January 21, 2024
An announcement was made last week by the chairs of the U.S. House Ways and Means Committee and Senate Finance Committee on a proposal that, if enacted, could address several of the tax policy priorities the American Rental Association (ARA) has been pursuing.
The plan, introduced by House Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR) as The Tax Relief for American Families and Workers Act of 2024 (The “Act”), is billed as a bipartisan, bicameral tax framework that promotes the financial security of working families, boosts growth and American competitiveness, and strengthens communities and Main Street businesses.
While the Act includes tax relief measures for families, those in low income housing and communities impacted by disasters, the following provisions are of particular significance to equipment and event rental operations:
Extension of 100 percent bonus depreciation: ARA has advocated for the extension of bonus depreciation which is phasing out and will be eliminated by 2026. The Act would restore full and immediate expensing for investments in machines, equipment and vehicles.
Enhancement of the small business expensing cap: ARA has advocated for the enhancement of Sec. 179 small business expensing. The Act would increase the amount of investment that a small business can immediately write off to $1.29 million, an increase above the $1 million cap enacted in 2017.
Deduction of R&D expenses: Under current law, Research and Development (R&D) expenses — incurred by many rental businesses when they develop systems that improve efficiency — must be amortized over five or 15 years. ARA has supported making the R&D tax credit fully deductible in the year the expense is incurred. The Act would enable businesses of all sizes to immediately deduct the cost of their U.S.-based R&D investments instead of over five years.
EBITDA extension: The Act contains a provision that extends the application of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) in determining the limitation on business interest.
The Act also proposes ending the Employee Retention Tax Credit (ERTC) program, which Chairmen Smith and Wyden said is a program hit by major cost overruns and fraud, and accelerating the deadline for filing backdated ERTC claims to Jan. 31, 2024 — a measure that could save more than $70 million in taxpayer dollars according to the Chairmen.
The proposed legislation is pending approval by both chambers of Congress.
You can view the Act section by section here.
