February 27, 2024

Legislature weighing tax breaks for small businesses, farmers

The Iowa Legislature needs to adopt policies and laws that are more favorable to small businesses and farmers.

As a former mayor, I know that small businesses are the heart and soul of most Iowa communities. And the Iowa economy often rises and falls with the changing climate of the farm economy.

Many constituents have contacted me this session about a proposal to couple with recently-passed federal tax code changes. By some estimates, if the Legislature and Governor Branstad coupled with changes to the federal tax code, small business owners, farmers and other Iowans would benefit by an estimated $96 million for tax year 2015. The biggest benefit would be extending Section 179 expensing.

Unfortunately, Governor Branstad’s budget proposal did not include any coupling.

When asked last month why he didn’t support coupling, the governor offered this explanation: “I think it’s important to look at the impact it’s going to have and what it will mean for school aid next year and in the future. What I have been told is that it would basically wipe out the opportunity or dramatically reduce our ability to provide additional funding. I always try to look at it -- not just one year – but the whole picture. Not only Fiscal Year 16-17, but 17-18, 18-19 and beyond…. So, we’re coupling where we can, but not with 179 just because we feel that that impact on the budget would really make it impossible for us to meet the goals that we have for education funding and elsewhere.”

David Roederer, director of the Iowa Department of Management, echoed the Governor’s fiscal analysis during a meeting of the Senate Ways & Means Committee.

Earlier this week, the Governor indicated that he is now interested in working on the issue. Legislators await his revised budget that includes coupling. We have not seen any details at this time.

Section 179 expensing allows taxpayers the ability to expense, rather than depreciate over time, the first $500,000 of equipment costs. The federal government made Section 179 expensing permanent after offering short-term extensions of this policy in previous legislation.

Iowa has coupled with Section 179 expensing in recent years, as the federal government offered it on a short-term stimulus policy. The Governor’s proposal does not include bonus depreciation or Section 179 expensing, and does not couple with any other provisions until tax year 2016, which are taxes that are due next year.

Contact Allen during the week, call the Senate Switchboard at 515-281-3371. Otherwise, he can be reached at 641-521-6297. Email him at chaz.allen@legis.iowa.gov