Small business tax provision lapses, but U.S. House has a solution

By: Gina Luke, assistant director, AVMA Governmental Relations Division

Money_symbolThe AVMA has long supported the small business expensing provision in the U.S. tax code—Section 179—which allows small businesses to write off up to $500,000 to purchase equipment. Unfortunately, this higher expensing limit was temporary and as of Jan. 1 that write off amount has reverted back to its original amount of $25,000, which could have a dramatic impact on veterinarians who want to invest in their practices.

Veterinarians often have to invest in costly equipment for their clinics, such as: MRI, X-ray or ultrasound machines, defibrillators, centrifuges, autoclaves, and/or equine tables. Some mobile veterinarians may even need to purchase a fully equipped truck for their mobile practices.

To help veterinary small businesses plan for their future and invest in needed medical equipment, the AVMA firmly believes that veterinarians should be able to immediately deduct their equipment costs in the tax year the investment is made. By making Section 179 permanent, practice owners would be given more financial certainty, freeing up cash to reinvest in their practices.

This is why on Feb. 12, the AVMA joined 174 associations representing businesses from every state and from every industry sector to deliver a unified message to lawmakers urging them to pass the America’s Small Business Tax Relief Act (H.R. 636), which would permanently maintain small business expensing at $500,000. Citing many reasons for this bill, the organizations write:

“Small business expensing gives business owners the ability to maximize investment in their companies during years when they have positive cash flow. This provides an incentive for small business owners to reinvest in their businesses, which fuels expansion, growth and jobs. This is particularly important for small businesses because they are more sensitive than larger firms to problems related to cash flow and are more reliant on earnings to finance new investment. …

The roller-coaster, ad-hoc changes in the level of small business expensing, which have often been enacted retroactively in recent years, has greatly contributed to uncertainty and prevented long-term planning. Making the higher small business expensing limits permanent and predictable would greatly reduce uncertainty and reduce the incidence of tax policy driving business decisions.”

On Feb. 13, the following day that the associations sent the letter, the House of Representatives passed H.R. 636. The bill now goes to the U.S. Senate, where its prospects for passage are a bit more uncertain. Even if the bill passes in the Senate, it is unlikely to be signed by the president outside of an overall tax reform package.

The AVMA will continue to work in concert with business-minded associations to push this proposal along in the legislative process. To learn more about Section 179 visit the Internal Revenue Service’s website.

Comments are closed.