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We have written many times about the group of tax provisions – referred to as “tax extenders” – that have typically been extended on a temporary basis (one or two years) over the last 20 plus years. As you likely know, these provisions expired at the end of 2014, and there have been a number of unsuccessful efforts during 2015 to reinstate these provisions retroactively to the beginning of the year. With the December 11 deadline looming for a bill to fund the government, we again anticipate these expiring provisions could be reinstated (through the government funding legislation) retroactively for 2015, and hopefully into 2016.
CompTIA has long supported a group of tax extenders that benefit both tech and small businesses. We believe reinstating these expired provisions will maintain the status quo with respect to longstanding tax policy until Congress can take up comprehensive tax reform. In particular, CompTIA supports extension of the R&D tax credit, bonus depreciation, restoration of the $250,000 limitation for section 179 small business expensing, and capital gain exclusion for the sale of certain small business stock.
Research and experimentation tax credit (aka R&D tax credit). Since its enactment in 1981, the on-and-off political reality of the R&D credit has been widely criticized as detrimental to the spirit of the credit, because companies have been unable to conduct long-term research and experimentation planning based on the availability of the credit. CompTIA supports a permanent R&D tax credit with an enhancement that allows small startups to receive current economic benefit of the credit through a payroll tax offset mechanism.
Bonus depreciation. The bonus depreciation provision allows companies to write off additional depreciation for certain equipment purchases. For example, the expired provision allowed an extra 50 percent bonus depreciation write-off for qualified property. We believe bonus depreciation supports businesses investing in new and more efficient equipment and technologies helping these businesses to grow and add jobs, which in turn boosts the entire American economy. Accordingly, we support the permanent extension of this provision.
Small business expensing – IRC sec. 179. This provision, popular with all small businesses, allows a business to write-off the costs of qualifying asset purchases in the year of purchase, as opposed to depreciating the costs over a period of years. For the tax years 2011 through 2013, the maximum write-off was limited to $500,000, with certain phase-out requirements. However, for 2015, the limitation has dropped back to $25,000. CompTIA has consistently supported making the higher $500,000 limitation permanent.
Qualified small business stock. This provision encourages investment in small businesses, by allowing individual investors to exclude gains from the sale of small business stock held for more than five years. Expired law allowed a 100 percent exclusion of the gain from qualifying small stock. Access to capital continues to be a major issue for small businesses, and we believe this incentive should also be made permanent.
There are over fifty provisions typically included in the tax extenders package. From a revenue scoring perspective, it is less expensive for Congress to extend these provisions on a temporary basis, as opposed to making the provision permanent. While we do support permanence for the provisions that benefit tech and small businesses, a temporary extension would be preferable to no extension. However, the fate of the tax extenders is uncertain, but will likely be told by the negotiations surrounding an extension of government funding past December 11.