Obama seeks tax breaks for small businesses

The Obama administration outlined a series of steps yesterday aimed at helping small business owners improve their cash flow.

Some of the announcements repeated plans that were disclosed earlier.

The president will ask Congress to allow small businesses to deduct $250,000 in equipment purchases for 2013, said Gene Sperling, head of the National Economic Council, during a telephone news conference. The equipment deduction, named the Section 179 deduction for a provision of the federal tax code, was expected to drop to $25,000 next year.

Congress also will be asked to expand what's called bonus depreciation, which allows all businesses to deduct 100 percent of equipment costs. That request covers 2012.

The Section 179 deduction allows small businesses to deduct upfront the cost of certain kinds of equipment, rather than depreciate them over a number of years. Manufacturing machines, vehicles, computers, office furniture, store shelving and medical diagnostic equipment are examples of equipment that fall under the section.

Bonus depreciation, available to companies of all sizes, also allows an upfront deduction. If a small business has used up the Section 179 deduction, it can use bonus depreciation to deduct equipment costs. Depreciation also can be used for equipment that doesn't qualify for Section 179, such as heating and air-conditioning units.

The tax breaks "clearly lower the tax costs for investments made by smaller companies," said Dorothy Coleman, vice president for tax and domestic economic policy with the National Association of Manufacturers. "There usually are jobs created that are connected to them."

Obama also has signed an executive order that accelerates payments to federal subcontractors, said Jeffrey Zients, acting head of the Office of Management and Budget. Last year, a government policy established that contractors would be paid within 15 days, he said. The policy is being expanded to include subcontractors, he said.