By:     Chris Pearce

March 8, 2002 – Congress acted this week on one of AFMA's priority legislative issues - passage of an accelerated capital cost recovery provision that will give manufacturers and other businesses a three-year, 30 percent "bonus depreciation" for a broad range of qualified capital purchases.

The provision applies to equipment purchases and leasehold improvements made after September 10, 2001, but before September 11, 2004. While there was some debate over the three-year term, which is immediate and retroactive, congressional leaders believed the three years offers the right balance between short-term stimulus and longer-term economic growth.

It was part of a compromise economic stimulus bill (H.R. 3090) that also included extended unemployment benefits for dislocated workers and the continuation of certain expiring tax breaks, such as those affecting businesses that hire former welfare recipients. The House took action first, passing the bill yesterday by a vote of 417 to 3. The Senate followed suit today, approving the bill by a vote of 85 to 9. In both cases, it was the first time the GOP-crafted stimulus plan received significant Democratic support. President Bush is expected to sign the legislation into law.

In a last-ditch effort, House Republican leaders agreed to abandon their quest to include new and expensive tax cuts in the stimulus proposal, such as elimination of the corporate alternative minimum tax (AMT), and focus instead on a slimmed-down version that would stand the best chance of attracting Democrat support in both chambers. Strong support from both parties helped keep the depreciation reform provision alive through the many rounds of negotiations and often heated floor debates.

Congress' action is an important victory in the effort to give manufacturers the tools they need to modernize, innovate, and improve their competitiveness, particularly in the face of increased imports. AFMA's Washington Office greatly appreciates the time and attention that member company executives contributed to the grassroots lobbying effort on this critical issue.

Please do not hesitate to contact Chris Pearce in the AFMA Government Affairs Office with any questions.