DICKINSON, N.D. -- The Internal Revenue Service has some new tax rules this year and Sen. John Hoeven is concerned about how the rules could affect small business owners, farmers and ranchers in the Peace Garden State.
The North Dakota Republican's letter sent Wednesday to IRS Commissioner John Koskinen stated his worry that certain tangible property repair regulations, which kicked in Jan. 1, will "adversely affect our farm and ranch families and other non-farm small business in North Dakota and across the country."
Essentially, Hoeven said Friday, the new rules make it more difficult for family farms and ranches and small businesses to expense certain costs against their taxable income.
"When I was back in North Dakota over the Christmas holiday, I had a lot of small business people, farmers and truckers talking to me about these new expensing rules," Hoeven said. "There are a lot of people saying these rules are not fair and reasonable, and I agree. Overly burdensome rules impose significant costs in both time and money that make it harder for small businesses to grow and expand."
The rules establish a "safe harbor" threshold of $200 for the purchase of tangible property used and consumed at a farm or business in a year's time, according to Hoeven's letter. Hoeven pointed out that some of the items in question, referred to as "materials and supplies," could include fuel, hydraulic fluids for machinery, tires and various types of chemicals.
ADVERTISEMENT
"This is geared for big business and it's just another example of red tape and regulation, and that doesn't work," Hoeven said. "We need simple, fair and easy-to-understand tax rules for our family farms, ranches and small businesses. Basically, you can only expense $200 or less unless you have a written plan or capitalization policy, in which case it would be $500 or less. But $500 is still far too low. Think about it. You can spend a lot more than $500 in a year just repairing equipment or a vehicle."
To get to $5,000 or less, Hoeven said, a business would need a capitalization policy, audited statements done by an accounting firm, or file with the U.S. Securities and Exchange Commission.
When asked Friday at a forum in Dickinson, Sen. Heidi Heitkamp, D-N.D., said the provisions likely are not set in stone.
"I think we need to sort through to find which ones work, which ones don't and which ones we want to continue," Heitkamp said. "The way it works is this isn't over until the year is over, so we can always reinstate those during this time period. I think it's important for people to communicate their concerns about these provisions."
Citing small businesses, including farmers and ranchers, as an important piece of the national economy, Hoeven said such regulations can have an adverse effect on the nation's economic recovery following the recession of 2007.
"This is the kind of stuff that is holding our national economy back," Hoeven said. "This is why you saw the jobs creation numbers (which came out Friday), and they weren't good. We need to create a good business climate. Small businesses are what create all the jobs in this country."
