Under the proposed changes, small businesses would be able to write off up to $200,000 for capital investments.
Feb. 21, 2006--Small businesses may soon be able to write off twice as many new machines, computers, and other capital investments, if a new bill making its way through Congress reaches President Bush's desk.
Sen. Olympia Snowe (R-Maine) and Sen. Trent Lott (R-Miss.) introduced a bill on Feb. 15 that would permanently increase the small-business expensing limit for capital expenditures from $100,000 to $200,000. With the current $100,000 limit set to expire in 2008, the bill is a duplicate of the changes sought by President Bush in his recent 2007 budget proposal.
In 2003, the small-business expensing cap was raised from $25,000 to $100,000.
Emphasizing the president's recurrent pro-growth themes, in which entrepreneurs are portrayed as the engine of economic growth, small-business advocates have offered their own praise for the proposal.
Alix Crockett, manager of House legislative affairs for the National Federation of Independent Businesses, a Washington, D.C.-based lobby, said that higher write-off limits have made small-business owners more confident that now is the right time to grow.
"This increase is allowing small businesses to buy what they need to expand and sustain their growth, and that's a great sign," Crockett said, adding his support for making the increases permanent.
According to a recent poll of NFIB members, 62% of small businesses plan to make a capital expenditure within the next six months.
At Boone County Lumber in Columbia, Mo., co-owner Brad Eiffert said he would use the proposed write-off increase to expand his retail building-materials company into new revenue streams. Eiffert projects he would expense new machinery that will allow his family-owned, 42-employee company to establish commercial door-manufacturing and pre-finished painting operations.
"We've used Section 179 to the full extent of the possible," said Eiffert of past expensing-limit increases. "I think this really affects the timing of purposes and lets people know it's OK to accelerate capital expenditures. They have the immediate tax benefit of having made the purchase, rather than spreading it out over a few years."
Since the 2003 increase in Section 179 write-offs, small-business accountants have not only seen their clients’ capital expenditures grow, but also their clients' staff. David J. Lucier, an accountant in Johnston, R.I., who works primarily with small businesses in the service and retail industries, said that nearly all of his clients are planning to increase their write-offs, and many are hiring.
"Every small business in the country is taking advantage of this," Lucier said. "If you buy a machine, you need an operator. If you buy a new truck, you're going to have to put somebody in it."
Lucier, who said that he's seen his clients use Section 179 to expense everything from automobiles and tools to computers and artwork, said that he’s no longer concerned about the much-maligned "SUV deduction," which allowed business owners to use Section 179 to write off sport-utility vehicles Since Congress modified the law in 2004, businesses can now deduct only $25,000 of any SUV or truck used for business purposes that weighs more than 6,000 pounds.
"There are no dubious purchases," Lucier said of Section 179. "It still comes down to the economy -- you’re not going to invest in a piece of equipment unless you’re going to get a ROI."