April 4, 2014

Senate Finance Committee: First Step To Tax Extenders

Related Service Tax & Business

Senate Finance Committee: First Step To Tax Extenders Tax & Business

This week the Senate Finance Committee approved a two-year extension of tax provisions that expired at the end of 2013. This is the first step towards a broader discussion on tax changes Congress will work through during the year.

Key tax extenders – including the Research and Experimentation (R&D) Tax Credit and the Energy Efficient Commercial Building (Section 179D) – were passed with bipartisan support with few adjustments.

One adjustment includes making the R&D Credit available to small businesses (targeted to start ups) that have no income tax liability. The change makes the R&D credit available to many start-up companies that typically aren’t able to claim it during their first years in operation. Under prior language, companies were entitled to take the credit only if there was an income tax due. With Committee amendment, the credit becomes available in the following year, even without a tax liability. The new credit, to be known as the Start Up Innovation Credit, allows a company to take a credit of up to $250,000 against payroll taxes paid on wages and is available for companies that have existed for less than five years and that have less than $5 million dollars in annual gross receipts. The Senators approved this proposal with no objections.

Other potential changes to R&D includes allowing companies to take the R&D credit against AMT and allowing companies to take the Alternative Simplified Credit (ASC) on amended returns.

Other expired provisions expected to be extended include:

  • Bonus depreciation
  • Wind production tax credit
  • Special Expensing for Film and TV productions
  • Look through treatment for certain controlled foreign corporations
  • Energy Efficient Commercial Building Deduction (Section 179D)
  • Update to energy efficiency credits

As noted, the Senate Finance Committee’s approval is the starting point to passing laws to include the extenders. The bill will now to go to the Senate floor for consideration. It is anticipated that the Senate will vote in favor of the extenders bill. All provisions are expected to be extended to year end 2015.

Your Marcum Tax Advisors will keep you updated on the progress of these extender provisions and how they may effect you and your business.

A special thanks to article contributors Diane Giordano, Partner, Tax & Business Services and Robert Spielman, Partner, Tax & Business Services.