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[From the U.S. Government Publishing Office]


114th Congress       }                              {    Rept. 114-21
                        HOUSE OF REPRESENTATIVES
 1st Session         }                              {    Part 1
======================================================================
 
              AMERICA'S SMALL BUSINESS TAX RELIEF ACT OF 2015

                                _______
                                

February 9, 2015.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Ryan of Wisconsin, from the Committee on Ways and Means, submitted 
                             the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 636]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 636) to amend the Internal Revenue Code of 1986 to 
permanently extend increased expensing limitations, and for 
other purposes, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
  I. SUMMARY AND BACKGROUND...........................................2
          A. Purpose and Summary.................................     2
          B. Background and Need for Legislation.................     3
          C. Legislative History.................................     3
 II. EXPLANATION OF THE BILL..........................................4
          A. Expensing Certain Depreciable Business Assets for 
              Small Business (sec. 179 of the Code)..............     4
III. VOTES OF THE COMMITTEE...........................................7
 IV. BUDGET EFFECTS OF THE BILL.......................................7
          A. Committee Estimate of Budgetary Effects.............     7
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................     9
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................     9
  V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......12
          A. Committee Oversight Findings and Recommendations....    12
          B. Statement of General Performance Goals and 
              Objectives.........................................    12
          C. Information Relating to Unfunded Mandates...........    12
          D. Applicability of House Rule XXI 5(b)................    12
          E. Tax Complexity Analysis.............................    12
          F. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................    16
          G. Duplication of Federal Programs.....................    16
          H. Disclosure of Directed Rule Makings.................    16
 VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........16
VII. DISSENTING VIEWS................................................23
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``America's Small Business Tax Relief 
Act of 2015''.

SEC. 2. EXPENSING CERTAIN DEPRECIABLE BUSINESS ASSETS FOR SMALL 
                    BUSINESS.

  (a) In General.--
          (1) Dollar limitation.--Section 179(b)(1) of the Internal 
        Revenue Code of 1986 is amended by striking ``shall not 
        exceed--'' and all that follows and inserting ``shall not 
        exceed $500,000.''.
          (2) Reduction in limitation.--Section 179(b)(2) of such Code 
        is amended by striking ``exceeds--'' and all that follows and 
        inserting ``exceeds $2,000,000.''.
  (b) Computer Software.--Section 179(d)(1)(A)(ii) of such Code is 
amended by striking ``, to which section 167 applies, and which is 
placed in service in a taxable year beginning after 2002 and before 
2015'' and inserting ``and to which section 167 applies''.
  (c) Election.--Section 179(c)(2) of such Code is amended--
          (1) by striking ``may not be revoked'' and all that follows 
        through ``and before 2015'', and
          (2) by striking ``irrevocable'' in the heading thereof.
  (d) Air Conditioning and Heating Units.--Section 179(d)(1) of such 
Code is amended by striking ``and shall not include air conditioning or 
heating units''.
  (e) Qualified Real Property.--Section 179(f) of such Code is 
amended--
          (1) by striking ``beginning after 2009 and before 2015'' in 
        paragraph (1), and
          (2) by striking paragraphs (3) and (4).
  (f) Inflation Adjustment.--Section 179(b) of such Code is amended by 
adding at the end the following new paragraph:
          ``(6) Inflation adjustment.--
                  ``(A) In general.--In the case of any taxable year 
                beginning after 2015, the dollar amounts in paragraphs 
                (1) and (2) shall each be increased by an amount equal 
                to--
                          ``(i) such dollar amount, multiplied by
                          ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2014' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                  ``(B) Rounding.--The amount of any increase under 
                subparagraph (A) shall be rounded to the nearest 
                multiple of $10,000.''.
  (g) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2014.

SEC. 3. BUDGETARY EFFECTS.

  The budgetary effects of this Act shall not be entered on either 
PAYGO scorecard maintained pursuant to section 4(d) of the Statutory 
Pay-As-You-Go Act of 2010.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    H.R. 636, reported by the Committee on Ways and Means, 
provides that the maximum amount that a taxpayer may expense, 
for taxable years beginning after 2014, is $500,000 of the cost 
of qualifying property placed in service for the taxable year, 
with such amount reduced by the amount by which the cost of 
such qualifying property exceeds $2,000,000. An identical 
temporary provision applied for tax years 2010 through 2014, 
but it expired for tax years beginning after December 31, 2014, 
causing these amounts to revert to $25,000 and $200,000, 
respectively. Under H.R. 636, both the $500,000 and $2,000,000 
limits would be indexed for inflation beginning in taxable 
years after 2015. H.R. 636 also treats off-the-shelf computer 
software, qualified real property, and air conditioning and 
heating units placed in service in taxable years beginning 
after 2014 as eligible for expensing.

                 B. Background and Need for Legislation

    While the Committee continues actively to pursue 
comprehensive tax reform as a critical means of promoting 
economic growth and job creation, the Committee also believes 
that it is important to provide small businesses permanent, 
immediate tax relief to help encourage economic growth and job 
creation. By restoring and making permanent for small 
businesses and farms the ability to expense purchases of 
property and equipment up to $500,000, with such expensing 
phased out for purchases exceeding $2,000,000, H.R. 636 
eliminates the significant reduction in the benefit of 
expensing that may result from the expiration of these 
temporary expensing levels after 2014. Making the 2014 levels 
permanent provides much-needed certainty for small businesses 
and farms, which have struggled through the economic challenges 
of the past seven years, enabling them to make investments 
critical to the growth and expansion of their businesses and to 
hire new employees. H.R. 636 also provides certainty by 
permanently treating investments in computer software, heating 
and air conditioning units, and certain investments in real 
property, as property eligible for expensing. To ensure that 
small businesses' ability to expense new investments in 
property and equipment will keep pace with the rising cost of 
such investments in future years, H.R. 636 indexes the 
expensing limits for inflation. Collectively, these changes 
will help small businesses and farms upgrade equipment and 
facilities, allowing them to reduce maintenance costs, take 
advantage of labor-saving advances, become more energy 
efficient, and adopt technology that is environmentally 
friendly.

                         C. Legislative History


Background

    H.R. 636 was introduced on February 2, 2015, and was 
referred to the Committee on Ways and Means.

Committee action

    The Committee on Ways and Means marked up H.R. 636, the 
America's Small Business Tax Relief Act of 2015, on February 4, 
2015, and ordered the bill, as amended, favorably reported 
(with a quorum being present).

Committee hearings

    The need for permanent rules regarding small business 
expensing was discussed at no fewer than seven hearings during 
the 112th and 113th Congresses:
           Full Committee hearing on Fundamental Tax 
        Reform (January 20, 2011);
           Select Revenue Measures Subcommittee Hearing 
        on Small Businesses and Tax Reform (March 3, 2011);
           Full Committee hearing on the Interaction of 
        Tax and Financial Accounting on Tax Reform (February 8, 
        2012);
           Full Committee hearing on the Treatment of 
        Closely-Held Businesses in the Context of Tax Reform 
        (March 7, 2012);
           Full Committee hearing on Tax Reform and the 
        U.S. Manufacturing Sector (July 19, 2012);
           Full Committee hearing on the Small Business 
        and Pass-Through Entity Tax Reform Discussion Draft 
        (May 15, 2013); and
           Full Committee hearing on the Benefits of 
        Permanent Tax Policy for America's Job Creators (April 
        8, 2014).

                      II. EXPLANATION OF THE BILL


  A. Expensing Certain Depreciable Business Assets for Small Business 
                         (sec. 179 of the Code)


                              PRESENT LAW

    A taxpayer may elect under section 179 to deduct (or 
``expense'') the cost of qualifying property, rather than to 
recover such costs through depreciation deductions, subject to 
limitation. For taxable years beginning in 2014, the maximum 
amount a taxpayer may expense is $500,000 of the cost of 
qualifying property placed in service for the taxable year.\1\ 
The $500,000 amount is reduced (but not below zero) by the 
amount by which the cost of qualifying property placed in 
service during the taxable year exceeds $2,000,000.\2\ The 
$500,000 and $2,000,000 amounts are not indexed for inflation. 
In general, qualifying property is defined as depreciable 
tangible personal property that is purchased for use in the 
active conduct of a trade or business.\3\ Qualifying property 
excludes investments in air conditioning and heating units.\4\ 
For taxable years beginning before 2015, qualifying property 
also includes off-the-shelf computer software and qualified 
real property (i.e., qualified leasehold improvement property, 
qualified restaurant property, and qualified retail improvement 
property).\5\ Of the $500,000 expense amount available under 
section 179, the maximum amount available with respect to 
qualified real property is $250,000 for each taxable year.\6\
---------------------------------------------------------------------------
    \1\For the years 2003 through 2006, the relevant dollar amount is 
$100,000 (indexed for inflation); in 2007, the dollar limitation is 
$125,000; for the 2008 and 2009 years, the relevant dollar amount is 
$250,000; and for the years 2010 through 2013, the relevant dollar 
limitation is $500,000. Sec. 179(b)(1).
    \2\For the years 2003 through 2006, the relevant dollar amount is 
$400,000 (indexed for inflation); in 2007, the dollar limitation is 
$500,000; for the 2008 and 2009 years, the relevant dollar amount is 
$800,000; and for the years 2010 through 2013, the relevant dollar 
limitation is $2,000,000. Sec. 179(b)(2).
    \3\Passenger automobiles subject to the section 280F limitation are 
eligible for section 179 expensing only to the extent of the dollar 
limitations in section 280F. For sport utility vehicles above the 6,000 
pound weight rating, which are not subject to the limitation under 
section 280F, the maximum cost that may be expensed for any taxable 
year under section 179 is $25,000. Sec. 179(b)(5).
    \4\Sec. 179(d)(1) flush language.
    \5\Sec. 179(d)(1)(A)(ii) and (f).
    \6\Sec. 179(f)(3).
---------------------------------------------------------------------------
    For taxable years beginning in 2015 and thereafter, a 
taxpayer may elect to deduct up to $25,000 of the cost of 
qualifying property placed in service for the taxable year, 
subject to limitation. The $25,000 amount is reduced (but not 
below zero) by the amount by which the cost of qualifying 
property placed in service during the taxable year exceeds 
$200,000. The $25,000 and $200,000 amounts are not indexed for 
inflation. In general, qualifying property is defined as 
depreciable tangible personal property (not including off-the-
shelf computer software, qualified real property, or air 
conditioning and heating units) that is purchased for use in 
the active conduct of a trade or business.
    The amount eligible to be expensed for a taxable year may 
not exceed the taxable income for such taxable year that is 
derived from the active conduct of a trade or business 
(determined without regard to this provision).\7\ Any amount 
that is not allowed as a deduction because of the taxable 
income limitation may be carried forward to succeeding taxable 
years (subject to limitations). However, amounts attributable 
to qualified real property that are disallowed under the trade 
or business income limitation may only be carried over to 
taxable years in which the definition of eligible section 179 
property includes qualified real property.\8\ Thus, if a 
taxpayer's section 179 deduction for 2013 with respect to 
qualified real property is limited by the taxpayer's active 
trade or business income, such disallowed amount may be carried 
over to 2014. Any such carryover amounts that are not used in 
2014 are treated as property placed in service in 2014 for 
purposes of computing depreciation. That is, the unused 
carryover amount from 2013 is considered placed in service on 
the first day of the 2014 taxable year.\9\
---------------------------------------------------------------------------
    \7\Sec. 179(b)(3).
    \8\Section 179(f)(4) details the special rules that apply to 
disallowed amounts with respect to qualified real property.
    \9\For example, assume that during 2013, a company's only asset 
purchases are section 179-eligible equipment costing $100,000 and 
qualifying leasehold improvements costing $200,000. Assume the company 
has no other asset purchases during 2013, and has a taxable income 
limitation of $150,000. The maximum section 179 deduction the company 
can claim for 2013 is $150,000, which is allocated pro rata between the 
properties, such that the carryover to 2014 is allocated $100,000 to 
the qualified leasehold improvements and $50,000 to the equipment.
    Assume further that in 2014, the company had no asset purchases and 
had no taxable income. The $100,000 carryover from 2013 attributable to 
qualified leasehold improvements is treated as placed in service as of 
the first day of the company's 2014 taxable year under section 
179(f)(4)(C). The $50,000 carryover allocated to equipment is carried 
over to 2014 under section 179(b)(3)(B).
---------------------------------------------------------------------------
    No general business credit under section 38 is allowed with 
respect to any amount for which a deduction is allowed under 
section 179.\10\ If a corporation makes an election under 
section 179 to deduct expenditures, the full amount of the 
deduction does not reduce earnings and profits. Rather, the 
expenditures that are deducted reduce corporate earnings and 
profits ratably over a five-year period.\11\
---------------------------------------------------------------------------
    \10\Sec. 179(d)(9).
    \11\Sec. 312(k)(3)(B).
---------------------------------------------------------------------------
    An expensing election is made under rules prescribed by the 
Secretary.\12\ In general, any election or specification made 
with respect to any property may not be revoked except with the 
consent of the Commissioner. However, an election or 
specification under section 179 may be revoked by the taxpayer 
without consent of the Commissioner for taxable years beginning 
after 2002 and before 2015.\13\
---------------------------------------------------------------------------
    \12\Sec. 179(c)(1).
    \13\Sec. 179(c)(2).
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that section 179 expensing provides 
two important benefits for small businesses. First, it lowers 
the cost of capital for tangible property used in a trade or 
business. With a lower cost of capital, the Committee believes 
small businesses will invest in more equipment and employ more 
workers. Second, it eliminates depreciation recordkeeping 
requirements with respect to expensed property. To increase the 
value of these benefits and to increase the number of taxpayers 
eligible, the provision increases the amount allowed to be 
expensed under section 179 and increases the amount of the 
phase-out threshold. In addition, to counteract the negative 
effect of inflation on the limit and phase-out threshold of 
this provision for small businesses, the provision indexes such 
amounts for inflation.
    The Committee also believes that qualified real property 
(i.e., qualified leasehold improvement property, qualified 
restaurant property, and qualified retail improvement property) 
should continue to be included in the section 179 expensing 
provision to encourage small businesses to invest in these 
types of real property. Similarly, the Committee believes that 
investments in air conditioning and heating units used in the 
active conduct of a trade or business should be included within 
the definition of qualifying property to remove a disincentive 
for small businesses to invest in more efficient cooling and 
heating equipment. Further, the Committee believes that 
purchased computer software should continue to be included in 
the section 179 expensing provision so that it is not 
disadvantaged relative to developed software. In addition, the 
Committee believes that the process of making and revoking 
section 179 elections should continue to be simpler and more 
efficient for taxpayers by eliminating the requirement to 
obtain the consent of the Commissioner.

                        EXPLANATION OF PROVISION

    The provision provides that the maximum amount a taxpayer 
may expense, for taxable years beginning after 2014, is 
$500,000 of the cost of qualifying property placed in service 
for the taxable year. The $500,000 amount is reduced (but not 
below zero) by the amount by which the cost of qualifying 
property placed in service during the taxable year exceeds 
$2,000,000. The $500,000 and $2,000,000 amounts are indexed for 
inflation for taxable years beginning after 2015.
    In addition, the provision makes permanent the treatment of 
off-the-shelf computer software as qualifying property. The 
provision also makes permanent the treatment of qualified real 
property as eligible section 179 property and removes the 
limitation related to the amount of section 179 property that 
may be attributable to qualified real property for taxable 
years beginning after 2014. Further, the provision strikes the 
flush language in section 179(d)(1) that excludes air 
conditioning and heating units from the definition of 
qualifying property.
    The provision also makes permanent the permission granted 
to a taxpayer to revoke without the consent of the Commissioner 
any election, and any specification contained therein, made 
under section 179.
    The provision exempts any budgetary effects from the PAYGO 
scorecards under the Statutory Pay-As-You-Go Act of 2010.

                             EFFECTIVE DATE

    The provision applies to taxable years beginning after 
December 31, 2014.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 636, the America's Small Business Tax 
Relief Act of 2014, on February 4, 2015.
    The bill, H.R. 636, was ordered favorably reported as 
amended by a roll call vote of 24 yeas to 14 nays (with a 
quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Ryan.......................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Rangel.......  ........        X   .........
Mr. Brady......................        X   ........  .........  Mr. McDermott....  ........        X   .........
Mr. Nunes......................        X   ........  .........  Mr. Lewis........  ........        X   .........
Mr. Tiberi.....................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Becerra......  ........        X   .........
Mr. Boustany...................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Price......................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Blumenauer...  ........  ........  .........
Mr. Smith (NE).................        X   ........  .........  Mr. Kind.........  ........        X   .........
Mr. Schock.....................        X   ........  .........  Mr. Pascrell.....  ........        X   .........
Ms. Jenkins....................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Mr. Davis........  ........        X   .........
Mr. Marchant...................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mrs. Black.....................        X   ........  .........
Mr. Reed.......................        X   ........  .........
Mr. Young......................        X   ........  .........
Mr. Kelly......................        X   ........  .........
Mr. Renacci....................        X   ........  .........
Mr. Meehan.....................        X   ........  .........
Mrs. Noem......................        X   ........  .........
Mr. Holding....................        X   ........  .........
Mr. Smith (MO).................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 636, as 
reported.
    The bill, as reported, is estimated to have the following 
effect on Federal budget receipts for fiscal years 2015-2025:

                                                                                          Fiscal Years
                                                                                      [Millions of Dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
     2015           2016           2017           2018           2019           2020           2021           2022           2023           2024           2025         2015-20        2015-25
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
      -8,340        -14,400        -10,846         -8,661         -6,901         -5,537         -4,817         -4,090         -4,071         -4,648         -4,787        -54,684       -77,097
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding.

    Pursuant to clause 8 of rule XIII of the Rules of the House 
of Representatives, the following statement is made by the 
Joint Committee on Taxation with respect to the provisions of 
the bill amending the Internal Revenue Code of 1986: the gross 
budgetary effect (before incorporating macroeconomic effects) 
in any fiscal year is less than 0.25 percent of the current 
projected gross domestic product of the United States for that 
fiscal year; therefore, the bill is not ``major legislation'' 
for purposes of requiring that the estimate include the 
budgetary effects of changes in economic output, employment, 
capital stock and other macroeconomic variables.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee further states that the revenue-reducing tax 
provisions involve increased tax expenditures. (See amounts in 
table in Part IV.A., above.)

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, February 5, 2015.
Hon. Paul Ryan,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 636, the America's 
Small Business Tax Relief Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Nate Frentz.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 636--America's Small Business Tax Relief Act of 2015

    H.R. 636 would amend section 179 of the Internal Revenue 
Code, which mostly affects small- to medium-sized businesses, 
to retroactively and permanently extend from January 1, 2015, 
increased limitations on the amount of investment that can be 
immediately deducted from taxable income. H.R. 636 also would 
index the limitations for inflation and expand the definition 
of property that qualifies for that immediate deduction.
    Specifically, the legislation would permanently extend to 
$500,000 (indexed for inflation) the annual cost of property 
eligible for expensing under section 179. That change would 
allow firms to deduct immediately from their taxable income 
larger amounts of investment instead of spreading those 
deductions out over time. The benefit of the immediate 
expensing would phase out for total qualifying investment in 
excess of $2 million, indexed for inflation.
    The staff of the Joint Committee on Taxation (JCT) 
estimates that enacting H.R. 636 would reduce revenues, thus 
increasing federal deficits, by about $77 billion over the 
2015-2025 period. The estimated budgetary effects of H.R. 636 
are shown in the following table.

 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        By fiscal year, in millions of dollars--
                                                       -----------------------------------------------------------------------------------------------------------------------------------------
                                                          2015       2016        2017       2018      2019      2020      2021      2022      2023      2024      2025     2015-2020   2015-2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       CHANGES IN REVENUES
Estimated Revenues....................................    -8,340     -14,400     -10,846    -8,661    -6,901    -5,537    -4,817    -4,090    -4,071    -4,648    -4,787     -54,684    -77,097
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Staff of the Joint Committee on Taxation.
Note: Components may not sum to totals because of rounding.

    Although enacting H.R. 636 would affect revenues, the 
provisions of the Statutory Pay-As-You-Go Act of 2010 do not 
apply to the legislation because it includes a provision that 
would direct the Office of Management and Budget to exclude the 
estimated changes in revenues from the scorecards used to 
enforce the pay-as-you-go rules.
    JCT has determined that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Nathaniel 
Frentz. The estimate was approved by David Weiner, Assistant 
Director for Tax Analysis.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was as a result of the 
Committee's review of the provisions of H.R. 636 that the 
Committee concluded that it is appropriate to report the bill, 
as amended, favorably to the House of Representatives with the 
recommendation that the bill do pass.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                D. Applicability of House Rule XXI 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the bill, and states that the bill does not 
involve any Federal income tax rate increases within the 
meaning of the rule.

                       E. Tax Complexity Analysis

    The following statement is made pursuant to clause 3(h)(1) 
of rule XIII of the Rules of the House of Representatives. 
Section 4022(b) of the Internal Revenue Service Restructuring 
and Reform Act of 1998 (the ``IRS Reform Act'') requires the 
staff of the Joint Committee on Taxation (in consultation with 
the Internal Revenue Service and the Treasury Department) to 
provide a tax complexity analysis. The complexity analysis is 
required for all legislation reported by the Senate Committee 
on Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
and has widespread applicability to individuals or small 
businesses. For each such provision identified by the staff of 
the Joint Committee on Taxation a summary description of the 
provision is provided along with an estimate of the number and 
type of affected taxpayers, and a discussion regarding the 
relevant complexity and administrative issues.
    Following the analysis of the staff of the Joint Committee 
on Taxation are the comments of the IRS and Treasury regarding 
each of the provisions included in the complexity analysis.
    1. Expensing Certain Depreciable Business Assets for Small 
Businesses

Summary description of the provision

    The bill provides that the maximum amount a taxpayer may 
expense, for taxable years beginning after 2014, is $500,000 of 
the cost of qualifying property placed in service for the 
taxable year. The $500,000 amount is reduced (but not below 
zero) by the amount by which the cost of qualifying property 
placed in service during the taxable year exceeds $2,000,000. 
The $500,000 and $2,000,000 amounts are indexed for inflation 
for taxable years beginning after 2015.
    In addition, the bill makes permanent the treatment of off-
the-shelf computer software as qualifying property. The bill 
also makes permanent the treatment of qualified real property 
as eligible section 179 property and removes the limitation 
related to the amount of section 179 property that may be 
attributable to qualified real property for taxable years 
beginning after 2014. Further, the bill strikes the flush 
language in section 179(d)(1) that excludes air conditioning 
and heating units from the definition of qualifying property.
    The bill makes permanent the permission granted to a 
taxpayer to revoke without the consent of the Commissioner any 
election, and any specification contained therein, made under 
section 179.
    The bill exempts any budgetary effects from the PAYGO 
scorecards under the Statutory Pay-As-You-Go Act of 2010.

Number of affected taxpayers

    It is estimated that the provision will affect over ten 
percent of small business tax returns.

Discussion

    While taxpayers purchasing section 179 property will still 
be required to complete and file Form 4562, Depreciation and 
Amortization (Including Information on Listed Property), 
significantly less detail is required to be included on such 
form. Accordingly, the compliance burden of many taxpayers will 
be reduced.


  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   G. Duplication of Federal Programs

    In compliance with Sec. 3(g)(2) of H. Res. 5 (114th 
Congress), the Committee states that no provision of the bill 
establishes or reauthorizes: (1) a program of the Federal 
Government known to be duplicative of another Federal program, 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139, or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to the Federal Program 
Information Act (Public Law 95-220, as amended by Public Law 
98-169).

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires no 
directed rule makings within the meaning of such section.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

INTERNAL REVENUE CODE OF 1986

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Subtitle A--Income Taxes

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CHAPTER 1--NORMAL TAXES AND SURTAXES

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Subchapter B--Computation of Taxable Income

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PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS

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SEC. 179. ELECTION TO EXPENSE CERTAIN DEPRECIABLE BUSINESS ASSETS.

  (a) Treatment as Expenses.--A taxpayer may elect to treat the 
cost of any section 179 property as an expense which is not 
chargeable to capital account. Any cost so treated shall be 
allowed as a deduction for the taxable year in which the 
section 179 property is placed in service.
  (b) Limitations.--
          (1) Dollar limitation.--The aggregate cost which may 
        be taken into account under subsection (a) for any 
        taxable year [shall not exceed--] shall not exceed 
        $500,000.
                  [(A) $250,000 in the case of taxable years 
                beginning after 2007 and before 2010,
                  [(B) $500,000 in the case of taxable years 
                beginning after 2009 and before 2015, and
                  [(C) $25,000 in the case of taxable years 
                beginning after 2014.]
          (2) Reduction in limitation.--The limitation under 
        paragraph (1) for any taxable year shall be reduced 
        (but not below zero) by the amount by which the cost of 
        section 179 property placed in service during such 
        taxable year [exceeds--] exceeds $2,000,000.
                  [(A) $800,000 in the case of taxable years 
                beginning after 2007 and before 2010,
                  [(B) $2,000,000 in the case of taxable years 
                beginning after 2009 and before 2015, and
                  [(C) $200,000 in the case of taxable years 
                beginning after 2014.]
          (3) Limitation based on income from trade or 
        business.--
                  (A) In general.--The amount allowed as a 
                deduction under subsection (a) for any taxable 
                year (determined after the application of 
                paragraphs (1) and (2)) shall not exceed the 
                aggregate amount of taxable income of the 
                taxpayer for such taxable year which is derived 
                from the active conduct by the taxpayer of any 
                trade or business during such taxable year.
                  (B) Carryover of disallowed deduction.--The 
                amount allowable as a deduction under 
                subsection (a) for any taxable year shall be 
                increased by the lesser of--
                          (i) the aggregate amount disallowed 
                        under subparagraph (A) for all prior 
                        taxable years (to the extent not 
                        previously allowed as a deduction by 
                        reason of this subparagraph), or
                          (ii) the excess (if any) of--
                                  (I) the limitation of 
                                paragraphs (1) and (2) (or if 
                                lesser, the aggregate amount of 
                                taxable income referred to in 
                                subparagraph (A)), over
                                  (II) the amount allowable as 
                                a deduction under subsection 
                                (a) for such taxable year 
                                without regard to this 
                                subparagraph.
                  (C) Computation of taxable income.--For 
                purposes of this paragraph, taxable income 
                derived from the conduct of a trade or business 
                shall be computed without regard to the 
                deduction allowable under this section.
          (4) Married individuals filing separately.--In the 
        case of a husband and wife filing separate returns for 
        the taxable year--
                  (A) such individuals shall be treated as 1 
                taxpayer for purposes of paragraphs (1) and 
                (2), and
                  (B) unless such individuals elect otherwise, 
                50 percent of the cost which may be taken into 
                account under subsection (a) for such taxable 
                year (before application of paragraph (3)) 
                shall be allocated to each such individual.
          (5) Limitation on cost taken into account for certain 
        passenger vehicles.--
                  (A) In general.--The cost of any sport 
                utility vehicle for any taxable year which may 
                be taken into account under this section shall 
                not exceed $25,000.
                  (B) Sport utility vehicle.--For purposes of 
                subparagraph (A)--
                          (i) In general.--The term ``sport 
                        utility vehicle'' means any 4-wheeled 
                        vehicle--
                                  (I) which is primarily 
                                designed or which can be used 
                                to carry passengers over public 
                                streets, roads, or highways 
                                (except any vehicle operated 
                                exclusively on a rail or 
                                rails),
                                  (II) which is not subject to 
                                section 280F, and
                                  (III) which is rated at not 
                                more than 14,000 pounds gross 
                                vehicle weight.
                          (ii) Certain vehicles excluded.--Such 
                        term does not include any vehicle 
                        which--
                                  (I) is designed to have a 
                                seating capacity of more than 9 
                                persons behind the driver's 
                                seat,
                                  (II) is equipped with a cargo 
                                area of at least 6 feet in 
                                interior length which is an 
                                open area or is designed for 
                                use as an open area but is 
                                enclosed by a cap and is not 
                                readily accessible directly 
                                from the passenger compartment, 
                                or
                                  (III) has an integral 
                                enclosure, fully enclosing the 
                                driver compartment and load 
                                carrying device, does not have 
                                seating rearward of the 
                                driver's seat, and has no body 
                                section protruding more than 30 
                                inches ahead of the leading 
                                edge of the windshield.
          (6) Inflation adjustment.--
                  (A) In general.--In the case of any taxable 
                year beginning after 2015, the dollar amounts 
                in paragraphs (1) and (2) shall each be 
                increased by an amount equal to--
                          (i) such dollar amount, multiplied by
                          (ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for 
                        the calendar year in which the taxable 
                        year begins, determined by substituting 
                        ``calendar year 2014'' for ``calendar 
                        year 1992'' in subparagraph (B) 
                        thereof.
                  (B) Rounding.--The amount of any increase 
                under subparagraph (A) shall be rounded to the 
                nearest multiple of $10,000.
  (c) Election.--
          (1) In general.--An election under this section for 
        any taxable year shall--
                  (A) specify the items of section 179 property 
                to which the election applies and the portion 
                of the cost of each of such items which is to 
                be taken into account under subsection (a), and
                  (B) be made on the taxpayer's return of the 
                tax imposed by this chapter for the taxable 
                year.
        Such election shall be made in such manner as the 
        Secretary may by regulations prescribe.
          (2) Election [irrevocable].--Any election made under 
        this section, and any specification contained in any 
        such election, [may not be revoked except with the 
        consent of the Secretary. Any such election or 
        specification with respect to any taxable year 
        beginning after 2002 and before 2015] may be revoked by 
        the taxpayer with respect to any property, and such 
        revocation, once made, shall be irrevocable.
  (d) Definitions and Special Rules.--
          (1) Section 179 property.--For purposes of this 
        section, the term ``section 179 property'' means 
        property--
                  (A) which is--
                          (i) tangible property (to which 
                        section 168 applies), or
                          (ii) computer software (as defined in 
                        section 197(e)(3)(B)) which is 
                        described in section 197(e)(3)(A)(i)[, 
                        to which section 167 applies, and which 
                        is placed in service in a taxable year 
                        beginning after 2002 and before 2015] 
                        and to which section 167 applies,
                  (B) which is section 1245 property (as 
                defined in section 1245(a)(3)), and
                  (C) which is acquired by purchase for use in 
                the active conduct of a trade or business.
        Such term shall not include any property described in 
        section 50(b) [and shall not include air conditioning 
        or heating units].
          (2) Purchase defined.--For purposes of paragraph (1), 
        the term ``purchase'' means any acquisition of 
        property, but only if--
                  (A) the property is not acquired from a 
                person whose relationship to the person 
                acquiring it would result in the disallowance 
                of losses under section 267 or 707(b) (but, in 
                applying section 267(b) and (c) for purposes of 
                this section, paragraph (4) of section 267(c) 
                shall be treated as providing that the family 
                of an individual shall include only his spouse, 
                ancestors, and lineal descendants),
                  (B) the property is not acquired by one 
                component member of a controlled group from 
                another component member of the same controlled 
                group, and
                  (C) the basis of the property in the hands of 
                the person acquiring it is not determined--
                          (i) in whole or in part by reference 
                        to the adjusted basis of such property 
                        in the hands of the person from whom 
                        acquired, or
                          (ii) under section 1014(a) (relating 
                        to property acquired from a decedent).
          (3) Cost.--For purposes of this section, the cost of 
        property does not include so much of the basis of such 
        property as is determined by reference to the basis of 
        other property held at any time by the person acquiring 
        such property.
          (4) Section not to apply to estates and trusts.--This 
        section shall not apply to estates and trusts.
          (5) Section not to apply to certain noncorporate 
        lessors.--This section shall not apply to any section 
        179 property which is purchased by a person who is not 
        a corporation and with respect to which such person is 
        the lessor unless--
                  (A) the property subject to the lease has 
                been manufactured or produced by the lessor, or
                  (B) the term of the lease (taking into 
                account options to renew) is less than 50 
                percent of the class life of the property (as 
                defined in section 168(i)(1)), and for the 
                period consisting of the first 12 months after 
                the date on which the property is transferred 
                to the lessee the sum of the deductions with 
                respect to such property which are allowable to 
                the lessor solely by reason of section 162 
                (other than rents and reimbursed amounts with 
                respect to such property) exceeds 15 percent of 
                the rental income produced by such property.
          (6) Dollar limitation of controlled group.--For 
        purposes of subsection (b) of this section--
                  (A) all component members of a controlled 
                group shall be treated as one taxpayer, and
                  (B) the Secretary shall apportion the dollar 
                limitation contained in subsection (b)(1) among 
                the component members of such controlled group 
                in such manner as he shall by regulations 
                prescribe.
          (7) Controlled group defined.--For purposes of 
        paragraphs (2) and (6), the term ``controlled group'' 
        has the meaning assigned to it by section 1563(a), 
        except that, for such purposes, the phrase ``more than 
        50 percent'' shall be substituted for the phrase ``at 
        least 80 percent'' each place it appears in section 
        1563(a)(1).
          (8) Treatment of partnerships and S corporations.--In 
        the case of a partnership, the limitations of 
        subsection (b) shall apply with respect to the 
        partnership and with respect to each partner. A similar 
        rule shall apply in the case of an S corporation and 
        its shareholders.
          (9) Coordination with section 38.--No credit shall be 
        allowed under section 38 with respect to any amount for 
        which a deduction is allowed under subsection (a).
          (10) Recapture in certain cases.--The Secretary 
        shall, by regulations, provide for recapturing the 
        benefit under any deduction allowable under subsection 
        (a) with respect to any property which is not used 
        predominantly in a trade or business at any time.
  (e) Special Rules for Qualified Disaster Assistance 
Property.--
          (1) In general.--For purposes of this section--
                  (A) the dollar amount in effect under 
                subsection (b)(1) for the taxable year shall be 
                increased by the lesser of--
                          (i) $100,000, or
                          (ii) the cost of qualified section 
                        179 disaster assistance property placed 
                        in service during the taxable year, and
                  (B) the dollar amount in effect under 
                subsection (b)(2) for the taxable year shall be 
                increased by the lesser of--
                          (i) $600,000, or
                          (ii) the cost of qualified section 
                        179 disaster assistance property placed 
                        in service during the taxable year.
          (2) Qualified section 179 disaster assistance 
        property.--For purposes of this subsection, the term 
        ``qualified section 179 disaster assistance property'' 
        means section 179 property (as defined in subsection 
        (d)) which is qualified disaster assistance property 
        (as defined in section 168(n)(2)).
          (3) Coordination with empowerment zones and renewal 
        communities.--For purposes of sections 1397A and 1400J, 
        qualified section 179 disaster assistance property 
        shall not be treated as qualified zone property or 
        qualified renewal property, unless the taxpayer elects 
        not to take such qualified section 179 disaster 
        assistance property into account for purposes of this 
        subsection.
          (4) Recapture.--For purposes of this subsection, 
        rules similar to the rules under subsection (d)(10) 
        shall apply with respect to any qualified section 179 
        disaster assistance property which ceases to be 
        qualified section 179 disaster assistance property.
  (f) Special Rules for Qualified Real Property.--
          (1) In general.--If a taxpayer elects the application 
        of this subsection for any taxable year [beginning 
        after 2009 and before 2015], the term ``section 179 
        property'' shall include any qualified real property 
        which is--
                  (A) of a character subject to an allowance 
                for depreciation,
                  (B) acquired by purchase for use in the 
                active conduct of a trade or business, and
                  (C) not described in the last sentence of 
                subsection (d)(1).
          (2) Qualified real property.--For purposes of this 
        subsection, the term ``qualified real property'' 
        means--
                  (A) qualified leasehold improvement property 
                described in section 168(e)(6),
                  (B) qualified restaurant property described 
                in section 168(e)(7), and
                  (C) qualified retail improvement property 
                described in section 168(e)(8).
          [(3) Limitation.--For purposes of applying the 
        limitation under subsection (b)(1)(B), not more than 
        $250,000 of the aggregate cost which is taken into 
        account under subsection (a) for any taxable year may 
        be attributable to qualified real property.
          [(4) Carryover limitation.--
                  [(A) In general.--Notwithstanding subsection 
                (b)(3)(B), no amount attributable to qualified 
                real property may be carried over to a taxable 
                year beginning after 2014.
                  [(B) Treatment of disallowed amounts.--Except 
                as provided in subparagraph (C), to the extent 
                that any amount is not allowed to be carried 
                over to a taxable year beginning after 2014 by 
                reason of subparagraph (A), this title shall be 
                applied as if no election under this section 
                had been made with respect to such amount.
                  [(C) Amounts carried over from 2010, 2011, 
                2012, and 2013.--If subparagraph (B) applies to 
                any amount (or portion of an amount) which is 
                carried over from a taxable year other than the 
                taxpayer's last taxable year beginning in 2014, 
                such amount (or portion of an amount) shall be 
                treated for purposes of this title as 
                attributable to property placed in service on 
                the first day of the taxpayer's last taxable 
                year beginning in 2014. For the last taxable 
                year beginning in 2014, the amount determined 
                under subsection (b)(3)(A) for such taxable 
                year shall be determined without regard to this 
                paragraph.
                  [(D) Allocation of amounts.--For purposes of 
                applying this paragraph and subsection 
                (b)(3)(B) to any taxable year, the amount which 
                is disallowed under subsection (b)(3)(A) for 
                such taxable year which is attributed to 
                qualified real property shall be the amount 
                which bears the same ratio to the total amount 
                so disallowed as--
                          [(i) the aggregate amount 
                        attributable to qualified real property 
                        placed in service during such taxable 
                        year, increased by the portion of any 
                        amount carried over to such taxable 
                        year from a prior taxable year which is 
                        attributable to such property, bears to
                          [(ii) the total amount of section 179 
                        property placed in service during such 
                        taxable year, increased by the 
                        aggregate amount carried over to such 
                        taxable year from any prior taxable 
                        year.
                For purposes of the preceding sentence, only 
                section 179 property with respect to which an 
                election was made under subsection (c)(1) 
                (determined without regard to subparagraph (B) 
                of this paragraph) shall be taken into 
                account.]

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