Tag: H.r. 5297

Depreciation in Small Business Loan Bill Spurs Investment, Jobs

President Obama this afternoon signed into law H.R. 5297, the Small Business Jobs and Credit Act, which allows businesses of all sizes to immediately write-off 50 percent of the cost of depreciable property purchased and placed in service anytime during 2010.  This provision is a temporary extension of the bonus depreciation provision included in both the 2008 and 2009 economic stimulus laws.  The new law also includes a provision that increases Section 179 expensing for two years by increasing the expense limitation to $500,000 with a phase-out threshold of $2 million for years 2010 and 2011.

The bonus depreciation provisions will encourage manufacturers to make investments that create jobs.  For example, Joseph McGlynn, executive vice president of Campbell Fittings Inc., a small manufacturer of industrial hose couplings in Boyertown, Pa., is working now to purchase factory floor equipment that will be eligible for the 50 percent  bonus depreciation extension available thanks to the new law. The company plans to hire an additional 4-5 employees to run two new pieces of equipment it hopes to purchase and have operating before year’s end.   

For a technical explanation of the new investment incentives, see pages 7-15 of the Joint Committee on Taxation technical explanation.

Details on the 2010 bonus depreciation and expensing provisions, prepared by Deloitte, can be viewed on the NAM website on pages 2 and 3.

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New Business Investment Tax Incentives Will Encourage Hiring

As the continued anemic economic recovery with high unemployment challenges manufacturers, bravo that Congress finally acted, albeit nine months into the year, in passing a proven business capital investment tax incentive that garnered bipartisan support.  Specifically, the tax relief included in the now-passed Small Business Jobs and Credit Act , H.R. 5297, will allow businesses of all sizes faster recovery of investment costs by permitting businesses to immediately write-off in the first year 50 percent of the cost of depreciable property purchased and placed in service in 2010.*

Jobs will be saved and jobs created with this investment incentive, as there are customers who want to buy and sellers who want to sell new equipment.  And it takes workers to manufacture and run such equipment.  The positive ripple effect of this new law will be immediate. 

After yesterday’s House passage of this provision, two testimonials quickly arrived in my e-mail. One Midwest small manufacturer reports he will now spend $150,000 on new equipment and hire seven full time employees and one part-time employee to operate the new plant equipment. Another East Coast small manufacturer told me he is quickly ordering new equipment and will hire an additional 4-5 more employees to run it. 

Bonus depreciation will allow manufacturers to act, that is, to purchase and sell machinery and plant floor equipment and put workers back to work. We look forward to President Obama signing the bill on Monday.

* The bonus depreciation extension in H.R. 5297 — which passed by a vote of 237-187 – is a temporary extension through 2010 of the bonus depreciation included in both the 2008 and 2009 economic stimulus laws.  The President’s Fiscal Year 2011 Budget included an extension of bonus depreciation through 2010. Also included in the new law is an increase in Section 179 expensing for two years. 

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Who’s Really Leaving Small Business Behind?

The Senate is currently debating a bill (H.R. 5297) that would extend bonus depreciation and expand a small business loan program. The Manufacturers have no problem with these provisions, and in fact, we’ve been on the record supporting both.*

Unfortunately, this isn’t enough for some folks. To be honest, it gets a little tiring to hear rhetoric claiming that we are “leaving small business behind” or that “small business is being held hostage by partisan politics.” The reality is that passing this bill at a time when small businesses are facing trillions of dollars in new taxes in less than six months is sort of like buying new furniture for someone facing foreclosure. 

In a recent survey conducted by RSM McGladrey, more than 85 percent of small- and medium-sized manufacturers said they were concerned about increased tax rates –- with 61 percent reporting they were very concerned.  By not acting, Congress will be increasing the top rates for small business owners to nearly 40 percent, increasing the estate tax to 55 percent, and nearly tripling the tax on dividend income.  One can logically ask: Exactly who is leaving small business owners behind?

* The National Association of Manufacturers joined this coalition letter and this one in support of extended bonus depreciation. The NAM is a member of the Small Business Access to Credit Coalition, which last week sent this letter to the Senate urging support for extending and improving SBA loan programs.

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