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Tax Advisory: Protecting Americans from Tax Hikes Act of 2015

Friday, December 18, 2015, the president signed a bill to extend current “temporary” provisions from January 1, 2015 (unless noted). The attached summary includes a listing of the provisions. Notations were added for any changes to current law, including addition of indexing provisions (*). A portion of the provisions are now permanent (P) and others have been extended again. The status or expiring year (on December 31) is noted in the description. As we have more time to study the provisions, additional information will be provided.

Credits for Business

  • P- Wage credit (20%) for active duty employees
    • Starting 2016, all employers
  • P- Research and development cost
    • Beginning 2016, allow small businesses to use against AMT and payroll tax
  • 2019- New Market Credit
  • 2019- Work Opportunity
    • Changed to increase the credit to 40% for long term unemployed
  • 2017- Delay on excise tax on medical devices
  • 2016- Indian Coal and Indian Employment
  • 2016- Facilities producing energy from renewable resources
  • 2016- Construction of new energy efficient homes

Accelerated depreciation provisions

  • P- 15 year straight line life for qualified leasehold improvements
  • P- $500,000* Section 179 limit with phase-out at $2,000,000*
    • Changed to include air conditioning and heating units after 2015
  • 2017- 50% bonus depreciation
    • With 40% in 2018 and 30% in 2019
    • Qualified improvement property qualifies for bonus
  • 2016- Reduced lives for property on Indian reservations
  • 2016- Expensing for improvements for energy efficient buildings

Credits for Individuals

  • P- Refundable child credit threshold
  • P- American opportunity credit
  • P- Enhanced earned income
  • 2016- Nonbusiness energy property
  • 2016- 2 wheeled plug in vehicles

Deductions for Individuals

  • P- School teacher expenses*
  • P- State and local sales taxes
  • 2016- Mortgage insurance premiums
  • 2016- Tuition expenses on page 1

Charitable contributions

  • P- Real property conservation
  • P- Food inventory with increase in 2016 from 10% to 15% of income
  • P- Owners’ basis adjustment for S Corporation contribution of property

Exclusions from income

  • P- RMD distribution to charity up to $100,000
  • P- Employer provided mass transit and parking benefits
  • P- Gains from sale of small business stock, including AMT
  • P- 5 year holding period for built in gains for S Corporations assets
  • P- Increase maximum premiums for small insurance companies to $2,200,000* beginning 2017
    • A maximum of 20% of premiums from one policyholder
    • Limitation will not apply if the ownership of the insured business and insurance company is equal
  • P- Rollover of retirement plan funds into Simple plan
  • 2016- Discharge of residential mortgage

Other-Foreign

  • P- Pass through character of RIC payments to foreign investors
  • P- Subpart F income does not include income from active financing
  • P- RIC are not subject to foreign withholding
  • 2019- Look through treatment of payments between related controlled foreign corporations

Other-Special Industries

  • 2016- Election to expense mine safety equipment
  • 2016- Special expensing provisions for film and television productions
  • 2016- Credit for
    • alternative fuel vehicle refueling property
    • Second generation biofuel producer
    • Biodiesel and renewable diesel
  • 2016- 50% Bonus depreciation for second generation biofuel plant property
  • 2016- 8 year recognition of income from sale to implement FERC
  • 2016- Excise tax credit for alternative fuels
  • 2016- Credit for purchases of qualified fuel cell motor vehicles

Other

  • P- Multiple changes related to REIT
  • P- Modification of tax treatment of payments by a controlled entity to an exempt organization
  • P- 9% minimum credit for low income housing
  • P- Military housing allowance exclusion from income in determining eligibility for low income housing
  • 2016- Issuance of qualified zone academy bonds
  • 2016- 3 year depreciable life for race horses and 7 year life for motorsport entertainment complexes
  • 2016- Puerto Rican production qualifies for DPD
  • 2016- Empowerment zone incentives
  • 2016- Special provisions for excise tax on Puerto Rican rum
  • 2016- American Samoa economic development credit
  • 2016- Railroad track maintenance credit
  • 2016- Mine rescue team training credit
  • Other provisions related to IRS operations and Tax Court