A batch of extended or expanded small-business tax breaks, tied to a boost in the minimum wage, is gaining steam in Congress. The House Committee on Ways and Means cleared a $1.3-billion tax-cut measure Feb. 12, with a floor vote to follow. The House then would have to hammer out a final bill with the Senate, which passed an $8.3-billion tax-cut plan Feb. 1. For construction firms, the outlook is bright for a one-year extension of a write-off for equipment, software and other assets. It’s in both the Senate and House bills.

Ways and Means $1.3-Billion Package Includes:

One-year extension of Section 179 expensing of depreciable assets (Cost: $68 million over 11 years)
One-year extension of credit for hiring disadvantaged workers (Cost: $695 million)
Lets employers continue to claim full tax credits for workers' tips (Cost: $552 million)
Sources: House Ways and Means Committee, Joint Committee on Taxation 

Senate Finance Committee Chairman Max Baucus (D-Mont.) says, “I’m disappointed to see several Senate provisions absent from the House bill, but at least we’ve got a ball game.”

A main construction focus is Section 179, which lets small firms deduct the cost of depreciable assets, within limits, from current-year income. The Associated General Contractors approves of a Section 179 extension in both bills, says Heidi Blumenthal, director for tax and fiscal affairs. Nick Yaksich, Association of Equipment Manufacturers’ vice president for global public policy, prefers a permanent extension. “But we’ll take a year if they’ll give us a year,” he says. 

Small companies now can expense up to $112,000 in assets in 2007. The deduction starts to phase out above $450,000. The Senate and the Ways and Means bills extend Section 179 through 2010, and raise the expensing ceiling to $125,000 and the phase-out mark to $500,000.

Both bills also extend a tax credit for employers who hire disadvantaged workers. The credit is to expire after December 2007. The Senate continues it for five years; the House panel, for one year.

House committee's $1.3-billion in tax breaks needs to be reconciled with Senate's $8.3-billion package.

Less clear is the fate of items backed by groups like The Real Estate Roundtable and National Restaurant Association to extend 15-year write-offs for leasehold and restaurant upgrades through March. The Senate bill has the extensions; the Ways and Means bill doesn’t.

House Democratic leaders wanted a minimum wage hike without tax breaks, and pushed that “clean” bill through the chamber Jan. 10. But tax incentives are seen as key to winning enough GOP votes to get the wage hike through the Senate.

When the tax-cut package emerges from House-Senate negotiations, AGC’s Blumenthal expects the total to be nearer the midpoint between the bills than either extreme. AGC also is working to see that a Senate provision, barring companies from federal contracts if they hire illegal immigrants, isn’t in the final bill.