Every year it’s the same… I pay a bunch of money to travel to a seminar on annual tax updates, and the instructor starts each topic with, “now, we don’t know whether Congress will extend this or not…” It’s gotten so bad that I finally started skipping all the November and December classes and signing up for tax updates in January. That’s right, for the tax laws of the *prior* year. This helps a great deal in year-end tax planning. (Sarcasm.)
Congress’ delayed action gets my goat for many reasons, not just my wasted time in seminars. The main frustration I have is that so many of these tax provisions are meant to be incentives for businesses or individuals to act a particular way — to take the plunge and buy that big piece of equipment, invest in R&D, or take on that big construction project. If they don’t know whether or not there is a tax incentive to do it — or that “maybe” Congress will renew a tax break — then how on earth does that serve as an incentive?
Well, thankfully, some of these frustrations are going away. This year, Congress actually made some of the “extenders” permanent, meaning they won’t have to vote year-after-year to extend them — they’ll be written into the IRS tax code.
The best summary of the changes I’ve read so far is by the incomparable Tony Nitti of Forbes, one of the best tax writers out there:
Tax Deal Makes Permanent R&D Credit, Generous Child And College Breaks – Forbes
And the best list of the items extended, made permanent and/or modified in the extender bill I’ve found is by Vern Hoven of Western CPE. (A complete list is included in the text of H. R. 2029, the “Protecting Americans from Tax Hikes Act of 2015.”)
| IRC | Individual Provisions | NEW Expiration Date |
| §24(d) | Enhanced American Opportunity tax credit is made permanent. Beginning in 2016, the provision requires the taxpayer claiming the American Opportunity credit to report the EIN of the educational institution to which the individual made tuition payments. | Provision made permanent |
| §25A | Enhanced child tax credit is made permanent | Provision made permanent |
| §25C(g)(2) | $500 credit for non-business energy property is extended toDec. 31, 2016. | December 31, 2016 |
| §32(b) | Enhanced earned income tax credit is made permanent. | Provision made permanent |
| §62 | $250 teacher supply deduction is made permanent. Beginning in 2016, the provision also indexes the $250 cap to inflation and includes professional development expenses. | Provision made permanent |
| §108 | Exclusion for personal residence COD income is extended to Dec. 31, 2016. | December 31, 2016 |
| §163 | Mortgage insurance premium deduction as mortgage interest is extended to Dec. 31, 2016. | December 31, 2016 |
| §164 | Election for itemizers to deduct sales tax in lieu of income tax is made permanent. | Provision made permanent |
| §170 | Contributions of real property for qualified conservation purposes is made permanent. | Provision made permanent |
| §222 | Tuition deduction is extended to Dec. 31, 2016. | December 31, 2016 |
| §408 | IRA transfers to charity in lieu of RMDs is made permanent. | Provision made permanent |
| IRC | Business Provisions | NEW Expiration Date |
| §41 | R & D tax credit is made permanent. Beginning in 2016 eligible small businesses ($50 million or less in gross receipts) may claim the credit against AMT liability, and the credit can be utilized by certain small businesses against the employer’s payroll tax liability. | Provision made permanent |
| §45P | Wage credit for activated military reservists is made permanent. Beginning in 2016, the provision modifies the credit to apply to employers of any size, rather than employers with 50 or fewer employees, as under current law. | Provision made permanent |
| §51 | WOTC for employers hiring qualified veterans and employees from other targeted groups is extended to Dec. 31, 2019. Beginning in 2016, the provision also modifies the credit to apply to employers who hire qualified long-term unemployed individuals (i.e., those who have been unemployed for 27 weeks or more) and increases the credit with respect to such long-term unemployed individuals to 40% of the first $6,000 of wages. | December 31, 2019 |
| §132 | Increased fringe benefit allowance for transit passes is made permanent | Provision made permanent |
| §168 | Bonus depreciation for qualified purchases is extended with revisions to Dec. 31, 2019 (50% in 2015 – 2017, 40% in 2018 and 30% in 2019). The provision modifies the AMT rules beginning in 2016 by increasing the amount of unused AMT credits that may be claimed in lieu of bonus depreciation. The provision also modifies bonus depreciation to include qualified improvement property and to permit certain trees, vines, and plants bearing fruit or nuts to be eligible for bonus depreciation when planted or grafted, rather than when placed in service. | December 31, 2019 |
| §168 | Election to accelerate AMT credit in lieu of bonus depreciation is extended to Dec. 31, 2019. | December 31, 2019 |
| §168 | 15-year recovery period for qualified leasehold improvements, qualified restaurant property, and qualified retail improvements is made permanent. | Provision made permanent |
| §170 | Enhanced charitable deductions for food inventory is made permanent. Beginning in 2016, the provision modifies the deduction by increasing the limitation on deductible contributions of food inventory from 10% to 15% of the taxpayer’s AGI (15% of modified taxable income in the case of a C corporation) per year. The provision also modifies the deduction to provide special rules for valuing food inventory. | Provision made permanent |
| §179 | $500,000 expensing limit is made permanent. Beginning in 2016, the provision modifies the expensing limitation by indexing both the $500,000 and $2 million limits for inflation and by treating air conditioning and heating units placed in service in tax years beginning after 2015 as eligible for expensing. | Provision made permanent |
| §179 | Treatment of certain real property as §179 property is made permanent. Beginning in 2016, the provision modifies the expensing limitation with respect to qualified real property by eliminating the $250,000 cap. | Provision made permanent |
| §1202 | 100% gain exclusion for qualified small business stock is made permanent. | Provision made permanent |
| §1367 | Basis adjustment to S corporation stock for charitable contributions is made permanent. | Provision made permanent |
| §1374 | Reduced built in gains recognition period for S corporations is made permanent at five years. | Provision made permanent |
© 2015 Sharon Kreider and Vern Hoven
Tony Nitti of Forbes.com will now be with SurgentCPE for the Tax Update course in 2017
Tony Nitti of Forbes.com will now be with SurgentCPE for the Tax Update course in 2017