The draft “Tax Reform Act of 2013” has been released by the House Ways and Means Committee to simplify the tax code for small businesses and spur job creation, according to the Specialty Equipment Market Association (SEMA).
Earlier this year, the Committee began the long tax reform process by establishing 11 bipartisan working groups focused on different issues including manufacturing, energy, income and tax distribution and small business/pass-throughs. These groups are scheduled to report their findings and recommendations by April 15. Key components of the draft small business tax reforms include:
* Makes permanent “Section 179” expensing, allowing small businesses to immediately deduct investments in new equipment up to $250,000 (phased-out for investments exceeding $800,000). These levels will revert to $25,000 and $200,000 in 2014 without legislation.
* Replaces small business tax-accounting rules with a uniform rule allowing small businesses with gross receipts of $10 million or less to use the cash method of accounting.
* Amends current law to establish a single deduction for start-up and organizational expenses. The bill increases the threshold for start-up expenses to $10,000 (from $5,000) and expands the deduction on organizational expenses.
* Modifies the current schedule for tax return filing to assist business owners in filing tax returns accurately. Partnerships would file by March 15, S Corporations by March 31, and C Corporations by April 15. Individuals would still be required to file by April 15, and all taxpayers would still be eligible for a six-month extension.
These initial steps toward a final comprehensive tax reform legislative package are promising and indicate a bipartisan effort to enact meaningful changes for small businesses, according to SEMA. For more information, visit the SEMA website.