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Section 179 and Bonus Depreciation Expensing Allowances: Current Law, Legislative Proposals in the 112th Congress, and Economic Effects
Under current tax law, firms may expense (or deduct as a current rather than a capital expense) up to $125,000 of the total cost of new and used qualified assets they purchase and place in service in 2012 under Section 179 of the federal tax code. They also have the option under Section 168(k) of expensing half of the cost of qualified assets they buy and place in service the same year. Many assets qualify for both allowances.
Expensing is the most accelerated form of depreciation. As a result, it has the potential to stimulate business investment by reducing the cost of capital for favored investments and increasing the cash flow of firms making such investments. This explains why economists view the two allowances as a significant investment tax subsidy.
The 112th Congress has passed no legislation changing the status of either allowance, though a number of bills have been introduced that would extend one allowance or the other by one or more years, or permanently. In contrast, the 111th Congress passed four bills that enhanced the allowances, partly as a countercyclical measure: the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5), the Hiring Incentives to Restore Employment Act of 2010 (HIRE Act; P.L. 111-147), the Small Business Jobs Act of 2010 (SBJA; P.L. 111-240), and the Tax Relief, Unemployment Compensation Reauthorization, and Job Creation Act of 2010 (TRUCA; P.L. 111- 312).
This report examines the current status, legislative history, and main economic effects (including their efficacy as an economic stimulus tool) of the Section 179 and bonus depreciation allowances. It also identifies legislative initiatives to extend them beyond 2012.
This report will be updated as legislative activity warrants.
Bills: H.R. 1773, H.R. 3630, S. 12
This package includes following files:
|#||File Name||Document Date||Order ID:||Number of Pages||Price|
|1||RL31852.pdf||Mar 16, 2012||RL31852||18||$29.95||Add to Cart|