May 17, 2017 Thune bill on cost recovery at odds with House plan Senate Finance Committee member John Thune (R-SD) on May 17, 2017, introduced a bill, for possible inclusion in a broader tax reform package, that would make permanent 50% bonus depreciation and increase small business expensing limits to $2 million annually. The bill is noteworthy as a proposal by a senior Senate tax-writer that is a departure from the House Republican Blueprint on tax reform, which proposed 100% expensing of all capital expenditures for tangible and intangible assets (including buildings but not land) and eliminating deductibility of net interest expense. The Blueprint envisioned that full expensing would operate "as a more beneficial and more neutral substitute" for the deductibility of interest expense. "Full and unlimited expensing may be the single most pro-growth provision in tax reform because it is all about driving productivity and investment, which really drives wages in the US economy," House Ways and Means Committee Chairman Kevin Brady (R-TX) told reporters May 16, ahead of a May 18 Committee hearing on economic growth during which supporters will likely highlight expensing and its potential contribution to economic growth. The Wall Street Journal reported Senator Thune as saying he is looking at limits on the deduction for interest costs but opposes full repeal out of concerns about the effects on the agriculture sector. A House Agriculture Committee hearing last month aired concerns about eliminating the deductibility of net interest expense given the level of debt-financing in the sector. The Trump administration has expressed a preference for retaining the deductibility of net interest expense and the Trump tax reform plan released April 26 is silent on expensing. Some Republican senators have recently said it is unlikely deductibility of net interest expense will be eliminated. Senator Thune's Investment in New Ventures and Economic Success Today (INVEST) would also allow new businesses to deduct up to $50,000 of their start-up costs within the first year, up from the current $5,000. The bill would increase to $15 million the threshold for small corporations and partnerships with a corporate partner to qualify for the cash method of accounting, meaning they could be taxed on income upon receiving cash from the customer and deduct an expense upon paying a supplier. Other accounting method changes under the bill would permit small and mid-sized businesses that sell materials or products to deduct the cost of such inventory immediately, rather than having to employ an inventory accounting method; provide a comprehensive exemption from the uniform capitalization rules (UNICAP) for businesses meeting the $15 million threshold; and increase the threshold to $15 million for the completed-contract method, which a Thune summary said is used primarily to account for small construction contracts. "Forcing business owners, farmers, and ranchers to lock up their capital for years or even decades, as our current tax code does, discourages growth and job creation …," Senator Thune said in a CNBC op-ed, which is attached along with the bill and summary documents. "I hope the INVEST Act will become an essential part of a broader tax reform package in the Senate that will help create the strong, sustainable growth Americans have been waiting for." ———————————————
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Thune Op-Ed
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Invest Act Topline
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