NTU urges all Representatives to vote “YES” on H.R. 636, “America’s Small Business Tax Relief Act of 2015.” This legislation would make permanent three tax policies that impact small businesses and create a more level playing field.
Section 2 of H.R. 636 would make permanent the pre-2014 expensing amount of $500,000 (with a total investment limit of $2 million) that can be immediately deducted by small and medium-sized businesses. This increased threshold for the deduction of certain capital investments in the year when they were made removes costly uncertainty related to financial decisions and long-term planning. The legislation also helps businesses avoid complicated depreciation calculations. Though H.R. 636 falls short of full business expensing, it would restore a lapsed provision of the law that was, until its expiration, moving the system in this salutary direction.
Section 3 of the legislation would protect S Corporations from extended periods of punitively high taxes as a result of tax status conversion or asset acquisition. The current ten-year recognition period for built-in gains subjects S Corporations to an extremely high tax rate of 35 percent. Not only does such a confiscatory level of taxation hurt economic growth, it also prevents S Corporations from reaping the economic benefits of reorganizing from or assuming the assets of a C Corporation. The result makes businesses less flexible and responsive to market changes. In addition, lowering the built-in gains period from 10 to 5 years eases the burden on businesses of tracking the disposition of assets over a long period of time.
Finally, Section 4 addresses a problematic disparity when it comes to S Corporations donating appreciated property versus partnerships or LLCs. S Corporations, and their shareholders, should be able to take full advantage of their charitable donations and not be saddled with future tax liabilities.
NTU also urges all Representatives to vote “YES” on H.R. 644, the “America Gives More Act.” This legislation would make permanent various charitable deductions and provide excise tax relief for private foundations.
The charities and private foundations that would benefit from H.R. 644 fulfill essential services to the public, such as providing an important safety net for society’s most vulnerable. It’s important that taxpayers and charitable recipients alike not be unduly penalized by the Tax Code. Until Congress can craft a simpler, broader exclusion from income for charitable contributions, H.R. 644 provides some modest, yet necessary relief in this area.
NTU supports broad-based comprehensive tax reform, and urges Members to evaluate renewal of so-called “extenders” in the context of making individual provisions of law simpler, more uniform, less burdensome, and permanent. Lawmakers should take care to only renew and extend laws that follow these principles and encourage systemic tax reform.
Roll call votes on H.R. 636 and H.R. 644 will be included in our annual Rating of Congress and “YES” votes will be considered the pro-taxpayer positions.
If you have any questions, please contact NTU Federal Affairs Manager Nan Swift at (703) 683-5700