Senate Passes Tax Extenders

By Jerry Hagstrom
DTN Political Correspondent

WASHINGTON (DTN) — The Senate late Tuesday night passed the tax extenders bill, which contains equipment depreciation and renewable fuels tax breaks important to agriculture.

The vote was 76 to 16. The bill was already passed by the House and will now go to President Barack Obama for his signature. The tax-extenders’ package was one of the final pieces of business that needed to be resolved before the lame-duck Congress could adjourn.

Several agricultural groups praised the tax-extenders’ vote and yet the newly enacted tax provisions will again expire in 15 days. The total tax-extenders package is projected to reduce federal taxes about $47.4 billion for 2014.

A pair of key provisions for farmers are Section 179 expensing and bonus depreciation. Congress let Section 179 drop for 2014 to $25,000, but the bill would kick that deduction back up to $500,000 for businesses spending $2 million or less in total equipment or machinery purchases. This is a popular provision for farmers and farm-machinery manufacturers. The provision is projected to save businesses about $1.43 billion in taxes.

The bill also extends 50% bonus depreciation for business equipment and machinery bought and put into operation in 2014. Bonus depreciation saves businesses about $1.49 billion in taxes.

The National Cattlemen’s Beef Association called the bill’s passage "great news." Kent Bacus, director of legislative affairs for NCBA, said the extension of Section 179, a provision that provides a higher deduction level for some capital expenditures, such as machinery and equipment, and the extension of bonus depreciation are key for producers.

"Last year, producers were able to expense up to $500,000 on capital investments, but this year that was lowered to $25,000," Bacus said. "For large equipment purchases and other capital investments, cattle producers need certainty in order to properly plan for their business."

Bob Dinneen, president and CEO of the Renewable Fuels Association, called it a step on the right direction. "The cellulosic production tax credit will help bolster the emerging cellulosic ethanol industry as plants in Iowa and Kansas are now in production.

"The alternative-fuel vehicle refueling infrastructure tax credit will help expand E85 availability to consumers by assisting gasoline marketers in making the infrastructure investments necessary to enhance greater choice at the pump," Dinneen said.

"These incentives can help to level the playing field in a tax code that is overwhelmingly tilted toward incumbent fuels and established oil extraction technologies. In fact, the International Energy Agency’s World Energy Outlook recently found that fossil fuels received an astounding $550 billion in subsidies worldwide last year," he said.

The Waterways Council applauded the Senate for including an increase in the barge diesel fuel user fee. The user fee — currently 20 cents per gallon of fuel used while operating on the inland system — will be increased to 29 cents per gallon, effective April 1, 2015. The provision is projected to increase revenue for the Inland Waterways Trust Fund by $260 million over 10 years.

The American Soybean Association praised the farm equipment, biofuels and waterways provisions. "Today’s passage of the tax extenders bill is a welcome relief to farmers as we close our books on 2014," said Wade Cowan, a farmer from Brownfield, Texas, and the new president of ASA. "While it’s not the long-term fix we need, the legislation does include the dollar-per-gallon biodiesel tax credit, expensing for farm equipment and infrastructure under Section 179, and bonus depreciation on farm assets, all of which provide greater certainty and a more stable climate for the farmers and producers who make use of these programs."

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DTN Ag Policy Editor Chris Clayton contributed to this report.