The chairman of the National Lumber & Building Material Dealers Association (NLBMDA) urged the House Small Business Committee today to revive a temporary provision that enabled businesses to immediately write off 50% of the cost of depreciable property, saying the change would encourage businesses to invest in new equipment and thus help create new jobs.

Dan Fesler, CEO of Lampert Yards in St. Paul, Minn., and this year's NLBMDA chair, was one of only five trade group representatives to testify before the panel. In his prepared remarks (see also video of his testimony), Fesler argued for extending the writeoff--which expired at the end of 2009--not only on economic but also on practical grounds.

Dan Fesler
Dan Fesler

He called the term used to describe the 50% writeoff--"bonus depreciation"--a misnomer because it makes it sound as if the company involved is getting a bonus or extra benefit. "In actuality," he said, bonus depreciation "makes depreciation match the true life cycle of a product."

"For Lamperts, we have 235 computer terminals and 197 printers in use in our company every day," he said. (Lamperts ranks 27th on this year's ProSales 100, with 2009 sales of $118 million.) "On average, they last three years because they are used 10 hours per day, six days a week in a work environment that can easily make them dirty and dusty.

"Under normal IRS depreciation rules, these must be written off over five years, which is much longer than their true life cycle," he continued. "Bonus depreciation allows us to write these off over a faster period of time, but also in line with their true life cycle. Without bonus depreciation, we hold and use equipment longer, and we delay the cost of investment in newer and better equipment. Giving a company the ability to write things off as they age and before they become obsolete would encourage the purchase of new equipment on a more frequent basis and would assist in stimulating the economy and providing more jobs for companies selling these types of products and equipment to businesses such as Lamperts."

Fesler also noted that NLBMDA and 81 other national organizations urged Congress this spring to renew the bonus depreciation law at least through 2010, and that inside Congress,11 Democrats and seven Republicans wrote jointly to the House Ways and Means Committee chairman recommending that the bonus depreciation provision be added to a package of small-business tax incentives that soon will be negotiated by a House-Senate conference committee. The Senate bill already contains the extension, but the House version doesn't.

Small Business Committee chair Nydia Velazquez, D-N.Y., spoke up for extending bonus depreciation in her prepared remarks to open the hearing.

"We all know that bonus depreciation can help boost economic activity," she said. "However, it is also important to recognize what it means for smaller firms. ... While small firms may not always purchase million dollar machines, they see new opportunities when corporations make investments. Small businesses often sell, manufacture, ship or service big-ticket items that large companies purchase using bonus depreciation. This is the kind of economic activity we need to foster widespread job creation."