《Bonus Depreciation Economic and》.pdf

Bonus Depreciation: Economic and Budgetary Issues Jane G. Gravelle Senior Specialist in Economic Policy July 7, 2014 Congressional Research Service 7-5700 R43432 Bonus Depreciation: Economic and Budgetary Issues Summary The Tax Extenders Act of 2013 (S. 1859), which would extend expiring tax provisions for a year, includes bonus depreciation and H.R. 4718 proposes to make bonus depreciation permanent. The temporary provisions enacted in the past for only a year or two and extended multiple times are generally referred to collectively as the “extenders.” One reason advanced for these temporary provisions is that time is needed to evaluate them. Most of these provisions, however, have been extended multiple times, and some suggest that these provisions are actually permanent but are extended a year or two at a time because permanent provisions would significantly increase the costs in the budget horizon. Historically, bonus depreciation has not been a traditional “extender.” Bonus depreciation allows half of equipment investment to be deducted immediately rather than depreciated over a period of time. Bonus depreciation was enacted for a specific, short-term purpose: to provide an economic stimulus during the recession. Most stimulus provisions have expired. Bonus depreciation has been in place six years (2008-2013), contrasted with an earlier use of bonus depreciation in place for three years. Is bonus depreciation temporary or permanent? The analysis of bonus depreciation differs for a temporary stimulus provision, compared to a permanent provision that can affect the size and a