By the end of 2015, tax legislation that retroactively extends some of the tax provisions that expired in 2014 may be enacted. More than 50 federal tax provisions expired in 2014, and most of those are the same provisions that expired in 2013 before legislation was enacted in December of 2014 to retroactively extend them for one year.
Below is a partial list of the provisions that expired in 2014. Under a bill that the Senate Finance Committee approved and moved to the Senate in July 2015, 52 provisions, including those listed below, would be retroactively extended for a period of two years. In September 2015, the House Ways and Means Committee approved a retroactive one-year extender bill which would extend through the close of 2015 just a few of the expired tax provisions and would make permanent the 50-percent bonus depreciation and the 15-year recovery period for qualified leasehold, restaurant and retail improvements. Included among the tax provisions that expired in 2014 that may be extended are the following:
- 50% bonus depreciation.
- Provisions that increased the maximum cost of eligible property which may be expensed under Section 179 of the Internal Revenue Code to $500,000 (from $25,000) and that increased the phase-out Section 179 investment amount to $2 million (from $200,000).
- 15-year recovery period for qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property.
- Inclusion of certain computer software in the definition of Section 179 property.
- Provision under which a taxpayer could treat up to $250,000 of the cost of qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property as Section 179 property.
- Reduced (5-year) recognition period for purposes of the S corporation “built-in gains” tax.
- Provision that limited the amount by which basis in S corporation stock is reduced by the shareholder’s pro rata share of the corporation’s adjusted basis in appreciated long-term capital gain property contributed to charity.
- 20 percent traditional research tax credit and 14 percent alternative simplified research tax credit.
- Itemized deduction for state sales taxes, which may be elected in lieu of an itemized deduction for state income taxes.
- Above-the-line deduction for up to $4,000 of certain higher education expenses for individuals with adjusted gross income of $65,000 or less ($130,000 or less for joint filers), or $2,000 for individuals with adjusted gross income of $80,000 or less ($160,000 or less for joint filers).
- $250 above-the-line tax deduction for elementary and secondary school teachers for expenses paid or incurred for books, supplies, computer equipment and supplementary materials used by the educator in the classroom.
- Exclusion of up to $1 million ($2 million for joint filers) of income from the discharge of qualified principal residence indebtedness.
- Exclusion from income of up to $100,000 of qualified charitable IRA distributions made from an individual retirement account by an individual who is 70-1/2 of age or older.
- Treatment of premiums paid or accrued for qualified mortgage insurance in connection with acquisition indebtedness on a principal or second residence of the taxpayer as qualified residence interest.
- Enhanced charitable deduction for contributions of food inventory.
- Increased contribution limits and carryforward period for contributions of appreciated real property, including partial interests in real property.
- Increase to 100 percent (from 50 percent) the exclusion for gain on certain small business stock.
- Corporate election to forgo bonus depreciation in favor of accelerating corporate alternative minimum tax credits.
- Energy efficient property credits for developers and builders of qualifying multifamily residential properties.
- Credit for energy efficient improvements to existing homes.
- Section 179D Energy Efficient Deductions for commercial buildings.
- Work Opportunity Tax Credit.
- Empowerment Zone Tax Incentives.
- New Markets Tax Credit.
- Low-income housing tax credit for new, non-federally subsidized buildings.
- Exception under Subpart F for active financing income.
- Look-through treatment of payments between related controlled foreign corporations.
Anyone considering or planning to execute a transaction in 2015 for which the federal tax consequences may be altered, by an expired provision, should keep an eye on extender legislation as it moves through Congress. If you are planning or considering such a transaction, or if you have questions about any provision of federal tax law, we encourage you to contact your Marcum LLP advisor.