Once in a while — perhaps in a blue moon — Congress does something to help companies invest in their business. That happened recently with the Omnibus Appropriations Act of 2016, which made permanent the federal tax credits for a manufacturer’s investment in capital equipment and R.&D.
Specifically, Public Law No. 114-113 changed 26 USC 179 to allow a deduction of up to $500,000 on a dollar-for-dollar basis for purchases of capital assets used in a trade or business. It includes a ceiling of $2 million for qualified purchases and can be taken on new or used property. An important limit is that the business must have taxable income to take the credit; none is extended to businesses in loss positions.
Another part of the law is a schedule of additional depreciation given for the purchase of new capital assets valued above the $500,000 allowed by the Section 179 tax credit. (Used property is excluded.) It starts with a 50% bonus allowance for assets placed in service through 2017, 40% for 2018 and 30% for 2019, the last year for the bonus. The benefits are effective for 2016 and retroactive for 2015.
Over the years, many similar appropriations and tax laws included credits and deductions for such investments, but always for a limited period, usually two to five years. When the time limits ran out, industry and legislators scrambled to reinstate the write-offs. And often, a year or more would elapse before the tax credits returned. The new law allows bakers to plan for the future. That’s good news especially with IBIE 2016, which runs Oct. 8-11 in Las Vegas, rapidly approaching.
