The Joint Committee on Taxation (JCT) issued a report—JCX-134-15 (October 27, 2015)—describing the macroeconomic effects of H.R. 2510, “Bonus Depreciation Modified and Made Permanent,” as ordered reported by the House Committee on Ways and Means on September 17, 2015.
H.R. 2510 would make “bonus depreciation” permanent and would modify certain rules applicable to qualified leasehold improvements, passenger automobiles, and long-term contracts. The bill also would make permanent and modify the election to increase the alternative minimum tax (AMT) credit in lieu of bonus depreciation; would provide rules for certain partnerships with a single corporate partner; and would provide special rules for fruit- and nut-bearing plants.
The JCT report includes a table showing that, without taking into account macroeconomic effects, H.R. 2510 is estimated to decrease revenues to the federal government by approximately $280.7 billion over the 10-year budget period. However, the table also shows that the bill is estimated to result in approximately $13.7 billion of additional revenues over that period due to the bill’s positive macroeconomic effects. Thus, taking into account the macroeconomic impact, the JCT estimates that the bill would, on a net basis, decrease revenues by approximately $267 billion over the 10-year budget period.
The JCT used its Macroeconomic Equilibrium Growth (MEG) model to simulate the macroeconomic effects of the bill.
The JCT report indicates that:
The JCT previously issued a report of the macroeconomic effects of S. 1946, the “Tax Relief Extension Act of 2015,” as approved by the Senate Finance Committee on July 21, 2015. That bill would extend retroactively the package of over 50 tax provisions that expired at the end of 2014, for two years—generally from January 1, 2015, through December 31, 2016. Thus, that bill included a temporary, retroactive extension of bonus depreciation.
The JCT report on the macroeconomic effects of S. 1946 included an overall estimate of the macroeconomic impact of extending the package of expired provisions. It did not provide a macroeconomic estimate of the impact of extending each particular expired provision. However, the analysis in the report indicated, as a general matter, that the provisions affecting business—especially the extension of bonus depreciation—were expected to have a significant, but temporary, impact on the after-tax cost of capital.
Read an August 2015 description of the JCT’s macroeconomic estimate of S. 1946—TaxNewsFlash-United States
<p>© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.</p> <p>KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.</p>
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.