US tax code overhaul would revise depreciation, eliminate LIFO
February 24, 2012
At a recent press conference, Treasury Secretary Timothy Geithner presented a framework for the Obama Administration's plan to overhaul the country's business tax code. This would make it simpler to work with and align the U.S. top corporate tax rate more closely with those of other economies, reducing it from 35 percent to 28 percent.
As part of the tax agenda, depreciation
schedules would be revised. The particulars aren't yet apparent but, Entrepreneur magazine notes, "The proposal does indicate that simply reducing tax rates would be more effective."
Other points of interest include expanding the cap on small businesses that can use the simpler method of cash accounting. Currently, the cut-off is $5 million in gross receipts, but under the proposal, it would be doubled.
Additionally, the "last-in, first-out" (LIFO) accounting method would be eliminated, as it is sometimes used by companies to artificially lower their tax liability.
LIFO assumes the first items to be inventoried will also be the first to leave, while first-in first-out (FIFO) works on the assumption that the most recently produced items will leave first.