U.S. Sen. John Thune (R-SD) introduced legislation to simplify accounting rules and reform parts of the tax code to help small and medium-sized businesses recover investment costs and certain other tax deductible business expenses.
The Investment in New Ventures and Economic Success Today (INVEST) Act of 2017 would help existing businesses expand their operations by accelerating cost recovery on property, equipment, inventory, and other common business investments.
“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,” Thune said. “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 That government-knows-best approach, coupled with a severely outdated tax code, not only discourages some business owners from expanding their operation, but in some cases, it also deters prospective owners from starting a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.”
The INVEST Act would allow investments in business equipment and property to be written off immediately up to $2 million 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.
The bill would also 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 used for business purposes; and 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.
It would additionally allow new business owners to expense more of their start-up and organizational expenses.
The bill would also enable more small and medium-sized corporations to use the cash method of accounting, and would allow more small construction companies to use the simplified completed-contract method of accounting. It would also 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.