Tuesday, March 6, 2012
The Senate Finance Committee holds a hearing today on Tax Reform Options: Incentives for Capital Investment and Manufacturing:
- Robert D. Atkinson (Information Technology & Innovation Foundation)
- Ike Brannon (American Action Forum)
- J.D. Foster (The Heritage Foundation).
- Jane G. Gravelle (Congressional Research Service).
- Michelle Hanlon (Sloan School of Management, MIT)
In connection with the hearing, the Joint Committee on Taxation has released Background and Present Law Relating to Cost Recovery and Domestic Production Activities (JCX-19-12)
This document ... provides background, data, and analysis and describes present Federal income tax law relating to cost recovery and domestic production activities. The first part of this document provides an overview of economic depreciation and of tax and financial accounting rules for cost recovery, along with an explanation of cost recovery methods. The second part of this document describes the present Federal income tax rules applicable to businesses with respect to capital cost recovery including depreciation, amortization of intangibles, expensing provisions, and recapture provisions upon sale of capital assets, as well as the present-law treatment of income from domestic production activities. A chart of statutory recovery periods under the current depreciation rules is provided. The third part of this document provides data and economic analysis relating to capital cost recovery as well as a survey of economic literature analyzing the economic effect of the Federal income tax incentives for capital investment and manufacturing.
This document does not address the concept of what is a capital expenditure as opposed to an amount that can be expensed currently (e.g., as a repair and maintenance cost), nor does it address the definition of property for purposes of determining whether an expenditure incurred with respect to a property adds value to the property, prolongs the useful life of the property, or adapts the property to a new or different use.