On December 16th, the Senate passed and sent to the President a $42 billion bill to extend dozens of expired tax credits and deductions retroactively for tax year 2014. Included in this bill is an increase in Section 179 expense to $500,000 (from $25,000), Bonus depreciation, and the ability to make charitable contributions from your IRA. Here is a summary of the tax provisions that are extended in the proposed legislation from RIA (common tax incentives have been highlighted) TIPA would extend the following individual provisions through 2014: • $250 above-the-line deduction for certain expenses of teachers (Code Sec. 62(a)(2)(D)); • Exclusion of up to $2 million ($1 million if married filing separately) of discharged principal residence indebtedness from gross income; (Code Sec. 108(a)(1)(E)); • Parity for exclusion for employer-provided mass transit and parking benefits (Code Sec. 132(f)(2)); • Deduction for mortgage insurance premiums treated as qualified interest (Code Sec. 163(h)(3)(E)); • Deduction for state and local sales taxes (Code Sec. 164(b)(5)(I)); and • Above-the-line deduction for qualified tuition and related expenses. (Code Sec. 222(e)) TIPA would extend the following business provisions through 2014: • Research and experimentation credit (Code Sec. 41); • Low-income housing 9% credit rate freeze (extended for allocations made before Jan. 1, 2016) (Code Sec. 42); • Military housing allowance exclusion for determining whether a tenant in certain counties is low-income (section 3005 of 2008 Housing Assistance Tax Act); • Indian employment credit (Code Sec. 45A); • New markets tax credit (Code Sec. 45D); • Railroad track maintenance credit (Code Sec. 45G); • Mine rescue team training credit (Code Sec. 45N); • Employer wage credit for activated military reservists (Code Sec. 45P); • Work opportunity tax credit (Code Sec. 51); • Qualified zone academy bonds (Code Sec. 54E); • Classification of certain race horses as 3-year property (Code Sec. 168(e)(3)(A)); • 15-year straight line cost recovery for qualified leasehold property, qualified restaurant property, and qualified retail improvements (Code Sec. 168(e)(3)(E)); • 7-year recovery period for motorsports entertainment complexes (Code Sec. 168(i)(15)); • Accelerated depreciation for business property on Indian reservations (Code Sec. 168(j)); • 50% bonus depreciation (Code Sec. 168(k)); • Increase in expensing limit and in investment based phaseout amount and expanded definition of Section 179 property for certain real property (Code Sec. 179); • Election to expense mine safety equipment (Code Sec. 179E); • Special expensing rules for film and television production (Code Sec. 181(f)); • Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico (Code Sec. 199); • Modification of tax treatment of certain payments to controlling exempt organizations (Code Sec. 512); • Special treatment of certain dividends of regulated investment companies (RICs) (Code Sec. 871(k)); • RIC qualified investment entity treatment under FIRPTA (Code Sec. 897(h)); • Exceptions under Subpart F for active financing income (Code Sec. 953, Code Sec. 954); • Look-through treatment of payments between controlled foreign corporations (Code Sec. 954(c)(6)); • Special 100% gain exclusion for qualified small business stock (Code Sec. 1202); • Reduction in S corporation recognition period for built-in gains tax (Code Sec. 1374); • Empowerment zone tax incentives (Code Sec. 1391); • Temporary increase in limit on cover over of rum excise taxes to Puerto Rico and the Virgin Islands (Code Sec. 7652); and • American Samoa economic development credit. (section 19 of 2006 Tax Relief and Health Care Act) TIPA would extend the following charitable provisions through 2014: • Enhanced charitable deduction for contributions of food inventory (Code Sec. 170); • Basis adjustment to stock of S corporations making charitable contributions of property (Code Sec. 1367); • Special rules for contributions of capital gain real property for conservation purposes (Code Sec. 170(b)(1)(E), Code Sec. 170(b)(2)(B)); and • Tax-free distributions for charitable purposes from individual retirement account (IRA) accounts of taxpayers age 70 1/2 or older. (Code Sec. 408(d)(8)(F)) TIPA would extend the following energy provisions through 2014: • Credit for nonbusiness energy property (Code Sec. 25C); • Credit for second generation biofuel producer credit (Code Sec. 40(b)); • Incentives for biodiesel and renewable diesel (Code Sec. 40A); • Production credit for Indian coal facilities placed in service before 2009 (Code Sec. 45(e)(10)); • Credits with respect to facilities producing energy from certain renewable resources (Code Sec. 45(d)); • Credit for construction of energy efficient new homes (Code Sec. 45L); • Special allowance for second generation biofuel plant property (Code Sec. 168(l)); • Energy efficient commercial building deduction (Code Sec. 179D(h)); • Special rule for sales or dispositions to implement FERC or State electric restructuring policy for qualified electric utilities (Code Sec. 451(i)); and • Incentives for alternative fuel and alternative fuel mixtures. (Code Sec. 6426, Code Sec. 6427) TIPA would extend the following provisions on multiemployer defined benefit pension plans through 2015: • Automatic extension of amortization periods (Code Sec. 431(d)(1)(C)); and • Shortfall funding method for plans in endangered or critical status. (sec. 221(c) of the Pension Protection Act of 2006, P.L. 109-280)
Tax Breaks for Taxpayers for Christmas!