MEAT+POULTRY - March 2015 - 14

WA S H I N G T O N

Needed: Tax stability
Congress once again passed a tax extender legislation
package - this time at the end of 2014. The series of
bills contains about 50 provisions that are helpful to
businesses and individuals, including small businesses,
and particularly small family owned poultry and meatprocessing companies.
Despite its passage, the legislation still has some
serious problems. The benefits legislation will need some
major work by Congress if they are to be of any lasting
help to industry.
The tax-extenders package provides benefits like bonus
depreciation and Section 179 expensing. The major trouble
with the package of bills, however, is there is only a one-year
extension of the tax benefits and it applies retroactively to
the 2014 tax year. But since the provisions expired at the
end of 2014, it means Congress
will again have to discuss the tax
extender provisions this year.
There has been opposition in
Congress and by President Obama
to some of the 50 provisions
because they're not all seen as
good tax policy. But several of
the provisions that would help
the meat and poultry businesses
are viewed as good tax-policy
improvements because they
would provide a more neutral
tax code, and should really
The tax
become permanent provisions
extenders in
in tax policy. Provisions such as
this legislative bonus depreciation and Section
179 expensing would help more
package
provide greater accurately define business neutral
income plus provide more
stability and
treatment to businesses under the
tax code, including what's called
certainty in
"look-through" treatment and
the tax code.
active financing.

COMPLICATES DECISION-MAKING
It's hard for meat and poultry processing businesses,
especially very small and small family owned operations,
to make good business decisions each year when the tax
code and policies affecting them aren't very stable. The
tax extenders in this legislative package provide greater
stability and certainty in the tax code, which should lead

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MEAT+ POULTRY | 03.15 | www.meatpoultry.com

to more economic growth for these plants and businesses.
Extending Section 179 expensing, for example,
provides a higher level of deduction for some capital
expenses. These expenses for meat- and poultryprocessing plants could include new equipment and
machinery. Extending bonus depreciation for poultry- and
meat-processing businesses is very important. For
example, in 2013, processors could take up to a halfmillion dollars in expenses, but during this past year, they
could expense only $25,000. There's no way processors
can plan for large-equipment purchases and other major
capital expenses if there's no certainty and constancy in
the tax benefits that they can count on.
Making the tax code more neutral will help meat and
poultry processors, especially smaller operations. If the tax
code isn't neutral, it tends to have a negative effect on these
businesses. The Section 179 expense plan was good because
allowing a half-million dollars in capital investment is a much
better deal than depreciating them over time. This makes for
fairer treatment of capital investments under the code.

BONUS DEPRECIATION
Bonus depreciation, also called 50 percent expensing,
allows businesses like poultry or meat plants to deduct
50 percent of their costs in software and equipment in the
year the purchases are made. This actually helps soften
the tax-code bias against capital investment by moving
closer to full expensing. If this was done on a permanent
basis, it would result in more of a boost to the economy.
The retroactive extension of the tax extenders isn't
the best solution to the problem because businesses will
be operating under a tax code this year that's expired. But
the tax-code expiration will put pressure on Congress to
come up with and pass a comprehensive tax-reform plan
this year. Such a plan could benefit the meat and poultry
industry for years to come.
The chance of such comprehensive tax reform is less
than certain, however. But the possibility of such changes
may have been increased with the Republicans taking
control of the entire Congress following the November
elections. Congress could work on the tax extenders
throughout the end of this year, 2015 or even beyond that.
By working on improving the tax policy, Congress could
make progress on a permanent solution. At the same time,
by taking steps this year Congress would give businesses like
meat and poultry processors some tax stability during 2015.
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MEAT+POULTRY - March 2015

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