Small business legislation allows capital expensing

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Congresswoman Marilyn Musgrave (R-Colo.) recently succeeded in passing two legislative measures in the House of Representatives designed to help small businesses.

If passed by the Senate and signed into law, they will expand capital expensing provisions and lower the tax burden of businesses through Section 179 of the tax code, which allows small businesses to deduct the cost of certain property and equipment in the year it is placed into service, rather than deducting its cost over several years.

In April, Musgrave introduced a legislative measure to extend $100,000 in capital expensing for small businesses for two more years (it is set to expire in current law in 2008). The bill is part of the proposed Tax Relief Extension Reconciliation Act.

Last month, she introduced a measure, part of the Gulf Opportunity Zone Act, to assist business owners and workers in the hurricane ravaged Gulf region. The bill would double the amount of capital that immediately can be expensed from $100,000 to $200,000 in this region.

"Small businesses are the backbone of the economy and their success depends on the ability to invest in equipment and employees," says Musgrave. "I've heard from hard working people with family owned businesses in Colorado and other parts of the nation and they have stressed the importance of this type of expensing when it comes to hiring more workers and buying more equipment.

"Also, down in the Gulf region, they need help to fully recover and my provision encourages more business investment and ultimately more jobs."

Section 179 of the Internal Revenue Code allows small businesses to deduct the cost of certain property and equipment in the year it is placed into service, rather than deducting its cost over several years. Because money is saved up front, business owners are empowered to hire more workers and reinvest their money in more business related equipment.

The IRS primarily allows small businesses such as sole proprietorships, partnerships and S-corporations to expense items such as machinery, equipment, furniture, fixtures, storage facilities and single-purpose agriculture structures.

Currently in her second term, Musgrave is chairman of the House Small Business Subcommittee on Workforce, Empowerment and Government Programs.

Earlier this year, Musgrave held an official congressional hearing in Fort Collins, Colo., to investigate ways to help Colorado's small businesses grow. Local residents, including Ron Lautzenheiser, a Big O Tire franchisee in Fort Collins, and tax experts testified on Musgrave's small business expensing bill, H.R. 1678. (See "Lautzenheiser supports small business legislation on expensing" in News Archives, Aug. 18, 2005.)

"The ability for small business to more quickly expense equipment purchases will help free up funds for more equipment purchases and to hire additional employees," says Lautzenheiser. "I believe this legislation will help and encourage small businesses to invest more in their respective operations and will strengthen the overall economy with an increased demand for employees."

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