Senate Finance Committee Chairman Max Baucus, D-Mont., and ranking member Charles Grassley, R-Iowa, have introduced legislation to lower taxes for small and large businesses by allowing them to write off more of the cost of purchases, such as equipment and machinery, more quickly than they would otherwise be able to under current law.

The bonus depreciation legislation would speed up the tax deductions that businesses can take for buying new equipment, in order to stimulate investment in small businesses and help create jobs. 

“This tax cut provides a double benefit by creating an opportunity for small businesses to purchase new equipment, while also helping the companies that manufacture and sell equipment to small businesses,” said Baucus in a statement.

“One of the vital elements of an economic recovery is increased business investment,” Grassley said in a statement. “Bonus depreciation is a time-tested temporary incentive for increased business investment. Chairman Baucus and I are sending a bipartisan signal to America’s businesses to increase investment and create jobs. It’s especially important for small businesses to use this provision, since they create 70 percent of all new jobs.”

The legislation helps both small and large businesses depreciate purchases faster, thereby encouraging businesses to invest in more equipment, which is often produced by small businesses. This will help small businesses sell their products and equipment to larger businesses more quickly. It will also allow small businesses to expense their own purchases more quickly.

Bonus depreciation allows businesses to recover the costs of certain capital expenditures more quickly than under ordinary tax depreciation schedules.  Businesses can use bonus depreciation to immediately write off 50 percent of the cost of depreciable property.

The bill would extend bonus depreciation through 2010. Bonus depreciation was first enacted as part of the 2008 economic stimulus efforts. The Recovery Act extended bonus depreciation, but the provision expired at the end of 2009.

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