Renewal of Tax Provisions on Congressional Agenda

Congress is quietly bustling with activity on tax policy, with each chamber working on a separate track.   The House is scheduled to vote on the first of six expired tax provisions on May 9, which would permanently extend tax credits for research and development activities.  These six business-related tax provisions were first passed by the House Ways and Means Committee, largely along party lines on April 29.  Committee-passed legislation supported by AGC includes H.R. 4457, America’s Small Business Tax Relief Act of 2014, and H.R. 4453, the Permanent S Corporation Built-in Gains Recognition Period Act of 2014. The Joint Committee on Taxation’s analysis on making these business-related tax provisions permanent in the “Tax Reform Act of 2014” can be viewed here. H.R. 4457, sponsored by Congressmen Pat Tiberi (R-Ohio) and Ron Kind (D-Wis.) would retroactively restore the 2013 expensing and phase-out levels for Section 179 to $500,000 and $2 million respectively. The bill also would make these provisions permanent and index those levels for inflation.  In 2013, the Section 179 expensing levels were set at $500,000 for direct expensing of purchases of qualified equipment. The $500,000 limit applied to firms investing less than $2 million in qualified equipment. Investments above the $2 million level reduced the $500,000 expensing limit dollar-for-dollar until it reached zero at purchases of $2.5 million or more. These provisions expired on December 31, 2013, and the limits reverted to those in the underlying statute, which are set at $25,000 for expensing and $200,000 as the phase-out limit. The drastic reduction in both the expensing limit and phase-out level meant that many AGC members who have been able to use Section 179 over the past decade were suddenly ineligible because their purchases would exceed $200,000 annually. In addition, they faced a significant tax liability for 2014 because they would have little or no expenses from equipment purchases to write-off in 2014. The Senate is moving more slowly than the House to retroactively reinstate a broader package of more than 50 expired tax provisions.  However, the Senate's immediate agenda is on energy legislation, not tax provisions. Once a tax bill passes the House (as required under the Constitution), Majority Leader Harry Reid (D-Nev.) is poised to take up the two-year extension package by inserting the EXPIRE Act language and sending it back to the House to await approval. AGC sent a letter to the Senate Finance Committee outlining policies important to the construction industry, including adequate financing for the Highway Trust Fund and Inland Waterways Trust Fund, as well as addressing multiemployer pension plans. AGC will continue to monitor and advocate for the tax policies that allow construction firms to make consistent long-term business decisions. For more information, please contact Brian Lenihan at (202) 547-4733 or lenihanb@agc.org.