OK, so maybe they’re eleven months late, but late Tuesday, the Senate passed H.R. 5771, the appropriately-named Tax Increase Prevention Act of 2014, which provides numerous tax extenders. While the bill must still be signed by President Obama, a veto is not expected; the bill passed the Senate 76-16.
Over fifty tax provisions designed to provide certain tax benefits expired after 2013. The purpose of the bill was to extend those provisions in order to avoid saddling small business owners and middle-income earners with significant tax increases. Virtually all provisions have been extended. The bill also identifies and repairs some technical issues found in prior legislation.
We will provide a brief list of the incentives that the bill extended, particularly those that we deal with in our Firm most frequently; however, a full listing can be found at the Journal of Accountancy.
Notable Individual Tax Extenders
- $250 maximum deduction for expenses of elementary and secondary schoolteachers.
- Exclusion from gross income of discharge of qualified principal residence indebtedness.
- Treatment of mortgage insurance premiums as qualified residence interest.
- Deduction for state and local general sales taxes.
- Above-the-line deduction for qualified tuition and related expenses.
- Provision allowing tax-free distributions from individual retirement plans for charitable purposes.
Notable Business Tax Extenders
- R&D credit.
- Employer wage credit for employees who are active duty members of the uniformed services.
- Work opportunity tax credit.
- Qualified zone academy bonds.
- Provision allowing 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.
- Provision allowing 7-year recovery period for motorsports entertainment complexes.
- Bonus first-year depreciation.
- Enhanced charitable deduction for contributions of food inventory.
- Increased expensing limitations and treatment of certain real property as §179 property.
- Special expensing rules for certain film and television productions.
- Allowance for basis adjustments to stock of S corporations making charitable contributions of property.
- Reduction in S corporation recognition period for built-in gains tax.
- Empowerment zone tax incentives.
Energy Tax Extenders
- Credits for non-business energy property and alternative fuel vehicle refueling property.
- Incentives for biodiesel and renewable diesel.
- Credit for energy-efficient new homes.
- Deduction for energy-efficient commercial buildings.
Additional provisions are in place to adjust various IRS penalties for inflation after 2014 including the failure-to-file and return preparer penalties.
As with all such bills, there has been some controversy at the notion that the bill focuses on helping the wealthy without having any provisions for the less affluent. It should be noted that the provisions that exist for lower-income earners, including the Earned Income Credit, Child Tax Credit, and other refundable credits did not require extending and were already present in the 2014 Tax Code. The purpose of this bill was to address expiring provisions, which typically affect higher-income earners more so than lower-income earners.
Regardless, as preparers and tax advisers, we are happy to finally have tax provisions in place to assist us with providing advice to our clients. If you have any questions regarding how these may affect your tax situation, please contact us immediately in order to address your concerns before year-end.