[Congressional Record Volume 148, Number 30 (Friday, March 15, 2002)]
[Senate]
[Pages S1979-S1981]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. COLLINS (for herself, Mr. Bond, Mr. Hutchinson, and Mr. 
        Smith of Oregon):
  S. 2023. A bill to amend the Internal Revenue Code of 1986 to provide 
for an increase in expensing under Section 179; to the Committee on 
Finance.
  Ms. COLLINS. Mr. President, I rise today to introduce legislation to 
benefit our Nation's small businesses--the backbone of our economy. I 
am very pleased to be joined by several of my colleagues, including 
Senator Bond, Senator Tim Hutchinson, and Senator Gordon Smith. All of 
these Senators have been steadfast proponents and supporters of small 
businesses throughout their Senate career. Today, we are introducing 
legislation to allow small businesses to expense more of their 
investments in equipment and property. In short, we are introducing 
legislation to help small businesses grow.
  The importance of small businesses to our economy cannot be 
overstated. According to the Small Business Administration, small firms 
account for three-quarters of our Nation's employment growth and almost 
all of the net new jobs. That is certainly true in my home State of 
Maine. These are good jobs, jobs that make our communities strong.
  Mr. President, last Friday the Senate overwhelmingly passed a 
critical piece of legislation designed to boost our economy. The 
legislation extends benefits for an additional 13 weeks to an estimated 
3 million unemployed workers who have exhausted, or will soon exhaust, 
their regular unemployment benefits before being able to find new work. 
This program will help put food on the table for an estimated 23,000 
unemployed workers in Maine by providing money for extended benefits.
  The economic recovery legislation also includes ``bonus 
depreciation'' provisions that will encourage mostly larger firms to 
invest in new property and equipment. Again, that is another provision 
I support. It includes a number of other important proposals, including 
one that is near and dear to me providing tax relief to teachers who 
reach deep into their own pockets to buy supplies and materials for 
their students. Yet my biggest regret about the economic recovery 
package we passed last week is that it does very little for smaller 
businesses. I think that is disappointing and I think that is wrong 
because it is small businesses that tend to lead our economy out of 
recession.
  Often, I think we take smaller businesses for granted. When times are 
good, we expect small businesses to create vast numbers of good, new 
jobs for American workers, and when times are tough, we count on small 
businesses to resuscitate our sluggish economy. Time and time again, 
entrepreneurs lead the Nation down avenues of new economic opportunity, 
and our expectations rise with each remarkable success story. But if we 
expect so much from small businesses, if we count on them to this 
degree, we owe it to them to create a climate that nurtures and rewards 
entrepreneurship.
  That is why we have come together to introduce this straightforward 
legislation. Under section 179 of the Tax Code, a taxpayer with a 
relatively small amount of annual investment may elect to deduct up to 
$24,000 of the cost of qualifying property and equipment placed in 
service in any given

[[Page S1980]]

year. The deduction is phased out for taxpayers who invest over 
$200,000 per year.
  Our bill would permit small businesses to expense their new equipment 
purchases up to $40,000 per year. In other words, we would be 
increasing the section 179 expensing limit from $24,000 to $40,000. 
That is a fairly significant increase, but it should be; the last time 
Congress increased the small business expensing limit was back in 1996. 
An adjustment is well overdue.

  Section 179 is critically important to small businesses. Direct 
expensing allows a small employer to avoid the complexities of the 
depreciation rules as well as unrealistic recovery periods for many 
assets. For example, under current law, a computer must be depreciated 
over 5 years. Now, all of us know that the useful life of most 
computers is only 2 or 3 years, at best.
  Expensing also addresses a top concern of small businesses that has 
been exacerbated by the recent recession. The concern is access to 
capital.
  I served for a time as the New England Administrator of the Small 
Business Administration, and I know there are so many small companies 
where the owner of the company has a wonderful concept, a workable 
business plan, yet lacks access to capital to get the business underway 
or to grow it to the next level. The concern is access to capital, 
which the Small Business Administration has called the ``greatest 
economic policy challenge'' for rapidly growing businesses.
  One indication of the need for additional financing is the amount of 
venture capital invested into the United States. In the year 2000, a 
record $103 billion was invested. But in 2001, that total fell by 65 
percent, to $36.5 billion. When we see this decrease in access to 
venture capital, inevitably, it seems, women-owned companies and 
minority-owned firms are disproportionately affected and are shut out 
of the capital market.
  By raising the section 179 limit, our bill, in effect, will reduce 
the cost of capital for small businesses nationwide and it will free up 
additional capital for small businesses to purchase more plant and 
equipment.
  I have spoken to small business owners in my home State of Maine, and 
they have told me time and again that an increase in the small business 
expensing limit would make a real difference to them. It would allow 
them to expand their businesses, thus create more good, new jobs.
  Terry Skillins of Skillins Greenhouses is a fourth-generation Maine 
family business founded in 1885. It is a good example of what I am 
talking about. Skillins Greenhouses employs between 70 and 120 
employees, depending on the season, in its landscaping, greenhouse, and 
floral businesses. Terry told me the company is looking to expand but 
that to do so takes money. From tractors, to conveyor belts, to 
specialized machinery, the equipment needed to expand is expensive. 
Terry said raising the small business expensing limit to $40,000 would 
help tip the scales in favor of his proceeding with an expansion, 
particularly if the increase were made permanent. Terry said his 
business plan extends over a number of years and, hence, knowing the 
expensing limit would be increased permanently, he could and would use 
a significant multiyear savings to expand his business.
  We offered a small business expensing amendment to the economic 
recovery bill back in January. The amendment was offered by my 
colleague from Missouri, Senator Bond, and myself. It included exactly 
the same increases as I am proposing in the bill we are introducing 
today. I point out that our amendment passed the Senate by an 
overwhelming vote of 90 to 2. So, clearly, there is an understanding 
among our colleagues that this tax change is long overdue and that it 
would make a real difference to the small businesses in our country.
  Today, I am inviting all of our colleagues to join us in cosponsoring 
this bill, which is strongly supported and has been endorsed by the 
National Federation of Independent Business, our Nation's largest small 
business organization. In that regard, I ask unanimous consent that a 
letter from Dan Danner, senior vice president of the NFIB, be printed 
in Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                            National Federation of


                                         Independent Business,

                                   Washington, DC, March 14, 2002.
     Hon. Susan Collins,
     U.S. Senate,
     Washington, DC.
       Dear Senator Collins: On behalf of the 600,000 members of 
     the National Federation of Independent Business (NFIB), I 
     commend you for introducing The Section 179 Small Business 
     Expensing Bill. The Collins-Bond-Hutchinson-Smith bill will 
     increase the amount of equipment purchases, allow small 
     businesses to expense each year from the current $24,000 to 
     $40,000 and most importantly, make this language permanent.
       Many small businesses are currently struggling to cope with 
     the recession and the events of September 11th. Increasing 
     the expensing limit would provide small and growing firms 
     with the funds to make critical investments and keep their 
     firms running and growing, creating new jobs.
       This legislation will also help small business by 
     eliminating burdensome record keeping involved in 
     depreciating equipment. And it adjusts the investment limit 
     on expensing from 200,000 to $325,000.
       Small business is the major job generator for the economy. 
     Let's give them the tools to grow, hire more employees, and 
     lead this country out of recession.
           Sincerely,
                                                       Dan Danner,
                             Senior Vice President, Public Policy.

  Ms. COLLINS. Mr. President, this is a change that makes sense. I hope 
we will adopt it this year. It is long overdue to change our tax policy 
to reflect the modern-day realities of running a small business.
  Mr. BOND. Mr. President, the bill offered by Senator Collins today is 
intended to simplify the tax rules for small businesses as they 
purchase new equipment to sustain and expand their businesses. I am 
pleased to be the lead co-sponsor on this important small business 
legislation.
  The bill parallels the amendment that Senator Collins and I offered 
to the economic-stimulus legislation considered on the floor in January 
and makes the increase in the expensing limits permanent. The Bond-
Collins amendment was approved by the Senate by a vote of 90-2.
  While some may think that small business is not that important, let's 
be clear about the role they play in our economy. Small business: 
represents 99 percent of all employers; employs 51 percent of the 
private-sector workforce; provides about 75 percent of the net new 
jobs; contributes 51 percent of the private-sector output; and 
represents 96 percent of all exporters of goods.
  In short, size is the only ``small'' aspect of small business.
  Our bill would permit small businesses to expense their new equipment 
purchases up to $40,000. The current annual limit is $24,000.
  The bill also increases the limitation on the total amount of 
property that a small business can place in service during a year 
before triggering a phase-out of the annual expensing amount. Under the 
amendment, a business would be able to claim the full $40,000 in 
expensing if it purchased no more than $325,000 of property during the 
year. Under current law, the phase-out limitation is only $200,000. To 
the extent that a business exceeds the phase-out limit, the annual 
expensing amount declines.
  Direct expensing allows small businesses to avoid the complexities of 
the depreciation rules as well as the unrealistic recovery periods for 
most assets. For example, under current law a computer must be 
depreciated over 5 years even though the useful life is most likely 2-3 
years at best.
  These provisions have several important advantages, especially in 
light of the current economic conditions.
  By allowing more equipment purchases to be deducted currently, we can 
provide much needed capital for small businesses.
  With that freed-up capital, a business can invest in equipment, which 
will benefit the small enterprise and, in turn, stimulate other 
industries.
  In addition, that's more money available to keep employees working 
and hopefully hire new employees.
  Moreover, new equipment will contribute to continued productivity 
growth in the business community, which Federal Reserve Chairman Alan 
Greenspan has repeatedly stressed is essential to the long-term 
vitality of our economy.
  Finally, these modifications will simplify the tax law for countless 
small businesses. Greater expensing means less equipment subject to the 
onerous depreciation rules.

[[Page S1981]]

  In short, the equipment-expensing change I propose are a win-win for 
small businesses consumers, equipment manufacturers, and our national 
economy as a whole.
  Mr. SMITH of Oregon. Mr. President, I rise today to respond to the 
urgent needs of small businesses in my home State of Oregon. Oregon 
small businesses are in need of help as the state's economy deals with 
poor growth and high unemployment.
  In an effort to boost both small business and the Oregon economy I am 
proud to introduce legislation with Senator Collins that will provide 
tax relief for small firms, the section 179 small business expensing 
bill.
  Economic recovery must include job creation. In Oregon most new jobs 
are created by the State's 270,000 small businesses. Small businesses 
have a broad impact on Oregon's economy and are essential to its well-
being.
  Oregon ranks third in the Nation in small businesses per capita. 
Oregonians are independent and creative and much of this creativity 
goes into the wide diversity of small businesses that exist in my 
State. Therefore it is imperative that we bolster and strengthen the 
small business community in Oregon.
  One critical way in which we can help small firms is by raising the 
threshold for expensing equipment purchases.
  Currently, companies may expense equipment purchases up to $24,000 of 
the cost of equipment and depreciate the remainder.
  This legislation will increase the amount small businesses can 
expense per purchase to $40,000 and increase the total investment from 
the current $200,000 to $325,000 annually.
  This limit of $325,000 on total purchases of equipment in a single 
year applies to the smallest of companies.
  Only the smallest of firms that are struggling to stay afloat and 
seek to grow by buying equipment would be able to take advantage of 
this expensing.
  This would provide a greatly needed boost to small businesses in 
Oregon, allowing them to move forward on job hiring and capital 
investment plans that they have had to put aside during the downturn of 
recent days.
  This legislation is strongly supported by the National Federation of 
Independent Businesses and I would like to enter into the Record a 
letter from Dan Danner expressing the importance of this increase to 
small businesses.
  I believe these changes will ease the record-keeping burden of 
depreciating such equipment and fill free up capital that can be used 
to create and sustain new jobs, expand current small businesses, and 
encourage the creation of new businesses as well.
  All of these economic actions will boost the Oregon economy at a time 
it is still sorely needed. Businesses will use the extra money to 
purchase new equipment, which will help an economic expansion.
  Creating new jobs for Oregonians who were laid off last year lessens 
the burden on the State economy and puts unemployed Oregonians back to 
work.
  In conclusion, I would like you to know that this critical 
legislation that would boost small businesses in Oregon was initially 
part of the economic stimulus legislation that the Senate passed 
overwhelmingly in January. I call on all of my colleagues to support 
this legislation and swiftly give small businesses across the Nation 
and in my State this important boost.
  I ask unanimous consent that the letter to which I referred 
previously be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                            National Federation of


                                         Independent Business,

                                   Washington, DC, March 15, 2002.
     Hon. Gordon Smith,
     U.S. Senate,
     Washington, DC.
       Dear Senator Smith: On behalf of the 600,000 members of the 
     National Federation of Independent Business (NFIB), I commend 
     you for introducing The Section 179 Small Business Expensing 
     bill. Your bill will increase the amount of equipment 
     purchases, allow small businesses to expense each year from 
     the current $24,000 to $40,000 and most importantly, make 
     this language permanent.
       Many small businesses are currently struggling to cope with 
     the recession and the events of September 11th. Increasing 
     the expensing limit would provide small and growing firms 
     with the funds to make critical investments and keep their 
     firms running and growing, creating new jobs.
       This legislation will also help small business by 
     eliminating burdensome record keeping involved in 
     depreciating equipment. And it adjusts the investment limit 
     on expensing from $200,000 to $325,000.
       Small business is the major job generator for the economy. 
     Let's give them the tools to grow, hire more employees, and 
     lead this country out of recession.
           Sincerely,
                                                       Dan Danner,
     Senior Vice President, Public Policy.

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