Fast Tax Write-Offs

Report Outline
Amortization of Defense Plant Costs
Tax Treatment of Ordinary Depreciation
Depreciation Problems in Public Utilities
Special Focus

Amortization of Defense Plant Costs

Authority for rapid amortization of the costs of industrial facilities affected with a defense interest moved a step closer to extinction, Aug. 12, when the Senate approved legislation to impose immediate restrictions on the practice and to terminate it completely by Dec. 31, 1959. The program of so-called fast tax write-offs, introduced in World War II to spur expansion of production facilities and revived in 1950 after outbreak of the Korean war, had already been drastically scaled down. However, the Office of Defense Mobilization, which administers the program, urged that it be continued in a few fields.

Instead, the Senate tacked on to a minor House-passed tax bill a measure by Finance Committee Chairman Harry F, Byrd (D-Va.), which embodies only limited concessions to O.D.M. views. Although allowing certifications for rapid tax amortization in a narrowly restricted area for two more years, the proposed legislation takes no account of O.D.M. Director Gordon Gray's plea that the President be authorized to reopen the program in an emergency.

Fast tax write-offs have the effect of deferring payment of substantial amounts of corporation income taxes. Although the corporations benefiting from current deferrals pay bigger taxes later, the federal government suffers a temporary loss of revenue. As a result, it is forced either to pay interest on money borrowed to make up the difference or to put off tax cuts which otherwise could be made. Either way, the general taxpayer bears the burden until the time when, plant costs having been written off at an accelerated rate, there is an offsetting increase in tax revenue from corporations during the remaining useful life of the facilities.