One of Sen. Charles Grassley’s priorities for the lame-duck session of Congress is to approve a package of tax breaks that would make it more attractive for farmers and other small businesses to buy larger equipment and machinery.
Grassley, an Iowa Republican, told reporters in a weekly conference call that Sen. Ron Wyden, D-Ore., chairman of the Senate Finance Committee, is working with House Ways & Means Chairman Dave Camp, R-Mich., to try to move the same bill of tax extenders through both chambers to speed up the process and avoid conference talks, Grassley said.
Grassley said one of his goals in the lame-duck session is to see a bill that would include returning the Section 179 deduction to $500,000 for business equipment, including farm machinery. After losing an extension at the end of last year, the Section 179 deduction was returned to a $25,000 cap for 2014.
“I have regularly heard at my town meetings from constituents who are putting off purchasing major items because that deduction is no longer available at the higher level,” Grassley said. “Of course this has harmed everyone from equipment dealers to large equipment manufacturers in Iowa. It creates uncertainty for business owners who don’t invest back into their business.”
Grassley noted John Deere has laid off 1,000 people this year in a couple rounds of layoffs. The senator cited low commodity prices, but said the lack of certainty on farm-equipment write-offs was also a factor.
The Association of Equipment Manufacturers has reported sales of larger tractors were down 22% in the U.S. from last year while combine sales were down 49% and at the lowest level since 2007. AEM cited that the decline was due to lower farm cash receipts, the loss of tax incentives and falling prices for used equipment as reasons for the lower sales.
Leaders from both the American Farm Bureau Federation and the National Farmers Union last week separately called on Congress to pass a tax-extension package during the lame-duck session. The presidents of both organizations specifically cited the Section 179 deduction and bonus depreciation provisions.
“NFU will strongly pursue the extension of expiring tax provisions for small business expensing and renewable energy during the upcoming lame-duck session of Congress,” said NFU President Roger Johnson. “Family farmers and ranchers rely on these provisions that are critical to managing their business.”
IRS Commissioner John Koskinen has urged Congress to not only approve tax-extenders legislation, but do it immediately so his agency and tax preparers have time to get ready for the 2015 filing season.
Last spring, the Senate Finance Committee voted out the Expiring Provisions Improvement Reform and Efficiency Act, or EXPIRE Act, to extend a package of tax credits. The bill, projected to provide about $85 billion in business tax breaks, has not made it to the floor for a vote.
EXPIRE would raise the Section 179 deductions for 2014 and 2015 back to a $500,000 maximum and be allowed for any business with less than $2 million in property put into service. The deduction phases out dollar for dollar for all equipment value purchased above $2 million. The bill also would extend 50% bonus depreciation until January 2016.
The EXPIRE bill also included an extension of the $1.01-per-gallon cellulosic biofuels producer tax credit through 2015. It also would extend the $1-a-gallon biodiesel tax credit as well as the 10-cent-a-gallon agri-biodiesel producer tax credit.
Grassley said he believed a tax-extension bill would also include the wind production tax credit, but groups representing the oil and gas industries wrote Republican leaders last week calling on them to reject an extension of the wind tax credit, which expired at the end of 2013. The American Energy Alliance argues, “Congress should reject any attempt to revive the wind PTC.”
Other observers have argued that Congress should not do a tax-extenders package now because the full Republican-led Congress could push for a more comprehensive tax-reform package in the next Congress. Grassley said he didn’t think that a tax-extenders package now would hinder those efforts.
“Doing the tax extenders is helpful for tax reform because you keep the money in the baseline if you want a revenue-neutral tax-reform bill,” he said.