The Republican-led House of Representatives is expected to pass a bill this week that would permanently extend the bonus depreciation tax break. But don’t expect President Obama to sign it.
The Obama administration said on Thursday that it “strongly opposes” the legislation, which would make permanent bonus depreciation rules that allow corporations to speed up deductions for certain investments and thereby delay tax payments. The bonus depreciation tax break expired on December 31, 2013.
Under the bill, HR 4718, which was drafted by Representative Pat Tiberi (R-OH), companies would be allowed to deduct 50 percent of the cost of new capital equipment purchases immediately, instead of over several years. Tiberi said in May that permanently extending the tax break will help companies better access capital, invest in new facilities, and create jobs.
The legislation, which according to an estimate from the Joint Committee on Taxation would add roughly $287.4 billion to the federal deficit over the next 10 years, was backed by the House Ways and Means Committee on May 29 and sent to the House floor, where it is expected to be approved on Friday.
However, the House Republicans’ bill is expected to stall in Congress as the Senate is unlikely to vote on any tax break legislation before the November midterm elections.
Even if the Senate were to pass the House’s proposal to permanently extend bonus depreciation, President Obama’s senior advisors would recommend that he veto the bill.
The White House criticized the legislation on Thursday, saying the bonus depreciation provision was enacted in 2009 to provide short-term stimulus to the economy, and it was never intended to be a permanent corporate tax cut. The Obama administration also said the bill includes no cost offsets, and the $287 billion price tag would wipe out more than one-third of the deficit reduction achieved by the American Taxpayer Relief Act of 2013.
“The deficit increase in HR 4718 is more than 20 times the cost of the proposed extension of emergency unemployment benefits, which Republicans are insisting be offset, and more than triple the discretionary funding increases for defense and nondefense priorities enacted in the Bipartisan Budget Act of 2013, which were offset,” the White House said. “House Republicans also are making clear their priorities by rushing to make business tax cuts permanent without offsets even as the House Republican budget resolution calls for raising taxes on 26 million working families and students by letting important improvements to the Earned Income Tax Credit, Child Tax Credit, and education tax credits expire.”
The Obama administration added that it wants to work with Congress to make progress on measures that strengthen the economy and help middle-class families, including pro-growth business tax reform.
“However, making costly business tax cuts permanent without offsets represents the wrong approach,” the White House said.
The Obama administration also threatened to veto a bill the House approved in early May that would permanently extend the popular business research and development (R&D) tax credit. The White House cited the $156 billion cost of extending the R&D credit – without offsets – for its opposition to the bill.
About Jason Bramwell
Jason Bramwell is a staff writer and editor for AccountingWEB. He has nearly 20 years of experience in print and online media as a journalist and editor.