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 Known as "bonus depreciation" and now temporary, the tax break
lets companies deduct 50 percent of the costs of equipment purchases
right away, instead of depreciating the costs over years. That
allows them to lower their federal tax costs.
The Republican-drafted House bill, approved with the backing of more
than 30 Democrats, will next go to the Democrat-controlled Senate,
where it faces an uphill climb.
The White House said on Thursday that if the bill were to win Senate
approval and arrive on President Barack Obama's desk, his senior
advisers would recommend that he veto it.
The administration criticized the measure because it would expand
the federal deficit, adding that bonus depreciation "was never
intended to be a permanent corporate giveaway."
Bonus depreciation has traditionally been used as a temporary
economic stimulus to encourage businesses to invest in plants and
equipment. It was last adopted to help companies recover from the
2007-2008 financial crisis.
It is one 55 temporary tax rules known as extenders, most of which
expired at the end of 2013. These are usually renewed retroactively,
which analysts expect will happen again after November's
congressional elections. Senate Democrats have proposed renewing
bonus depreciation through 2016.
The Republican backers of the bill just approved want not only to
renew bonus depreciation, but to make it permanent, saying it would
spur economic and job growth.
"Making 50 percent bonus depreciation permanent is supported by
associations representing ... farmers, telecommunications,
manufacturers, energy, construction, retailers and technology,"
Republican Representative Dave Camp, chairman of the tax-writing
House Ways and Means Committee, said in a statement.
"By making long-standing features of the tax code permanent, we can
facilitate a comprehensive overhaul of the tax code."
The bonus depreciation bill has no accompanying proposal for raising
new government revenue to offset its costs, which Republicans have
sometimes demanded for any tax changes.
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DEMS CRITICIZE BILL
Representative Sander Levin, the committee's top Democrat and also
from Michigan, said making bonus depreciation permanent detracts
from its short-term stimulatory impact.
"Bonus depreciation ... allows companies to write off investments
more quickly than normal, providing them an incentive to make
capital investments now rather than later," Levin said. "That
incentive actually disappears when the provision is made permanent."
He questioned the Republican bill for contradicting a comprehensive
tax reform plan released by Camp in February that called for
eliminating bonus depreciation. "I’m amazed at the inconsistency of
this position. It was five months ago ... that they proposed to
eliminate this provision entirely," Levin said.
The loophole-riddled U.S. tax code has not been thoroughly
overhauled since 1986, during the Reagan administration. Camp's tax
reform plan was bold, but corporate lobbyists attacked it, defending
their interests, and the plan gained little support.
(Reporting by Kevin Drawbaugh; Editing by James Dalgleish, Jonathan
Oatis and Dan Grebler)
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