Under current tax law, firms may expense (or deduct as a current rather than a capital expense) up to $1 million of the total cost of new and used qualified assets they purchase and place in service in tax years beginning in 2018 under Section 179 of the federal tax code. They also have the option under Section 168(k) of expensing the entire cost of qualified assets they acquire and place in service between September 28, 2017, and December 31, 2022. Many of the assets that qualify for the Section 179 expensing allowance are also eligible for the Section 168(k) expensing allowance (which is also known as bonus depreciation). Expensing is the most accelerated form of depreciation. It has the potential to stimulate business investment by reducing the cost of capital for favored investments and by increasing the cash flow of firms undertaking such investments. As a result, economists view the two allowances as significant investment tax subsidies, especially since firms are allowed to take advantage of both allowances in the same tax year. P.L. 115-97 (known informally as the Tax Cuts and Jobs Act of 2017) made several notable changes in both tax provisions. Specifically, the new tax law permanently increased the annual dollar limitation for expensing under Section 179 to $1 million, raised the phaseout threshold to $2.5 million, indexed both amounts for inflation, and expanded the range of assets eligible for the allowance. P.L. 115-97 also increased the Section 168(k) bonus depreciation allowance to 100% of the cost of eligible assets acquired and placed in service from September 28, 2017, through the end of 2022 and made certain changes in the property eligible for the allowance. This report examines the current status, legislative history, and main economic effects (including their efficacy as a tool for economic stimulus) of the Section 179 and bonus depreciation allowances. Section 179 of the Internal Revenue Code (IRC) is a permanent tax provision. It gives firms in all lines of business and all sizes the option, within certain limits, of expensing the cost of new and used qualified property in the tax year when the assets are placed in service. Business taxpayers that cannot (or choose not to) claim the allowance may recover capital costs over longer periods and at slower rates by claiming the appropriate depreciation deductions under the Modified Accelerated Cost Recovery System (MACRS) or Alternative Depreciation System (ADS). The maximum Section 179 expensing allowance is set at $1 million for qualified assets bought and placed in service in 2018 and thereafter. (See Table 1 for the annual expensing allowances from 1987 to 2018.) Under current law, new and used tangible property—as specified in Section 1245(a)(3)—qualifies for the allowance if it is depreciable under Section 168 (which contains the MACRS) and acquired for use in the active conduct of a trade or business. For the most part, this property consists of machinery and equipment used in manufacturing, mining, transportation, communications, the generation and transmission of electricity, gas and water distribution, and sewage disposal. Research and bulk storage facilities do qualify for the allowance, as do single-purpose agricultural structures, storage facilities for petroleum products, and railroad grading and tunnel bores. In addition, the cost of off-the-shelf computer software used in a business or trade that is acquired and placed in service in tax years starting in 2003 may be expensed under Section 179. Improvements to the interior of nonresidential real property, as well as fire protection and alarm systems, security systems, roofs, and heating, ventilation, and air conditioning systems installed in such property, are also eligible for Section 179 expensing. Use of the allowance is subject to two limitations: an investment (or dollar) limitation and an income limitation. Under the dollar limitation, the maximum allowance a taxpayer is permitted to claim in a tax year is reduced, dollar for dollar but not below zero, by the amount by which the aggregate cost of the qualified property a firm buys and places in service during that year exceeds a phaseout threshold. That threshold is set at $2,500,000 in 2018 and thereafter (see Table 1 for the limitations going back to 1987). As a result, a taxpayer may claim no Section 179 expensing allowance in 2018 when the total cost of qualified property it acquires and places in service equals or exceeds $3,500,000. The income limitation bars a taxpayer from claiming a Section 179 allowance greater than its taxable income (including wages and salaries) from the active conduct of a trade or business. The limitation is determined after the application of the investment limitation. So, if a company has $50,000 in taxable income in 2018 from its business and may claim a Section 179 allowance of $75,000 under the investment limitation, it could expense no more than $50,000 of the cost of qualified property and recover the remaining $25,000 through the MACRS or carry it forward to a future tax year when the company is able to deduct it under Section 179. Taxpayers are not allowed to carry forward any allowance from the current tax year that cannot be used because of the investment limitation, but they may carry forward indefinitely allowances that cannot be used because of the income limitation. To claim the allowance, a taxpayer must specify on Form 4562 the items to which the election applies and the portion of the cost of each item that is deducted immediately. Historically, an election to claim the Section 179 allowance could be revoked only with the consent of the Internal Revenue Service (IRS). Congress suspended this rule for tax years beginning in 2002 to 2014 and repealed it through the PATH Act for tax years beginning in 2015 and thereafter. Repeal of the rule means that taxpayers may revoke any part of an election to expense qualified property without the IRS's consent, regardless of whether the election is made on an original or amended return (IRS regulation 1.179-5). To revoke an election, a taxpayer merely submits an amended return for the tax year in question using a different depreciation method. Businesses may also claim a 100% expensing (or bonus depreciation) allowance under Section 168(k) for eligible property acquired and placed in service after September 27, 2017, and before January 1, 2023. The allowance is equal to 100% of the cost of qualified property. Under current law, this rate is to remain in effect through 2022; it is scheduled to decrease to 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and 0% for property acquired and placed in service in 2027 and thereafter. Qualified property with relatively long production times is allowed an extra year of bonus depreciation over this period. The initial bonus depreciation allowance (BDA) was set at 30% and applied to qualified property acquired and placed in service between September 12, 2001, and December 31, 2004. In 2003, Congress raised the allowance to 50% of the cost of qualified property acquired and placed in service from 2003 to 2005. It expired at the end of 2005. Congress reinstated it in 2007 for property acquired and placed in service in 2008 (or 2009 for property with long production times and certain aircraft). Owing to several subsequent extensions and enhancements, a BDA of 50% or 100% was available for property acquired and placed in service in 2009 to 2015. Like the Section 179 expensing allowance, the Section 168(k) allowance accelerates the depreciation of qualified property, lowering the cost of capital for investment in those assets and boosting the cash flow of businesses making such investments. Congress created the allowance to spur increased business investment during periods of negative or sluggish economic growth, such as the severe recession that lasted from late 2007 to mid-2009 and the relatively weak recovery that persisted into early 2014. The BDA applies to new or used qualified property. In general, this is property that is eligible for depreciation under the MACRS with recovery periods of 20 or fewer years, off-the-shelf computer software, and qualified improvement property (which is considered 15-year property even though eligible improvements apply to nonresidential real property that is depreciated over 39 years). In a change in the BDA enacted in P.L. 115-97 , property acquired and placed in service after September 27, 2017, by rate-regulated utilities that provide electrical power and water, sewage disposal, the local distribution of gas or steam, or the transportation of gas or steam by pipeline no longer qualifies for the BDA. From 2008 and through 2015, C corporations had the option under Section 168(k)(4) of cashing in some or all of their alternative minimum tax (AMT) and research tax credits carried over from tax years before 2006, in lieu of taking the BDA. Corporations choosing the accelerated credit also had to use the straight-line method over MACRS recovery period for the bonus depreciation property to recover its cost. The credit was refundable and limited to a corporation's bonus depreciation amount. This amount was equal to 20% of the difference between the bonus depreciation and regular depreciation a company could claim for the current tax year and the depreciation it could claim for that year without bonus depreciation. From 2008 to 2010, the bonus depreciation amount was limited to the lower of (1) 6% of the sum of its carried-forward (or unused) AMT and research tax credits from tax years before 2006, or (2) $30 million. For bonus depreciation property placed in service from 2011 to 2015, corporations could claim the accelerated credit for unused AMT credits from tax years before 2006 only. The credit was provided indirectly through an increase in the limitations on the use of the AMT credit (under Section 53(c)) and the research tax credit (under Section 38(c)); the increase was treated as a refundable overpayment of tax.