House Approves Permanent Small-Business Tax Break. Break Allows Small Businesses to Write Off up to $500,000 in New Equipment Purchases

The House voted to make permanent a tax break allowing small businesses to write off up to $500,000 in new equipment purchases.

The vote was 272-144, with several dozen Democrats joining Republicans to support the measure.

The vote adds to momentum for congressional efforts to extend a range of now-temporary tax breaks, many of which expired at the end of 2013. But it also sharpens an emerging conflict between the House and Senate over whether to extend the breaks permanently or temporarily.

The list of temporary tax breaks has grown over the years, and now includes more than 50 separate provisions affecting businesses as well as individuals.
By now, the cost of making them all permanent is proving to be prohibitive—almost $1 trillion over the next decade. But many of the breaks are so popular or important that lawmakers are reluctant to eliminate them.

House Republicans are trying to make permanent a few of the most significant ones, such as the expensing provision, in an effort to give certainty to businesses as well as government budget writers. The expensing provision gives small businesses the ability to write off equipment purchases up front, rather than depreciating them over a period of years. The amount has been set at $500,000 since 2010, but without congressional action would fall to about $25,000 for 2014.
“It’s time to make it a permanent part of the tax code,” said Rep. Dave Camp (R., Mich.), the chairman of the Ways and Means Committee, in floor debate on Thursday. “Why not do something good for America?…What we really need is permanent policy.”

Democrats said House Republicans’ effort would force cuts in spending, especially from social programs. They also warned that putting expensive business breaks on a permanent footing would make it harder to rewrite the tax code.

“This is piecemeal and an ill-considered way to do tax reform,” said Rep. Richard Neal (D., Mass.).

The House also passed a second bill, 263-155, to ease the tax burden somewhat on firms that convert from taxable corporate status to small-business status. Small businesses generally are organized so they don’t pay a corporate-level tax; instead, the owners pay tax on the profits through their individual returns.

The Obama administration said it opposed making the two provisions permanent. “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,” such as extending emergency unemployment insurance, the White House said.
Senate Democrats want to extend virtually all the breaks for another two years, a path that could prove politically easier in a year when major policy changes are proving almost impossible in Congress.

The conflict over the so-called extenders appears likely to drag on for much of the year, and perhaps until after the November election.

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