One of the big challenges for agriculture in recent years is the lack of tax certainty after a key provision in tax law expired a few years ago. The Section 179 deduction, which could be as high as $500,000 a year, lapsed in 2013 and was given a short extension in 2014 and lapsed again.
Late Tuesday, Speaker of the House Paul Ryan, R-Wis., announced a tax compromise that would fund the government, but also included a number of other tax pieces, including a continued renewable energy credit, and even making Section 179 permanent. That new Section 179 provision would also index the provision to inflation. Essentially, the new rule would allow an immediate deduction up to $500,000 of the cost of a qualifying asset, with a phase out of $2 million.
Loss of Section 179 deduction has been targeted as one cause for the rapid collapse of farm equipment sales.
The tax compromise – called Protecting Americans from Tax Hikes Act of 2015 – contains a host of other provisions, including reinstating the expired biodiesel tax incentive. In a press statement from the National Biodiesel Board, Anne Steckel, vice president of federal affairs, comments: “Restoring this tax incentive will create jobs and economic activity at biodiesel plants across the country, so we want to thank leaders in the House and Senate for proposing this extension. Unfortunately the impact would be muted because this proposal would continue allowing foreign biodiesel to qualify for the tax incentive. This not only costs taxpayers more money but it paves the way for foreign fuels that already receive incentives in their home countries to undercut US production.”
Steckel says she’s not heard any member of Congress say why U.S. tax dollars should be used to support foreign production, and called the move “incentivizing predatory biodiesel imports.”
The American Soybean Association weighed in on the new omnibus tax bill with a comment from President Richard Wilkins: “The extension of the biodiesel tax credit is integral to the continued growth and expansion of the biodiesel industry in the U.S.”
Wilkins, a Greenwood, Del., farmer, did express concern that the measure did not maximize support of domestic biodiesel. “We’re disappointed that Congress did not take this opportunity to maximize support for domestic biodiesel production by including the provisions passed by the Senate Finance Committee earlier this year to restructure it from a blender's to a producer's credit, and we thank Senator Grassley and Congresswoman Noem for their leadership on this issue.”
You can learn more from the 200-page report, which references changes to a range of tax provisions. Whether this measure passes both House and Senate remains to be seen, but it is part of a comprehensive measure to keep the government operating, and answers a range of tax questions that have been hanging over U.S. businesses for some time.
Forbes contributor Tony Nitti broke down more of the provisions, with insight to their value for a range of industries.
The bill does include a five-year extension of bonus depreciation for property acquired and put in service during 2015 through 2019, with an added year for certain property with a longer production period. ASA notes that the bonus depreciation percentage is 50% for property put in service in 2015, 2016 and 2017, but phases down to 40% in 2018 and 30% in 2018.
Adds Wilkins: “The Section 179 and bonus depreciation provisions are a big deal for soybean farmers because they encourage investment in our operations in the form of new equipment, infrastructure and other capital improvements.”