In May John Thune introduced a bill to reform key parts of the tax code and is a significant component of the overall tax reform package.  The bill is intended to foster new business formation and help existing businesses expand their operations, create new jobs, and fuel greater economic growth.

Below is a summary of some key points:

  1. Increase section 179 expensing limit to $2 million and starts phasing out the benefit when total purchases are over $3 million. Currently businesses can only expense $500,000 in 2017.
  2. Section 179 would apply to wider range of property and equipment – HVAC units and property used in rental real estate.
  3. Reduce depreciable life for farm machinery and equipment from 7 years to 5 years.
  4. Allow small to mid size businesses to expense cost of inventory immediately rather than waiting until the inventory is sold
  5. 50% bonus depreciation on new qualified property is made permanent
  6. Increase the direct write-off of start-up and organizational expenses from $5,000 to $50,000. Additional costs over the $50,000 would be depreciated over 10 years instead of 15 years.
  7. For a passenger vehicles under the 6,000lb limit the bill increases the amount a business can deduct to $50,000 over 6 years instead of the current $16,935 limit. Businesses could use the 50% expensing or bonus depreciation in the first year up to $25,000.
  8. Allows business to depreciate intangible property over 10 years instead of 15 years.

We will keep an eye on this bill and see if or when it will be passed.