A pair of Pennsylvania Farm Bureau (PFB) supported bills related to tax deductions on small business machinery purchases, as well as tax tools for landowners used to calculate depreciation of natural resources, passed in the state House on Tuesday afternoon and were referred to the Senate’s finance committee for consideration.
House Bill 333 would increase the amount that business owners would be able to deduct when purchasing machinery and equipment under Section 179. The federal government recently increased the deduction limit to $1 million, while the state currently only allows deductions up to $25,000, which restricts the growth of small businesses.
House Bill 199 would provide two different tax strategies for landowners to use when calculating the depreciation of natural resources on their land, such as oil, gas and timber. Federal tax law currently allows two methods to calculate depreciation – the percent depletion method and the cost depletion method.
Many landowners lack the documentation needed to use the cost depletion method, as a landowner must have established the value of the asset at the time their property was purchased. The IRS gives flexibility to landowners to use either method to calculate depletion. The passage of House Bill 199 would require the state to provide those same tax tools.
Both bills are of key importance in terms of farm and small business tax reform within Pennsylvania.