December 21, 2015

Protecting Americans from Tax Hikes Act of 2015 ("PATH Act")

Tax & Business

Congressional leaders unveiled a massive comprehensive package last week, which will not only keep the government funded through September 2016, but also addresses the extension of many valuable tax provisions.

The House of Representatives and the Senate voted in favor of the bill. The President signed the legislation on December 18th, making it law. As part of the $680 billion tax extender package, this legislation not only makes various expired tax provisions permanent, it also extends other expired provisions for up to five years. Some of the most relevant provisions of the new legislation are summarized below. As always, consult your Marcum Tax professional to discuss how these provisions can benefit you and your business for 2015 and future years.

PROVISIONS	CHANGES
KEY INDIVIDUAL TAX PROVISIONS
Tax-free IRA contributions to charity after age 70 1/2	Made permanent
State and local sales taxes itemized deduction	Made permanent
American Opportunity Tax Credit (College Costs)	Made permanent with new restrictions to claim credit
Enhanced Child Tax Credit	Made permanent with new restrictions to claim credit
Basis adjustment to stock of S corporations making charitable contributions of appreciated property	Made permanent
Income exclusion for discharged mortgage debt	Extended for two years (2015 through 2016)
Deduction of mortgage insurance premiums	Extended for two years (2015 through 2016)
Deduction of qualified tuition & fees “above-the-line”	Extended for two years (2015 through 2016)
KEY BUSINESS TAX PROVISIONS
Research Tax Credit	• Made permanent • The credit is refundable up to $250,000 against employer payroll taxes for any business under five years of age and with less than $5 million in annual gross receipts • Private companies with less than $50 million in gross receipts can use the credit against Alternative Minimum Tax
Five-year holding period for S Corporation built-in gains for dispositions	Made permanent
Subpart F exception for active financing income	Made permanent
Qualified small business stock gain exclusion	Made permanent
Work Opportunity Tax Credit	• Extended through 2019 • Increases the credit to 40% of first $6,000 of wages for individuals who have been unemployed for 27 weeks or more and have received unemployment compensation
CFC-related payment look-through rule	Extended through 2019
Energy Efficient Commercial Building Deduction	Extended for two years (2015 through 2016)
New Markets Tax Credit	Extended through 2019 with an annual allocation of $3.5 billion and extends the carryover period to 2024
Production Tax Credit for Renewables	Extended for five years (2015 through 2019)
Affordable Care Act “Cadillac Tax”	Postponed the starting date from 2018 to 2020
Affordable Care Act Medical Device Tax	Two year moratorium
KEY DEPRECIATION PROVISIONS
Bonus depreciation	• Extended for property placed in service through 2019 (2020 for certain long-lived and transportation property) • 50% rate for 2015-2017, 40% rate for 2018, and 30% rate for 2019
Section 179 depreciation (first year expensing)	• Made permanent • $500,000 expensing allowance and $2 million phase-out threshold which will be indexed for inflation for years after December 31, 2015 • Computer software and HVAC units made eligible • Elimination of the Section 179 expensing cap for qualified real property beginning in 2016
15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements	Made permanent