U.S. Rep. Bill Pascrell, Jr. (D-NJ) stood with local business leaders yesterday to announce the permanent extension of Section 179 of the Internal Revenue Code allowing small businesses to plan ahead and make investments knowing they will not be hit with a tax bill for those purchases. [January 20, 2016]

As New Jersey's only member of the House Ways and Means Committee, Rep. Pascrell oversees all tax-related issues. He stood with Jim Kirkos, CEO of the Meadowlands Regional Chamber of Commerce, and Harold Diamond, president of Diamond Chemical Company, Inc., in the warehouse of the East Rutherford manufacturer of laundry, housekeeping, sanitizing, and other industrial products.

"Last year, Harold made almost $1 million in new investments in equipment to upgrade and improve the efficiency here at Diamond Chemical," Pascrell said. "But because of the uncertainty in our tax code and the gridlock in our politics, Harold didn’t know for sure whether he’d be able to write off the cost of those new investments, or get hit with a tax bill."

This section of the tax code allows businesses to write off the cost of new equipment or property – machinery, computers, furniture and other items – invested in their business immediately in the year the purchase was made.

"Being automated and being able to compete, that's very important for United States companies," Diamond said. "That's why we need to buy the equipment to invest in our facilities."

In December, Rep. Pascrell supported the Protecting Americans from Tax Hikes (PATH Act), the so-called "tax extenders package", that included a provision to make Section 179 a permanent part of the tax code and to have it indexed to inflation.

"Fortunately, Democrats and Republicans on the Ways and Means Committee got together and did something right," Pascrell said. "We not only renewed Section 179 expensing, we made it permanent and indexed to inflation, so businesses can plan ahead and when they have to make a choice between that new investment or holding back, they can make that next investment and their business gets a little bit stronger, a little more productive."

"Harold made the leap and it’s going to pay off. His investment in his business will be worth it, and our investment in this program is worth it. But now businesses can make the investment without the leap," Pascrell said. "Manufacturing has been the backbone of the American economy and an integral part of American society. I have a responsibility to fight for policies that will keep jobs here in New Jersey and around the country."

The provision of the PATH Act permanently extends the small business expensing limitation and phase-out amounts that had been in effect from 2010 to 2014 – $500,000 and $2 million, respectively. Without the legislation, the levels would have reverted to $25,000 and $200,000, respectively. The special rules allow expensing for computer software and qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property). The $500,000 and $2 million limits are indexed for inflation, and the expensing limitation on qualified real property is no longer capped.

"This bill allows companies like Diamond Chemical to write-off a good portion of their investment in equipment, and that's incredibly important to small businesses today," Kirkos said. "In the Meadowlands, we have hundreds of small companies right here that need this incentive."

Without this write-off, businesses would have to write off the expense gradually over three to seven years. Originally designed to allow write-offs of up to $25,000 per year, Congress increased the amount that can be deducted in 2008. Last year, Congress increased the amount to up to $500,000.

"It gives you the ability to buy, to have capital equipment, expenditures and to write them off in one year," Diamond said, "without the worry of having to be taxed at the end of the year, which in turn enables you to be more competitive, hire more people and that's very important." Diamond said he could hire as much as 30 new employees in the coming year.

"With the certainty that this provision will be there for years to come, businesses like Diamond can plan ahead and make that new investment without worry of an unknown and possibly large tax burden coming down the pike," Pascrell said. "And as our nation continues its economic recovery – and we’ve had 70 straight months of strong job growth – we need to do everything we can to support America’s small businesses. Small businesses create seven of every ten new jobs and employ more than half of the country’s private-sector workforce."

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