AMT Online - President Bush Signs the FSC/ETI Bill

AMT - The Association For Manufacturing Technology. Over 100 Years of Building Global Productivity.

Tax & Budget Policy

	Home > Your Industry's Voice in Washington > Tax & Budget Policy

President Bush Signs the FSC/ETI Bill

Statement from AMT President John B. Byrd, III
October 22, 2004

President Bush Signs the American Jobs Creation Act

Today, President Bush signed into law the American Jobs Creation Act. I want to commend the President for signing the bill, and Sens. Grassley (R-IA) and Baucus (D-MT), and Cong. Thomas (R-CA) and Crane (R-IL) for steering it through Congress. The bill provides a solid benefit for our members and their customers who manufacture products in the United States, and brings an end to the European Union sanctions against certain U.S. exports, including machine tools, (which rose to 12 percent October 1st and would have risen to 17 percent if Congress had failed to act this year). Fairness would dictate that the Europeans immediately terminate the sanctions. Enactment of this legislation will help strengthen U.S. competitiveness at home and in the global marketplace.

The new law provides an additional nine percent deduction for manufacturing costs (which translates into a phased-in three percent differential effective rate cut for U.S. manufacturers) but without the “haircut” which would have reduced the manufacturing benefit for multi-national companies (including foreign-owned firms with U.S. facilities). S-corporations would be eligible for the differential effective rate cut (many AMT members are S-corps). The bill also reforms complicated international tax rules for multi-nationals; establishes a one-year “tax holiday” for the repatriation of foreign-source income; extends $100,000 small business expensing (Sec. 179) through 2007; allows small aircraft manufacturers to use 50% “bonus depreciation” until 12/31/05; allows the temporary deductibility of state and local sales taxes in states that don’t have a state income tax; provides tax benefits for ethanol producers; and includes a controversial $10 billion tobacco farmer subsidy buyout (“paid for” by the tobacco companies). The bill is “paid for” by a three-year phase out of FSC/ETI; by custom user fee increases; and by closing down various tax shelters.

There have been several requests for information on how H.R. 4520 dealt with capital cost recovery issues.

· $100,000 small business expensing provision (Sec. 179) which was set to expire on 12/31/05, was extended through 12/31/07. This means that small job shops (those whose total annual equipment purchases of all kinds do not exceed $400,000) can expense the first $100,000 of the $400,000 in the first year. The remaining basis in their equipment purchases would be amortized for tax purposes using the normal depreciation schedule. As you know there is a dollar-for-dollar phase-out of the $400,000 cap up to $500,000 (in other words, a company with $410,000 in total equipment purchases could expense $90,000).

· H.R. 4520 made no change in the expiration date of 50% expensing allowance “bonus depreciation.” Therefore, in order to be eligible for the 50% expensing allowance, your customers must order AND place in service new equipment by 12/31/04. (There was an extension of the “placed in service date” until 12/31/05 for producers of small aircraft, in case any of your customers fit that description.)

Tel.703-893-2900 Fax 703-893-1151