U.S. bill introduced to simplify, reform tax law | KPMG | US

Senate Finance’s Thune introduces bill to simplify, reform tax law

U.S. bill introduced to simplify, reform tax law

U.S. Senator John Thune (R-SD), a member of the Senate Finance Committee, today introduced a bill to simplify accounting rules and reform key parts of the tax law.

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According to a release from Senator Thune’s office, the legislation—Investment in New Ventures and Economic Success Today (INVEST) Act of 2017 (S. 1144)—would simplify accounting rules and reform key parts of the tax law and would help small and medium-sized business owners more quickly recover investment costs and certain other tax deductible business expenses. The release also indicates that:

  • The bill would accelerate cost recovery on property, equipment, inventory, and other common business investments. 
  • It would encourage new business growth and help existing businesses, including farms and ranches, expand their operations, create new jobs, and grow the economy. 
  • Although introduced as a standalone bill, it would be intended to be included in the Senate’s broader tax reform legislation.

In introducing the bill, Senator Thune said: 

Congress and the president have a once-in-a-generation opportunity to truly reform the tax code and strengthen the economy, and I’m confident the INVEST Act will help move us in the right direction.

Overview of provisions

According to today’s release, the legislation would provide the following expensing and cost recovery incentives:

  • Allow investments in business equipment and property to be written off immediately up to $2 million under section 179 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 
  • Make temporary “bonus” depreciation into permanent 50% 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, including a light truck or van, used for business purposes, and allow businesses to claim the full 50% expensing in the first year, up to $25,000
  • 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

 

With respect to start-up costs, the bill would:

  • Allow new business owners to expense more of their start-up and organizational expenses

 

The simplified accounting measures in the bill would:

  • Enable more small and medium-sized corporations to use the cash method of accounting
  • Simplify inventory accounting so small businesses can deduct the cost of their inventories rather than having to use inventory accounting methods that can delay the recovery of those costs 
  • Allow more small construction companies to use the simplified completed-contract method of accounting

KPMG observation

As a member of the Senate Finance Committee, Senator Thune can be expected to play a significant role in putting together Senate tax reform legislation. Some of the proposals in the INVEST Act might be considered as part of the Senate’s tax reform efforts.

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