The AIMM Act permanently extends the allowance for depreciation, amortization, or depletion when calculating the limitation on business interest, starting after December 31, 2021.
Adrian Smith
Representative
NE-3
The AIMM Act permanently extends a tax provision related to how businesses calculate their interest expense deductions. This extension allows businesses to include depreciation, amortization, and depletion when determining the limitation on business interest expenses. This change applies to taxable years beginning after December 31, 2021. Formally, the bill is called the American Investment in Manufacturing and Main Street Act.
AIMM Act Permanently Extends Key Tax Deduction for Businesses: Depreciation Allowance Now Here to Stay
The American Investment in Manufacturing and Main Street Act (AIMM Act) does one big thing: it makes permanent a tax break that lets businesses deduct depreciation, amortization, and depletion when figuring out their limit on business interest expenses. Basically, it lowers the taxable income for companies, especially those investing in equipment or property. This rule change isn't new; it retroactively applies to tax years after December 31, 2021 (SEC. 2).
Tax Breaks: What's the Deal?
This bill is all about tweaking how businesses calculate their taxes. Before this change, the way companies figured out their deductible interest expenses didn't always include things like depreciation (the decrease in value of equipment over time). Now, with the AIMM Act, those costs are included, which generally means a lower tax bill. Think of a construction company buying new heavy machinery. The cost of that equipment loses value over time – that's depreciation. This bill lets the company factor that cost in sooner, reducing their immediate tax burden.
Real-World Ripple Effects
For businesses, this permanent extension provides more certainty. They can plan long-term investments knowing this tax calculation method is here to stay. A manufacturer looking to upgrade its factory, for example, can now better predict its tax liability for years to come, potentially making that big investment more appealing. This could be a boost for industries that rely heavily on equipment and capital investments.
The Bottom Line
While it sounds technical, the AIMM Act has a straightforward goal: to reduce the tax burden on businesses, particularly those making significant capital investments. The idea is that this will encourage more investment, leading to growth and potentially more jobs. However, it's worth noting that larger companies with significant assets to depreciate might see bigger benefits than smaller businesses or startups. It also opens the door for some creative accounting to maximize those deductions.