It seems to happen every year at this point: Critical tax deductions on which millions of small businesses across the country rely every year end up being debated in Congress until extremely late in the calendar year. That, in turn, can have a detrimental impact on those companies, as owners have to wait to determine the most beneficial moves for their firms until the last few weeks of the year. And it seems that 2015 is going to be no different.
The issue being weighed in Congress currently relates to the Section 179 deduction, which is a deduction related to how companies can write off equipment purchases, according to a report from the Associated Press. The value of this deduction is currently at $25,000, and lawmakers want to raise that number to $500,000. However, there is a major holdup, because lawmakers cannot decide if they should increase that level permanently, or for this tax year only. And if they can't come to an agreement on the matter before Congress begins its holiday recess, the deduction will stay at the current $25,000.
What's the issue?
This time around, Section 179 is part of a larger federal spending bill over which lawmakers are currently haggling in an attempt to broker a deal, the report said. In all, the total value of that proposal would come to about $1.1 trillion, and with the stakes so high, Congressional observers are now unsure when the law will be approved. If legislators wait too much longer, though, they're going to leave millions of small business owners in limbo.
And indeed, many owners also say that by this point, the delay has already caused major problems, because even if the bill was approved right now, it might be difficult for their small businesses to complete the actual purchases they were planning to make before the end of the calendar year, the report said. Moreover, businesses that sell equipment which is likely to be purchased by other companies are likewise impacted by lower sales numbers as a result of this delay. Some report declines in activity of as much as 20 percent.
"If they had known (a $500,000 deduction) was coming, they would have been visiting us," Sherry Wuebben, whose company in LaCrosse, Wisconsin, sells heavy farm equipment including tractors, combines and threshers ranging in price from $25,000 to $500,000, told the newspaper.
Unfortunately, it seems unlikely that this is a situation which is going to cure itself any time soon, the report said. This type of political wrangling has become common since the economic downturn really hit, back in 2008. Since then, this kind of issue for small businesses has sadly become the norm, and there might not be much of a way to reverse that reality without further, and perhaps more robust, economic recovery.
Until that time, though, the best thing small business owners can do is come up with contingency financial plans that allow them to have success regardless of what Congress ends up doing. This can put them in a good position, and allow them to move forward with confidence.