IS TAX REFORM IN 2014 STILL POSSIBLE?
A question I am often asked by business owners is whether or not there will be any tax reform in 2014? As many business owners know, the tax provisions for bonus depreciation and the $500,000 Section 179 expensing expired at the end of 2013. Business owners are wondering if Congress will extend these provisions, and others, so year-end purchases can be made. The cynic in me says nothing will happen if the current makeup of Congress stays the same. The optimist in me says it has to get done.
President Obama has stated that he wants to see comprehensive tax reform to the tax code, and absent comprehensive tax reform some tax reform. The House of Representatives has passed three tax reform bills aimed at small business: (1) an Act to amend the Internal Revenue Code of 1986 to modify and make permanent bonus depreciation (“Bonus Depreciation Act”); (2) America’s Small Business Tax Relief Act of 2014; and (3) the S Corporation Permanent Tax Relief Act of 2014.
The Bonus Depreciation Act passed the House on July 11, 2014 and was placed on the Senate Calendar on July 15, 2014. The purpose of this bill was to make bonus depreciation permanent in the tax code rather than just extend it for a year or so.
The America’s Small Business Tax Relief Act passed the House on June 12, 2014, and was placed on the Senate Calendar on June 17, 2014. The purpose of this bill was to increase Section 179 expensing to $500,000 per year and make permanent.
The S Corporation Permanent Tax Relief Act passed the House on June 12, 2014 and was placed on the Senate Calendar on June 17, 2014. The purpose of this bill was to reduce the built in gains tax recognition period from ten years to five years.
Thus far, it appears that Senate has refused to take any action on these bills that would help small businesses, whether the small business be the one making the investment in their business or the business that is selling the equipment.
If the Republicans take control of the Senate in November, I would fully anticipate these bills being taken up by the Senate and if not passed until 2015, I would anticipate that they be retroactive to 2014. Now, I am not making any guarantees here, but that would be the smart thing to do. The question would then become if the bills are presented to President Obama for signature, will he sign them? Again, the optimist in me says President Obama has to sign them because he needs some sort of good thing to happen given all the crises that have transpired over the last two years. The cynic in me says he will veto them as he really does not want any tax reform for businesses and he will not care if his presidential legacy takes another negative hit.
Unfortunately, there is no way to know for sure what will happen. One can only make their own best educated guess. My guess is there will be tax reform in the way of bonus depreciation and enhanced Section 179 expensing and it will be retroactive for 2014. But, that is just my prediction. The best way to make sure the bills at least make it to the President for signature is for the Republicans to take control of the Senate and force the President to make a decision. In that situation, the President will not be able to hide behind Senator Harry Reid and will have to sign the bills or take a stand against small businesses and veto the bills. An interesting scenario then arises as to whether or not Senate Democrats join the Republicans to override the Presidential veto. Let’s hope it doesn’t come to that and Congress and the President do the right thing and provide some tax relief. Good luck to us all!!
– Jason W. Harrel is a Partner at Calone & Harrel Law Group, LLP who concentrates his practice in all manners of Taxation, Real Estate Transactions, Corporate, Partnership and Limited Liability Company law matters. He is a certified specialist in Taxation. Mr. Harrel may be reached at 209-952-4545 or jwh@caloneandharrel.com