New legislation offers tax write-offs for equipment and software.

Metalcasters owning small businesses should be aware of two new pieces of legislation (H.R. 1388 and H.R. 1678) that have the potential to change the tax code by extending the increased Section 179 expensing limits. This specific section of the Internal Revenue Code allows small businesses to receive an immediate tax write-off on property that has a useful life of more than one year, such as machinery, equipment, furniture and off-the-shelf computer software.

Prior to a 2003 amendment to Section 179, businesses had to spread the cost of property more than $25,000 across several tax years as depreciation with a portion of the cost deducted each year. In 2003, the "Jobs and Growth Tax Relief Reconciliation Act" increased the amount to $100,000 to adjust for inflation; however, the current legislation stipulates that this increase will expire in 2008 and return to the $25,000 limit.

H.R. 1388, the "Small Business Expensing Permanency Act of 2005," was introduced by Wally Herger (R-Calif.) and would make the expensing increase permanent by adjusting for inflation. H.R. 1678, introduced by Marilyn Musgrave (R-Colo.), is similar legislation, which extends the increase until 2010. Proponents of both pieces of legislation claim the increase has provided small business owners with increased cash flow and a reduction in the paperwork necessary to account for the capitalization of purchased business property.

Both bills currently are being reviewed by the House Ways and Means Committee. For more information on the legislation, visit http://www.sba.gov/advo/laws/test05_0809.pdf.

Waterman & Assoc., Washington, D.C.