U.S. Sen. John Thune (R-S.D.), a member of the tax-writing Senate Finance Committee, today introduced the Investment in New Ventures and Economic Success Today (INVEST) Act of 2017 (S. 1144), legislation that would simplify accounting rules and reform key parts of the tax code to help small and medium-sized business owners more quickly recover investment costs and certain other tax deductible business expenses. By accelerating cost recovery on property, equipment, inventory, and other common business investments, the INVEST Act would encourage new business growth and help existing businesses, including farms and ranches, expand their operations, create new jobs, and grow the economy. The INVEST Act, while introduced as a standalone bill, is intended to be included in the Senate’s broader tax reform legislation.
“We have got to get our economy back on the path to strong, sustained growth, and I believe that starts with creating a pro-growth environment in which small and medium-sized businesses can thrive,” said Thune. “For years, American businesses and consumers have suffered from an overly regulated system that prioritizes growing the government over growing jobs, wages, and the economy. That government-knows-best approach, coupled with a severely outdated tax code, not only discourages some business owners from expanding their operation, but in some cases, it also deters prospective owners from starting a business at all.
“My proposal would help reverse this trend and help create the right kind of pro-growth tax code to reenergize new and existing business owners in South Dakota and across the country. Whether you’re running a family farm, taking on the risks of pursuing a new venture, or thinking about expanding your business to another state or foreign market, the INVEST Act is designed to ensure the tax code works for you, not against you. Congress and the president have a once-in-a-generation opportunity to truly reform the tax code and strengthen the economy, and I’m confident the INVEST Act will help move us in the right direction.”
The INVEST Act would:
Expensing and cost recovery:
- Allow investments in business equipment and property to be written off immediately up to $2 million under Section 179 and start phasing out the benefit for investments over $3 million. Expensing would also apply to a broader range of property and equipment, including roofs, HVAC units, and property used in rental real estate.
- Make temporary “bonus” depreciation into permanent 50-percent expensing.
- Reduce the depreciation period for farm machinery and equipment from seven years to five years.
- Increase the amount that a company can deduct for a passenger vehicle, including a light truck or van, used for business purposes. Businesses would also be able to claim the full 50-percent expensing in the first year, up to $25,000.
- Allow businesses that acquire intangible property, like a patent or customer list, to recover that investment over 10 years, rather than the 15-year period under current law.
- Allow new business owners to expense more of their start-up and organizational expenses, which would encourage entrepreneurs to pursue new business opportunities.
- Enable more small and medium-sized corporations to use the cash method of accounting.
- Simplify inventory accounting so small businesses can deduct the cost of their inventories rather than having to use complicated inventory accounting methods that can delay the recovery of those costs.
- Allow more small construction companies to use the simplified completed-contract method of accounting.
Click here for a full topline summary of the INVEST Act, here for a section-by-section summary of the bill, and here for legislative text.
The INVEST Act is the third major tax proposal that Thune has introduced during the 115th Congress. In January, Thune reintroduced legislation to permanently repeal the federal estate tax, a purely punitive tax that has the potential to hit family farms, ranches, and businesses as the result of an owner’s death. In March, Thune reintroduced legislation with U.S. Sen. Ben Cardin (D-Md.) that would make pro-growth reforms to help S corporations operate more effectively and improve their ability to raise capital.In 2015, Thune and Cardin co-chaired the Finance Committee’s Business Income Tax Working Group. The report they submitted to the full committee included key principles for business tax reform and multiple recommendations that were designed to modernize U.S. business taxation, address structural biases in the tax code, and promote American innovation. Numerous policy principles outlined in the working group’s report are addressed in the INVEST Act.
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