For most of the year, taxpayers have been wondering if the “tax extenders,” all of which expired as of December 31, 2014, would be extended again. Congress continued to say it would get done, but taxpayers entered December with no assurances. As the congressional sessions drew to a close for 2015, the House (on December 17) and the Senate (on December 18) passed a bill that went to President Obama late in the day on December 18, which was signed.
This bill included many of the “tax extenders” that had been renewed one year at a time for many years, but took a different approach by including provisions that retroactively extend the expiration date several years for some provisions, and makes others permanent. There is some hope that this is the first step to a broader overall reform of the US Tax Code, but that will need to wait until 2016, and possibly 2017. In the meantime, following is a brief summary of how this most recent bill will impact 2015 and forward.
General Business Provisions
- Provisions made permanent include:
- Research and Development credit.
- Enhanced limitations for asset expensing under IRC Section 179.
- Provisions that received a 5-year extension through 2019 include:
- “Bonus” depreciation for qualified property.
- The work opportunity tax credit.
- The new markets tax credit.
- Provisions that received a 2-year extension through the end of 2016 include:
- The energy efficient commercial buildings deduction.
- The special expensing rules for certain film and television productions.
- The Indian employment tax credit.
- The holding period under IRC Section 1374 related to built-in-gains are permanently extended to 5 years.
- Provisions under IRC Section 1367 providing that a shareholder’s basis is reduced only by the basis of donated property (versus the fair market value of the property) is permanently extended.
Qualified Small Business Stock
- For taxpayers other than corporations, the exclusion from gross income under IRC Section 1202 of 100% of the gain recognized on the sale or exchange of Qualified Small Business Stock held more than 5 years is permanently extended.
Individual and Family Provisions
- Some of the key provisions made permanent are:
- The enhanced child tax credit.
- The enhanced American opportunity tax credit.
- The enhanced earned income tax credit.
- The deduction of certain expenses for elementary and secondary school teachers.
- The deduction for state and local general sales taxes in lieu of state and local income taxes.
- Three provisions particularly important to homeowners are extended through 2016:
- The exclusion from gross income of discharge of qualified principal residence indebtedness.
- The provision allowing mortgage insurance premiums to be treated as qualified residence interest.
- The credit for non-business energy property.
Due Date Changes
Earlier this year, congress passed legislation that, beginning with 2016 tax returns, will change the due dates for various forms including Partnerships, S Corporations, Employee Benefit Plans and others. This trend has continued with the most recent bill which provides for changes to the due date of Forms W-2 and W-3. These forms, which have generally been due on the last day of February, will be due on or before January 31 for 2016 forms filed in early 2017.
Affordable Care Act
Congress also passed a 2-year delay in the enactment of the 40% Cadillac tax on high-cost health insurance plans. The bill also includes a 2-year delay in the excise tax on medical devices.
It should be noted that with 2016 being a presidential election year, the time period of most of these extensions and deferrals will put these issues to bed until after the election and a new Congress and President have had time to set their agendas.