In correspondence sent to U.S. Representatives Tiberi and Kind, ISSA voiced its strong support of H.R. 636, the America’s Small Business Tax Relief Act of 2015. This vital legislation, introduced by Tiberi and Kind, would restore the small business expensing—sometimes called Section 179 expensing—level to $500,000, including limited improvements to real property and permanently index the level to inflation.

According to reports from ISSA, small business expensing allows business owners to immediately deduct the cost of a qualified investment in the year that it is purchased, rather than being forced to depreciate the cost of the investment over time.  Since 2003, Congress has steadily increased the amount of investment that small businesses can expense from $25,000 to $500,000.  Support for this expansion has been long-standing, bipartisan and widespread.  Legislation expanding and/or extending small business expensing has been enacted nine times, across two Presidential Administrations and six Congresses, under both Democratic and Republican leadership.

These higher expensing limits were temporary, however, and at the beginning of this year they again reverted to $25,000 and will remain there unless Congress acts.

While expensing provides important relief to small business owners, it is not a “tax cut” or a “tax loophole.”  Small business expensing simply gives companies the ability to recover the cost of investing in their own businesses more quickly than if they use depreciation.  Expensing does not lead to a loss of revenue to the government over the lifetime of an investment—it is not a matter of if revenue is collected, but when.

Small business expensing gives business owners the ability to maximize investment in their companies during years when they have positive cash flow.  This provides an incentive for small business owners to reinvest in their businesses, which fuels expansion, growth and jobs.  This is particularly important for small businesses because they are more sensitive than larger firms to problems related to cash flow and are more reliant on earnings to finance new investment.

Therefore ISSA encouraged the passage of legislation permanently maintaining small business expensing at $500,000 because it will increase investment and jobs, reduce complexity and paperwork and alleviate uncertainty.  These are critical issues for small businesses, which continue to experience significant economic challenges.