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.