Senator John Hoeven Monday spoke on the Senate floor to press for a vote on the Tax Increase Prevention Act, legislation that will extend through the end of 2014, certain tax credits and deductions that expired either at the end of calendar year 2013 or during 2014.
Of particular importance to North Dakota, the measure extends Section 179, a part of the tax code that allows farmers, ranchers and other small businesses to expense the purchase of equipment they need to run their operations. Hoeven announced he will speak on the floor every day this week until the measure passes, and on Monday, he focused on the importance of extending the Section 179 rule for the current tax year so that producers and small businesses can expense purchases made in 2014.
Hoeven and other lawmakers were working to make many of the expired tax provisions permanent. President Obama, however, threatened to veto the bill, resulting in a temporary one-year extension. The senator said he will work to make the extensions permanent in the new Congress.
“It’s so important for our small businesses and, in fact, for our entire economy,” Hoeven said. “Section 179 allows farmers and other small businesses to expense what they’ve purchased for their operations during the first year. That’s important, so they don‘t see a tax increase, but also to keep our economy going. Without it, small businesses will buy and repair less equipment, slowing down our manufacturing base and our economy. Quite simply, that means fewer jobs. It’s not only because small businesses’ costs are increased, but also because of the uncertainty that’s created when they don't know the rules of the road. We were working on a deal until the president threatened to veto that legislation. Now we’ve got a one-year fix. But we’ve got broad support in this chamber for the one-year fix and we need to pass it, we need to pass it now, and then go back to work on a permanent fix next year.”
Constituents have expressed their concerns regarding the expiration of the credits and deductions, and the senator discussed those on the floor.
Without Section 179 and the bonus depreciation, Dick Hedahl, owner of Bismarck-based Hedahl’s Auto Plus, would have really felt the pinch last year when he purchased equipment he uses to service diesel powered trucks and heavy equipment. Since the growth in the Bakken, his services have been especially important because he can save clients thousands of dollars by refurbishing worn diesel engine blocks.
What makes the refurbishing possible is the 100 percent American-made equipment Hedahl bought in 2012 and 2013 for $450,000. At a 34 percent tax rate, Hedahl would not have been able to make the equipment purchases, which help to sustain good jobs in a dynamic part of North Dakota’s economy and elsewhere in the country. Hedahl Auto Plus employs more than 200 people.
Leann Slaubaugh of Rolette wrote: “I am concerned about Section 179 and what this is doing to the agricultural sector in North Dakota. Farm equipment is not being sold as the farmers are concerned about the amount they will have to pay taxes on. I farm with my husband and work at a small town farm supply. Farmers have quit spending, due to low commodity prices and Section 179. I am concerned with the effect on our small town economy if Section 179 is not revised. After meeting with our tax consultant, we are concerned with the possible tax liability we are facing and what this means to the future of our family farm. Please push for revision of Section 179.”
Dennis Miller, who grew up in Stark County and worked for an agriculture equipment dealership for 28 years, is similarly concerned. Four years ago, he started his own business, Southwest AG Repair Inc. He sells new McCormick tractors and repairs all brands of farm equipment. He has six employees. Mr. Miller wrote to Hoeven earlier this year, anxious about the expiration of Section 179.
“It is going to cut sales of farm equipment drastically if the farmers don’t get a tax incentive to purchase equipment,” Mr. Miller wrote. “The loss of sales will create backlash in the economy throughout the state and the country. There has to be better ways to create the tax revenue.”
Other important provisions the Tax Increase Prevention Act extends:
- The 50 percent bonus depreciation to property acquired and placed in service during 2014 or 2015 for certain property with a longer production period.
- Eight provisions for individuals, including the deductibility of state and local sales taxes, the deduction of certain expenses for elementary and secondary school teachers, extension of the “above the line” deduction for qualified tuition and the extension of tax-free distributions from individual retirement plans for charitable purposes.
- A total of 30 business-related provisions in addition to Section 179 and the bonus depreciation provisions. These include the extension of the research credit and the subpart F exception for active financing income.