Tax break for manufacturers up in the air

Prospects for Senate passage of a bill establishing a permanent expensing allowance for capital equipment are dicey.

The House passed the America's Small Business Tax Relief Act of 2015 (H.R. 636) in February with all but one Republican voting for it and 33 Democrats adding their support. Now the bill, which President Obama has threatened to veto because it increases the federal deficit by $79 billion over 10 years, goes to the Senate Finance Committee.

Carolyn Lee, senior director of tax policy, National Association of Manufacturers, said the extension of the 179 expensing provision has historically enjoyed bipartisan support, and she hoped the Senate would take it up sooner rather than later. But Sen. Orrin Hatch, R-Utah, chairman of the Senate Finance Committee, has not made a commitment to bring the bill up for a vote. His press secretary did not respond to an e-mail asking about Hatch's intentions.

The bill makes permanent the $500,000 allowance for the expensing of depreciable business property (Section 179 property) and the $2 million threshold, after which the amount of such allowance is reduced. Both the allowance and the threshold amount are indexed for inflation for taxable years beginning after 2015.

The allowance is also made permanent for computer software and qualified real property, such as qualified leasehold improvement property, restaurant property, and retail improvement property. The exclusion of air conditioning and heating units from the definition of Section 179 property is eliminated.