FEDERAL TAX EXTENDERS 2015

PERMANENT PROVISIONS

The new legislation makes numerous tax relief provisions permanent, including these major ones:

  • Research and Development Credit (base credit, 14% Alternative Simplified Credit, eligible small businesses (50 million or less in gross receipts) may claim the credit against AMT and certain small businesses (less than 5 yrs. old with less than $5 million in annual gross receipts) may claim up to $250,000 of the credit against the employer’s payroll tax (FICA)
  • Section 179 expensing ($500,000 and $2 million limits, no limitation on real estate)
  • State and local sales tax deduction – A taxpayer may deduct the actual amount of sales tax paid in the tax year in lieu of state and local income taxes
  • 15-year depreciation for qualified leasehold improvements, qualified restaurant property and qualified retail improvement property
  • Both S corporation provisions: 5-year built in gains tax and charitable contributions
  • Enhancements Since 2009: Additional Child Tax Credit, Earned Income Tax Credit, and American Opportunity Tax Credit
  • International tax relief: Subpart F exception for active financing income;
  • Two provisions for mutual funds: treatment of RIC dividends for foreign investors and treatment of RICs as qualified investment entities not subject to withholding under FIRPTA
  • Three charitable deduction extenders: food inventory (also increased the limitation on deduction from 10% to 15%), contributions of real property for conservation purposes, and IRA charitable distributions (not to exceed $100,000 per taxpayer), and exemption for certain payments to a controlling exempt organization
  • 100% exclusion on gains from sale of small business stock
  • Employer 20% wage credit for employees on active duty (also expanded to all employers)
  • Mass transit parity, i.e., permanently extends the maximum monthly exclusion amount for transit passes and van pool benefits so they match the exclusion amount for qualified parking benefits. These fringe benefits are excluded from an employee’s wages and from gross income
  • Deduction for teacher classroom expenses ($250 cap now indexed for inflation and includes professional development expenses)
  • Low-Income Housing Tax Credit extenders: the 9% floor and military housing allowance

FIVE-YEAR PROVISIONS

  • Bonus depreciation (50% for 2015-2017, 40% in 2018, 30% in 2019)
  • Sec. 45 Production Tax Credit and Sec 48 Investment Tax Credit for qualified wind facilities (Full PTC and ITC credit values for 2015-2016, 80% for 2017, 60% for 2018 and 40% for 2019)  
  • Investment Tax Credit for Solar Energy Property (30% for 2017-2019; 26% for 2020 and 22% for 2021)
  • Work Opportunity Tax Credit
  • New Markets Tax Credit with a $3.5 billion annual allocation
  • Controlled foreign corporation look-through rule for payments of dividends, interest, rents and royalties between controlled foreign corporations

TWO-YEAR PROVISIONS

  • Exclusion of discharged mortgage debt relief from gross income (modified)
  • Qualified Mortgage insurance premiums treated as interest for purposes of the mortgage interest deduction
  • Above the line deduction for qualified tuition and related expenses (capped at $4,000 for an individual whose AGI does not exceed $65,000 ($130,000 for joint filers) or $2,000 for an individual whose AGI does not exceed $80,000 ($160,000 for joint filers)
  • Residential Energy Efficient Property Credits
  • Film and television expensing (modified to include live theater)
  • Empowerment Zones tax incentives (modified)
  • 10% nonbusiness energy property credit (max. $500)
  • Alternative fuel vehicle refueling property credit
  • Credit for energy-efficient new homes
  • Energy efficient commercial buildings deduction
  • Credit ($4,000 to $40,000 depending on weight) for new qualified fuel cell motor vehicles
  • Moratorium on the 2.3% medical device excise tax
  • Second generation biofuel producer credit
  • Special allowance (50% bonus depreciation) for second generation biofuel plant property
  • Credit for facilities producing energy from certain renewable resources
  • Indian Employment Tax Credit
  • Indian Coal Production Tax Credit (modified)
  • Accelerated depreciation for business property on Indian reservations (modified)
  • American Samoa economic development credit
  • Biodiesel and renewable diesel incentives credit
  • Credits relating to alternative fuels
  • 10% 2-wheeled plug-in electric motorcycles and vehicles credit
  • Special rule for sales or dispositions to implement FERC or State electric restructuring policy for qualified electric utilities
  • Election to expense mine safety equipment
  • Temporary increase in limit on cover over amount of rum excise tax
  • Motorsports Entertainment Complexes: 7-year recovery period
  • Mine Rescue Team Training Credit
  • Race horses: 3-year recovery period for racehorses placed in service during 2015 or 2016
  • Qualified Zone Academy Bonds
  • Section 199 domestic production deduction for activities in Puerto Rico
  • Railroad Track Maintenance Credit (modified)

EXCISE TAXES

  • Medical device tax moratorium
  • Craft Beverage Modernization and Tax Reform Act of 2015 – Reduction of tax for U.S. producers and exempts home distilleries

PROGRAM INTEGRITY

  • Modification of filing dates of returns and statements relating to employee wage information, e.g., W-2 and W-3, and non-employee compensation, e.g., 1099-MISC, to improve compliance
  • Safe harbor for de minimis errors on information returns and payee statements
  • Requirements for the issuance of TINs
  • Prohibits retroactive claims of earned income credit after issuance of social security number
  • Prohibits retroactive claims of child tax credit
  • Prohibits retroactive claims of the American Opportunity Tax Credit
  • Expands the paid preparer due diligence requirements with respect to procedures to reduce improper claims of the earned income credit to cover returns claiming the child tax credit and the American Opportunity Tax credit
  • Expands the restrictions barring individuals from claiming the earned income credit for 10 years if convicted of fraud and for 2 years if they are found to have recklessly or intentionally disregarded the rules to taxpayers claiming the child tax credit and the American Opportunity Tax credit in prior years
  • Applies the 20% penalty for erroneous claims to the refundable portion of credits and eliminates the penalty exception for erroneous refunds and credits
  • Increases the penalty from 50% to 75% applicable to paid tax preparers who engage in willful or reckless conduct
  • Employer identification number (EIN) required for claiming the American Opportunity Tax Credit
  • Reforms the reporting requirements for Form 1098-T so that educational institutions are required to report only qualified tuition and related expenses actually paid

MISCELLANEOUS PROVISIONS

Family Tax Relief

  • Exclusion for amounts received under the Work Colleges Program
  • Improvements to section 529 accounts
  • Elimination of residency requirement for qualified ABLE programs
  • Exclusion for wrongfully incarcerated individuals
  • Clarification of special rule for certain governmental plans
  • Rollovers permitted from employer sponsored retirement plans into Simple IRAs
  • Technical amendment allowing rollover of certain bankruptcy payments received by an airline employee to an IRA without being subject to annual contribution limit
  • Extends exception to 10% penalty for early withdrawals (before age 50) of retirement distributions for nuclear materials couriers, United States Capitol Police, Supreme Court Police, and diplomatic security special agents
  • Prevention of extension of tax collection period for members of the Armed Forces who are hospitalized as a result of combat zone injuries

Real Estate Investment Trusts

  • Restriction on tax-free spinoffs involving REITs
  • Reduction in percentage limitation from 25% to 20% of assets of REIT which may be taxable REIT subsidiaries
  • Prohibited transaction safe harbors
  • Repeal of preferential dividend rule for publicly offered REITs
  • Authority for alternative remedies to address certain REIT distribution failures
  • Limitations on designation of dividends by REITs
  • Debt instruments of publicly offered REITs and mortgages treated as real estate assets
  • Asset and income test clarification regarding ancillary personal property
  • Hedging provisions
  • Modification of REIT earnings and profits calculation to avoid duplicate taxation
  • Treatment of certain services provided by taxable REIT subsidiaries
  • Exception from FIRPTA for certain stock of REITs
  • Exception for interests held by foreign retirement or pension funds
  • Increase in rate of withholding of tax on dispositions of United States real property interests
  • Interests in RICs and REITs not excluded from definition of United States real property interests
  • Dividends derived from RICs and REITs ineligible for deduction for United States source portion of dividends from certain foreign corporations

Additional Provisions

  • A one-year extension of the moratorium on taxes on internet access
  • 40% excise “Cadillac” tax on high-cost health plans scheduled to take effect in 2018 was postponed until 2020
  • Deductibility of charitable contributions to agricultural research organizations
  • Removal of bond requirements and extending filing periods for certain taxpayers with limited excise tax liability
  • Modifications to alternative tax for certain small insurance companies
  • Treatment of timber gains
  • Modification of definition of hard cider
  • Church plan clarification

Revenue Provisions

  • Updated ASHRAE standards for energy efficient commercial buildings deduction
  • Excise tax credit equivalency for liquefied petroleum gas and liquefied natural gas
  • Exclusion from gross income of certain clean coal power grants to non-corporate taxpayers
  • Clarification of valuation rule for early termination of certain charitable remainder unitrusts
  • Prevention of transfer of certain losses from tax indifferent parties
  • Treatment of certain persons as employers with respect to motion picture projects

TAX ADMINISTRATION

Internal Revenue Service Reforms

  • Duty to ensure that IRS employees are familiar with and act in accord with certain taxpayer rights
  • IRS employees prohibited from using personal email accounts for official business
  • Release of information regarding the status of certain investigations
  • Administrative appeal relating to adverse determinations of tax-exempt status of certain organizations
  • Organizations required to notify Secretary of intent to operate under 501(c)(4)
  • Declaratory judgments for 501(c)(4) and other exempt organizations
  • Termination of employment of Internal Revenue Service employees for taking official actions for political purposes
  • Gift tax not to apply to contributions to certain exempt organizations
  • Extend Internal Revenue Service authority to require truncated Social Security numbers on Form W–2
  • Clarification of enrolled agent credentials
  • Partnership audit rules

United States Tax Court

  • Filing period for interest abatement cases
  • Small tax case election for interest abatement cases
  • Venue for appeal of spousal relief and collection cases
  • Suspension of running of statute of limitations period for filing petition of spousal relief and collection cases
  • Application of Federal rules of evidence
  • Judicial conduct and disability procedures
  • Administration, judicial conference, and fees
  • Clarification relating to United States Tax Court