U.S. Sen. James Lankford (R-OK) authored a bill that would make permanent a provision in the 2017 Tax Cuts and Jobs Act (TCJA) to allow businesses to fully expense new investments in the year of purchase.
That provision currently began to phase out in the federal tax code starting at the end of 2022 and expires at the end of 2026. His bill, the Accelerate Long-term Investment Growth Now (ALIGN) Act (S.1117), would make it permanent, so businesses could continue to expense 100 percent of new investments, like machinery and equipment.
“Business expenses are not business profits, so they should not be taxed as profits,” Lankford said. “The 2017 tax law encouraged more economic activity from our US manufacturers by allowing them to depreciate their capital and equipment during the year it was purchased instead of over years and years of tax returns. But that provision started phasing out at the end of 2022. High inflation and high costs for everything from gasoline to construction materials will continue to plague our economy unless we immediately pass my bill to allow businesses to invest in their employees and business future. Let’s get this passed and signed into law to help our vital US manufacturing sector and other US industries continue to create high-paying jobs.”
Other sponsors of the legislation include U.S. Sens. Jim Risch (R-ID), Marco Rubio (R-FL), John Barrasso (R-WY), Mike Braun (R-IN), Marsha Blackburn (R-TN), Todd Young (R-IN), Steve Daines (R-MT), John Boozman (R-AR), John Thune (R-SD), and Tim Scott (R-SC).
With the provision being phased out, businesses can expense 80 percent in 2023, 60 percent in 2024, 40 percent in 2025, and 20 percent in 2026.
The bill is supported by the National Association of Manufacturers, USTelecom, National Taxpayers Union, 60 Plus Association, American Consumer Institute, Americans for Prosperity, Americans for Tax Reform, Association of Mature American Citizens Action, Center for a Free Economy, Center for Freedom and Prosperity, Center for Individual Freedom, Consumer Action for a Strong Economy, Council for Citizens Against Government Waste, Independent Women’s Voice, Institute for Liberty, and Taxpayers Protection Alliance.
The House version of the bill is sponsored by U.S. Rep. Jodey Arrington (R-TX).
“There’s no bigger incentive in the tax code for job creation and economic expansion than allowing businesses, both large and small, to fully and immediately deduct the cost of new investments, equipment, and machinery,” Arrington said. “Full expensing was a critical component to the Tax Cuts and Jobs Act and the economic boom that ensued prior to the pandemic. The ALIGN Act will lower the cost of capital and simplify the tax code as businesses look to make vital investments, bring workers back, onshore manufacturing capabilities, and ramp up production. This legislation will lead to stronger growth, more jobs, increased productivity, and higher wages for working families.”