passage of H.R. 4457, which would permanently extend and expand the current expensing provisions for small businesses without offsetting the cost, adding to long-run deficits.

By making expanded expensing for small business permanent without offsets, H.R. 4457 would add $73 billion to the deficit over the next ten years. Moreover, if this unprecedented approach of making major traditional tax extenders permanent without offsets were followed for the other traditional tax extenders, it would add $500 billion or more to deficits, wiping out most of the deficit reduction achieved through the American Taxpayer Relief Act of 2013. Just two months ago, House Republicans passed a budget resolution that required offsets for any tax extenders that were made permanent with other revenue measures.

With this legislation, Republicans are imposing a double standard by adding to the deficit to fund tax breaks for businesses, while insisting on offsetting the cost of measures that help middle-class and working Americans. The cost of H.R. 4457 is many times the cost of the proposed extension of emergency unemployment benefits, which House Republicans insist be offset, and more than the discretionary funding increases for defense and non-defense priorities such as research and development in the Bipartisan Budget Act of 2013, which were offset. House Republicans also are making clear their priorities by rushing to make business tax cuts permanent without offsets even as the House Republican budget resolution calls for raising taxes on 25 million working families and students by letting important improvements to the Earned Income Tax Credit, Child Tax Credit, and education tax credits expire.

The Administration wants to work with Congress to make progress on measures that strengthen the economy and help middle-class families, including pro-growth business tax reform. However, making traditional tax extenders permanent without offsets represents the wrong approach.

If the President were presented with H.R. 4457, his senior advisors would recommend that he veto the bill.