Senate Finance Committee Approves Horse Provisions in Tax Extender Bill

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On April 3, 2014, the Senate Finance Committee approved a tax extender bill that included several provisions important to the horse industry.

At the end of 2013, a number of favorable tax provisions for horse owners, breeders and businesses expired. In all, over 60 tax provisions expired; some applied to all businesses, including the horse industry, and one was specifically applicable to owners of race horses. The tax extender bill would reinstate several of these favorable provisions for two years retroactively from Jan. 1, 2014.

Foremost, the bill would reinstate the three-year-depreciation for all race horses for two more years. From 2009 through 2013, race horses could be depreciated over three years, regardless of when they were placed in service. This provision was passed in 2008 through the efforts of Minority Leader Mitch McConnell (R-KY). That change, which eliminated the seven-year depreciation period for race horses and made all race horses eligible for three-year depreciation, expired at the end of 2013. The extender bill would reinstate three-year-depreciation for race horses placed in service after Dec. 31, 2013, through 2015.

The bill would raise the so-called Section 179 business expense deduction back to $500,000 for the next two years. It is currently set at $25,000. This would allow anyone in the horse business to immediately depreciate up to $500,000 of the cost of any investment in business assets, including horses, purchased and placed in service. The deduction would be reduced dollar-for-dollar once investment in all one's business activities hit $2 million.

The bill would also restore 50% bonus depreciation for qualifying new property, including assets used in the horse business, such as horses and other equipment, purchased and placed in service through 2015. The first use of the horse or equipment must begin with the taxpayer.

The extender bill would restore favorable tax treatment for land donated for conservation purposes, particularly land donated by farmers and ranchers for two years.

The bill must now be considered by the full Senate.

The AHC supports the tax extender bill and hopes the Senate will take quick action on the bill.