By SEMA Washington, D.C., Staff
As part of a continuing effort to revise the American tax code, the leadership of the U.S. Senate Finance Committee has released a proposal to address reforms to cost recovery and tax accounting laws. Earlier this year, the committee began a thorough review of the tax code to modernize the system and create simpler rules for small businesses. The latest draft proposes reforms that will more accurately measure business income, lessen burdens on business owners and raise enough revenue from corporations over time to significantly reduce overall corporate tax rates.
Highlights of the draft include reducing the number of major depreciation rates from 40 to 5, requiring businesses to deduct the cost of research and development (R&D) and 50% of advertising expenses over five years, simplifying accounting rules to lessen the costs of tax compliance and enforcement, and repealing the “last in, first out” (LIFO) inventory accounting method. Lawmakers would permanently increase Section 179 expensing to $1 million and expand the definition of qualifying expenses to include all pooled assets, research and experimental expenditures, advertising costs and qualified extraction expenditures. The committee is also considering permanent expansion of the R&D tax credit, set to expire at the end of 2013.