House Passes Permanent Bonus Depreciation Provision

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On July 11, the U.S. House of Representatives passed a bill to restore and make permanent the 50 percent bonus depreciation provision. The vote was 258-160, largely along party lines, with only 34 Democrats voting for the bill and two Republicans voting against it.

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House Passes Permanent Bonus Depreciation Provision

  1. 1. 1 | P a g e July 16, 2014 House Passes Permanent Bonus Depreciation Provision On July 11, the U.S. House of Representatives passed a bill to restore and make permanent the 50 percent bonus depreciation provision. The vote was 258-160, largely along party lines, with only 34 Democrats voting for the bill and two Republicans voting against it. This marks the fifth expired business tax provision (“extender”) that the House has voted to permanently restored this year. As with the other extender bills passed by the House, President Obama has vowed to veto the $287 billion bonus depreciation bill because it contains no budget offsets. The bill also is unlikely to pass the Democrat-led U.S. Senate, which is seeking only a two-year extension of all of the expired tax provisions. The bonus depreciation provision, which last applied to qualifying property placed in service before January 1, 2014, generally allowed taxpayers to immediately deduct 50 percent of the cost of original-use tangible personal property, off- the-shelf computer software and qualified leasehold improvement property. The new bill expands the availability of bonus depreciation to owner-occupied retail stores and to fruit and nut-bearing trees and vines. Permanent extender bills previously passed by the House include: • The research tax credit; • The enhanced $500,000 Section 179 expensing deduction (increased from $25,000); • The five-year built-in gain recognition window on conversions from regular corporations to S corporations (currently 10 years); and • The provision that allows S corporations to donate appreciated property and to only reduce the owners’ basis in their S corporation stock by the cost basis of the donated property. The President and Congressional Democrats have criticized these extender bills for not containing budget offsets. They have also criticized the House for moving forward with some of these provisions given that they would have been allowed to lapse under the comprehensive tax overhaul plan introduced by House Ways and Means Committee Chair Dave Camp (R-Mich) this past February. Following a path similar to what we’ve seen for the last several years, the Senate Finance Committee in April approved the EXPIRE Act which would have restored and extended the above provisions, and several others, through 2015. The full Senate still has not taken action on the EXPIRE Act, bogged down by procedural issues and desires by Senate Republicans to tack on amendments to the legislation that would repeal the medical device tax and other parts of the Affordable Care Act. Despite the recent activity by the House, many pundits believe that the votes are largely symbolic and intended to establish positions prior to the upcoming mid-term elections. Several members of Congress have stated publicly that they do not believe the extenders will be resolved until after the election. For more information on the status of the tax extenders and how you should plan accordingly, contact your local CBIZ MHM tax professional. Copyright © 2014, CBIZ, Inc. All Rights Reserved. Contents of this publication may not be reproduced without the express written consent of CBIZ. To ensure compliance with requirements imposed by the IRS, we inform you that- unless specifically indicated otherwise-any tax advice in this communication (and any attachments) is not written with the intent that it be used, and in fact it cannot be used, to avoid penalties under the Internal Revenue Code, or to promote, market, or recommend to another person any tax related matter. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to
  2. 2. 2 | P a g e contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. CBIZ MHM is the brand name for CBIZ MHM, LLC and other Financial Services subsidiaries of CBIZ, Inc. (NYSE: CBZ) that provide tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly-traded and privately-held companies.

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