Could the economic stimulus plan delay patent reform?

After warning as late as yesterday afternoon about the possible disruptive side effects that Congress’ economic stimulus program might have on future legislation, a powerful trade organization is suddenly applauding its passage today.

Last night, the US Senate passed the Economic Stimulus Package of 2008, after a few moments of heated debate over cloture (the rules of debate) that threatened to kill the bill, and that even led cable news to report at one point the bill was already dead. Among its provisions is one measure that extends the cap on business deductions on assets from $150,000 to $250,000.


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It was that provision that prompted the Computing Technology Industry Association this morning to applaud the bill’s passage, with its group director for public policy, Roger Cochetti, saying the raising of the cap will “incentivize the purchase of IT.”

“This will create powerful cascading benefits,” Cochetti wrote. “Small-to-large businesses will more rapidly bring new IT online, boosting competitiveness; laborers will have newer IT tools with which to be more productive; and average Americans will be more likely to purchase IT, decreasing the digital divide.”

In an IDG News Service report yesterday, a CompTIA spokesman sounded an alarm, saying that the bill’s passage could have a detrimental effect on other IT-related legislation Congress is considering down the road, including the critically important patent reform bill, which was drafted last April.

But this morning — now that the stimulus bill is passed — that same spokesman, Mike Wendy, told BetaNews he and his group are somewhat pleased that it went through, saying that the cap extension has been a measure the group has been prompting Congress to consider ever since President Bush took office, when Mr. Bush first mentioned the idea in his State of the Union Address following his inauguration.

“We’ve been pushing Section 179 small business provisions, pushing exemptions up, for seven years,” Wendy told us. “We wish they’d make those deductions permanent.”

His organization did achieve some success in that regard twice before, said Wendy, most recently in 2003. This year’s stimulus package should give a boost to exemptions for at least one year.

A full one third of those business exemptions will be tech-oriented, CompTIA believes. If those exemptions were written into law permanently, Wendy argued, businesses would be able to amortize their assets over 18-month periods, thus aligning their deduction cycles with the real life cycles of their technology assets, rather than doling out deductions over three or four years for assets they no longer use. “We’ve been trying to make depreciation even faster,” he said.

Business are asking, Wendy passed on, “Can’t we expense this stuff? Isn’t that the reality? But the IRS says, we still have to pay for these tools three years after they’re useful.”

But the fact that CompTIA won a small victory yesterday could be a problem in itself, Wendy warned.

“Look, we wanted this to go through, to benefit the IT industry,” Wendy told us. “But Congress has other stuff that’s still on the platter,” he said, renewing his warning that Congress could conclude it’s done its part for IT, thus “popping the bubble,” as Wendy put it, for this year.

“Congress might say, ‘We helped you out, we know…But we’re so busy.”

The big problem now lies with coordinating with Senate Majority Leader Harry Reid (D – Nevada), who is responsible for scheduling debate there. There are a huge number of items still on the docket for consideration, Wendy noted. Patent reform is one of them, and another problem from last April — the overflow in demand for H-1B visas — is another. Tax credits for research and development efforts is a third.

Sen. Reid promised CompTIA that these issues would be addressed, said Wendy, and when last they talked, the date was mid-March. But with economic stimulus having been passed in early February, the group’s concern is that Reid may think the IT industry’s chip has already been cashed in.

“The Senate is the upper body. It has a different pace [than the House],” remarked CompTIA’s Wendy. “Sen. Reid cannot put [patent reform] on the schedule until he knows that there’s consensus.” So it’s his group’s job, therefore, to make the case that the IT industry has reached consensus.

Then there’s the difficult little matter about the Bush Administration expressing disagreement with certain aspects of patent reform, especially its proposed limitations on the amounts of judgment awards.

One more prominent senator added his voice to the din of applause for the stimulus package’s passage: Sen. John McCain (R – Ariz.), now widely considered to be the front runner for the Republican presidential nomination. In a statement issued this morning, Sen. McCain wrote, “America has the second highest corporate tax rate in the world. Cutting corporate taxes will spur economic growth immediately and over the long run. We need to allow first year expensing of technology and equipment investment for businesses, which would further simplify our code and provide incentives for capital expenditure.”

CompTIA’s Wendy was happy to align himself with everything…in the second part of McCain’s paragraph. The first part, he said, he’ll leave to others to debate. Right now, there’s too many issues on the table to tackle something so big, so soon, as the overall corporate tax rate.

“Congress wasn’t made to move quickly,” remarked Wendy. “It wasn’t made to pass bills. There are so many checks and balances.”