Worcester Business Journal

www.wbjournal.com March 16, 2015 • Worcester Business Journal 11 Recent Commercial and Business Loans include: $1,350,000: Littleton, MA (Manufacturing Facility) $875,000: West Boylston, MA (Multiple Investment Properties) $800,000: Worcester, MA (Multi-Families) $470,000: Worcester, MA (Builder Construction Loan) $1,200,000: Boston, MA (Multi-Family) Member FDIC n Member DIF n Ayer n Devens n Groton n Littleton n Lunenburg n Pepperell n Shirley www.nmsb.com n n n Mobile We're Lending! Purchasing or Refinancing? Expanding? Buying New Equipment? We listen to your unique lending and business banking needs, allowing you to focus on your business. Please contact one of our experienced Relationship Officers today. VP, Commercial Loan Officer 978-772-8502 Ext. 1121 stephen.sugar@nmsb.com Stephen J. Sugar, Jr. SVP, Senior Lending Officer 978-772-8502 Ext. 1155 ruth.cavanagh@nmsb.com Ruth Cavanagh VP, Commercial Loan Officer 978-772-8502 Ext. 1152 carl.wiley@nmsb.com Carl S. Wiley Health New England has earned the trust of more than 5,000 employers throughout our region by providing outstanding, personal service and quality health insurance options. We offer plans without tiered networks and no referral is needed for members to see an in-plan specialist. At HNE, we're committed to being a better choice in health insurance for everyone in Worcester County. Maura McCaffrey President & CEO, Health New England " " Ask your insurance broker or call us at 508.453.9170 · hne.com/worcester A better choice in health insurance. D.C. dithering forces businesses to delay capital spending plans L ast year, Richard Pelletier, the owner of Nashoba Valley Winery in Bolton, found himself in need of new equipment for the business — a keg machine and some kegs and barrels, vehicles and a TV and furniture. In previous years, he knew, he could have gained a tax advantage by deducting the cost of these kinds of purchases under a federal rule concerning depreciation known as Section 179. But the govern- ment hadn't finalized the amount of capi- tal investments businesses could write off. So Pelletier waited. By the time Congress passed a provision with a relatively high $500,000 cap and President Obama signed it into law, it was Dec. 19, leaving less than two weeks to make the purchases. "It was very difficult purchasing and getting the equipment into operations in time," Pelletier wrote in an email inter- view. "It is tiring trying to run a business and not knowing what the rules are." This year, a similar scenario is playing out. In February, the House of Representatives passed a plan to make the $500,000 cap permanent. But Obama called for more clarity on how the tax break will be funded without adding to the federal deficit. It's unclear when busi- nesses will have the information they need to decide on capital investments. Leominster CPA Robert Alario said the fluctuations and uncertainty around the deduc- tion have made it imp ossible to count on. "We rec- ommend to our businesses to base their equipment purchases on need and rate of return and not necessarily on what the tax benefits are, because the way Washington is today you can't predict what's going to be the Section 179 depre- ciation," Alario said. The Section 179 deduction is part of the tax law concerning depreciation, which lets companies account for the loss of their equipment's value as it deteriorates. Under Section 179, the depreciation of some items can be counted in the year they're purchased instead of gradually as they wear out. The rule was once a fairly small consideration. In 2000, it was available only for up to $20,000 in purchases each year. The cap rose slowly until, between 2007 and 2010, the federal government hiked it from $125,000 to $500,000 in an effort to boost capital investments. At the start of this year, it automatically dropped to $25,000, and it's unclear so far whether it will be raised again and, if so, whether the increase will be permanent. Accountants and businesses say that when the deduction is passed on a tempo- rary, retroactive basis, it loses its ability to encourage investment. Like Alario, Dennis Corsini, a partner with McDonough, McDonough & Corsini in Sutton, said he wouldn't encourage a client to assume that the higher cap will apply to any purchases they make this year. "You can only plan within the con- straints of what's currently going to be acceptable," he said. Conservative approach on the farm Brian Gay, president of Mendon-based Maple Farm Dairy, which delivers fresh milk to more than a dozen local towns, said he's conservative about making new purchases, regardless of any tax benefits. "I don't really buy it until I need it," he said. "There's a bunch of things I want to buy, but I'm not going into hock." Besides, Gay said, his main capital assets are milk trucks, and no one makes them anymore, so he just does his best to keep the ones he has running. Ann Starbard, who raises goats and makes fresh goat cheese at Crystal Brook Farm in Sterling, said equipment expens- es are a big deal for the family enterprise. When it comes to tax deductions, Starbard said it's helpful to have options. Profits vary in farming depending partly on the weather, so some years might be better than others for taking a deprecia- tion deduction. Douglas Frost of Frost Manufacturing in Worcester said he looks for tax advan- tages when he's ready to make a big pur- chase, but it's not a motivator to buy something he wouldn't otherwise. "If something's around then I wait a few months for it," he said. "I haven't bought that much equipment lately." n BY LIVIA GERSHON Special to the Worcester Business Journal • Section 179 of the federal tax code addresses deductions for depreciation of capital assets. It sets the maximum cash value of capital investments that can be written off as a tax deduction in the year they're purchased. • It covers the purchase or lease of business-related tangible property, including machinery and livestock, as well as some software and, under some circumstances, real estate. • The deduction is available to busi- nesses of any size, but it phases out for companies that spend more than $2 million on equipment. • As part of economic stimulus ef- forts, the government raised the limit for the deduction from $125,000 in 2007 to $500,000 in 2010. Since then, Congress has repeatedly extended the higher level. Sources: LGC+D LLP website, Section179.org, White House Statement of Administration Policy - Feb. 10, 2015 Section 179: The basics CPA Robert Alario faults Washington's foot-dragging on law

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