Senate Finance Committee approves tax extender package

WASHINGTON, July 22, 2015 –The year is half over but there are some signs of life for those expired tax benefits that are critical to agriculture, including the higher Section 179 expensing allowance and the tax credit that subsidizes biodiesel production.

The Senate Finance Committee on Tuesday approved, 23-3, a two-year extension of those and other expired tax benefits, including the production tax credit for wind power. As a bonus for farmers and other business owners, the higher Section 179 limits would not only be restored by the Finance Committee’s $96 billion package, but they would also be indexed for inflation.

However, we could be headed for yet another one of those frustrating, pre-Christmas renewals of the provisions. House Republicans have been insisting that they want to make many of the provisions permanent, including the higher Section 179 limit, and Majority Leader Kevin McCarthy said they’re looking to do the extenders at the end of the year along with a long-term highway bill.

McCarthy also said he would like to see the extenders made permanent and sees the issue linked with the highway bill, which requires some spending offsets, and with changes in international taxation. “That is a vehicle that can take care of a number of different issues,” McCarthy said.

Senate Republicans are pushing for passage of a long-term highway bill now, rather than waiting until the end of the year. Asked about McCarthy’s plan to tie the issues together later in the year, Hatch said, “We’re not going down that road, as you can see. We intend to have the highway bill passed here. It’s going to be pretty hard for them to reject it.”

Sen. Chuck Grassley, R-Iowa, said the extenders need to be enacted as soon as possible. “Last year it didn’t get done until two weeks before Christmas and it didn’t do the economy much good or the business people and farmers wanting to use it,” he said.

The higher Section 179 allowance in the Senate package raises the amount a farmer or other business owner may immediately expense from $25,000 to $500,000 annually and indexes it for inflation starting this year. The limit on the phase-out of the maximum deductible amount for purchases is restored to $2 million, with an inflation adjustment, up from $200,000. The indexing provisions were added to the draft bill before it was approved Tuesday.

Committee member John Thune, R-S.D., drafted an amendment to make several of the tax provisions permanent, including the higher Section 179 limits, but he didn’t ask for a vote. The amendment, he said, “simply acknowledges that we all know that these are popular provisions that Congress is going to extend year after year. “

The Senate package also would revive the 50-percent bonus depreciation deduction.

The committee adopted a Grassley amendment that would limit the $1-a-gallon biodiesel tax credit to domestically produced fuel.

Other two-year extensions include the production tax credit for wind power, a $1.01-per-gallon tax subsidy for cellulosic biofuels, a 30-percent investment tax credit for ethanol blender pumps and a special depreciation allowance for next-generation biofuel production facilities

In a letter to the Finance Committee Friday, trade groups representing biofuel producers said that expiration of their tax breaks was “chilling investment for producers of advanced biofuels. These credits stimulate investment and growth of clean energy development and deployment and are vital to ongoing development of the advanced biofuels industry.”

The wind credit survived unscathed despite some opposition on the committee. Pat Toomey, R-Pa., said it should be abolished, and Dan Coats, R-Ind., called for cutting it by 20 percent in 2016, but neither senator sought a vote. Coats called his proposed cut a “haircut” that would “move wind energy to the point of competitiveness.”

Farm equipment industry waits impatiently

Russ Keating, owner of Keating Tractor & Equipment in Liberal, Kansas, says the tax extenders package is crucial to stimulating the economy and providing a boost to sagging farm equipment sales. But he’d like to see the tax package, including Section 179, made permanent rather than passing another extension at the end of the year. Waiting until December, “doesn’t give guys time to plan ahead,” he adds.

“The big issue is the timing of it,” agrees Nick Yaksich, vice president, government and industry relations for the Association of Equipment Manufacturers. He’s confident that Congress will approve a package of tax incentives this year, but worries that it may not be done in time to stimulate any equipment sales.  “I just hate to say it has to be done so late in the year, but I think it will be done.”

Read a detailed summary of the original Senate package here, and a summary of modifications here.

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