Extenders provisions in the Protecting Americans from Tax Hikes Act of 2015 & the Consolidated Appropriations Act, 2016

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1 Extenders provisions in the Protecting Americans from Tax Hikes Act of 2015 & the Consolidated Appropriations Act, 2016 The tables below outline the tax extenders provisions included in H.R. 2029, legislation that combines the Protecting Americans from Tax Hikes (PATH) Act of 2015 and the Consolidated Appropriations Act, 2016, which President Obama signed into law on December 18, Table 1: General business provisions Table 2: Energy provisions Table 3: Infrastructure and economic development provisions Table 4: Individual tax provisions Table 5: Charitable giving provisions Table 6: Changes to implementation of tax provisions in the Patient Protection and Affordable Care Act Extenders provisions generally are effective retroactive to December 31, 2014; modifications generally are effective prospectively as indicated. Table 1: General business provisions Research and experimentation credit Modify to: Allow eligible small businesses to claim the credit against AMT liability. Allow certain small businesses to claim the credit against payroll tax liability. Modifications effective for taxable years beginning after Dec. 31, Bonus depreciation Extend, but phase down through 2019: 50 percent bonus depreciation in 2015, 2016, and 2017; 40 percent in 2018; and 30 percent in Sunset as of Jan. 1, Modify to: Allow bonus depreciation for qualified improvement property regardless of whether the property is subject to a lease; remove the requirement that an improvement be placed in service more than three years after the building was placed in service. Permit certain trees, vines, and plants bearing fruit or nuts to be eligible for bonus depreciation when planted or grafted, rather than when placed into service. Modifications effective for taxable years beginning after Dec. 31, Election to accelerate AMT credits in lieu of first-year bonus depreciation Subpart F exceptions for active financing income Lookthrough treatment of payments between related CFCs under the foreign personal holding company rules Extend through 2019 and sunset thereafter. Modify to increase the amount of unused AMT credits that may be claimed in lieu of bonus depreciation effective for taxable years ending after Dec. 31, Extend through Dec. 31, Tax News & Views, Dec. 18, 2015 Copyright 2015 Deloitte Development LLC. All rights reserved.

2 Table 1: General business provisions 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements Increased expensing limits ($500,000/$2 million) and expanded definition of section 179 property Credit for certain expenditures for maintaining railroad tracks Mine rescue team training credit Employer wage credit for activated military reservists Three-year depreciation for race horses two years old or older Seven-year recovery period for motorsports entertainment complexes Accelerated depreciation for business property on an Indian reservation Election to expense advanced mine safety equipment Special expensing rules for certain film, television, and live theatrical productions Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico Treatment of certain dividends of regulated investment companies (RICs) paid to foreign investors Modify to: (1) index expensing limits to inflation; (2) remove limitation related to the amount of qualified real property that qualifies as section 179 property; and (3) add air conditioning and heating units to the definition of qualifying property. Modifications effective for taxable years beginning after Dec. 31, Modify to apply definition of qualified railroad track maintenance expenditures to track owned or leased as of Jan. 1, 2015, effective for expenses paid or incurred in tax years beginning after Dec. 31, Modify to expand availability to employers of any size, effective for taxable years beginning after Dec. 31, Modify to permit taxpayers to annually elect out of accelerated depreciation rules, effective for taxable years beginning after Dec. 31, Tax News & Views, Dec. 18,

3 Table 1: General business provisions RIC qualified investment entity treatment under the Foreign Investment in Real Property Tax Act (FIRPTA) Exclusion of 100 percent of gain on qualified small business stock Reduction in recognition period for S corporation built-in gains tax Temporary increase in limit on cover over of rum excise tax revenues (from $10.50 to $13.25 per proof gallon) to Puerto Rico and the Virgin Islands Determination of low-income housing credit rate for credit allocations with respect to nonfederally subsidized buildings Treatment of military basic housing allowance under low-income housing tax credit Table 2: Energy provisions Beginning-of-construction date for renewable power facilities eligible to claim the electricity production credit or investment credit in lieu of the production credit Production tax credit For wind facilities: Extend, but phase down, through Dec. 31, 2019: 100 percent for projects that begin construction by Dec. 31, 2016; 80 percent for construction beginning in calendar year (CY) 2017; 60 percent for CY 2018; and 40 percent for CY Sunset thereafter. (Included in the Consolidated Appropriations Act, 2016.) For nonwind facilities: Extend for projects that begin construction by Dec. 31, (Included in the PATH Act.) Investment tax credit in lieu of production tax credit For wind facilities: Extend, but phase down, through Dec. 31, 2019: 30 percent if construction begins before 2017; 24 percent if begun in CY 2017; 18 percent for CY 2018; 12 percent for CY Sunset thereafter. (Included in the Consolidated Appropriations Act, 2016.) For nonwind facilities: Extend at full 30 percent rate for projects that begin construction before Jan. 1, (Included in the PATH Act.) Tax News & Views, Dec. 18,

4 Table 2: Energy provisions Higher investment tax credit rate for solar energy projects Investment tax credit for residential solar projects Credit for construction of new energy-efficient homes Deduction for energyefficient commercial buildings Credit for energy-efficiency improvements to existing homes Alternative fuel vehicle refueling property (nonhydrogen refueling property) Incentives for biodiesel and renewable diesel: (1) Income tax credits for biodiesel fuel, biodiesel used to produce a qualified mixture, and small agribiodiesel producers; (2) Income tax credits for renewable diesel fuel and renewable diesel used to produce a qualified mixture; (3) Excise tax credits and outlay payments for biodiesel fuel mixtures; (4) Excise tax credits and outlay payments for renewable diesel fuel mixtures Special rule for sales or dispositions to implement Federal Energy Regulatory Commission (FERC) or state electric restructuring policy Extend for solar projects that commence construction (rather than the old placed-in-service rule) before Jan. 1, Gradually phase down to the permanent 10 percent investment tax credit rate: 30 percent if construction begins before Jan. 1, 2020; 26 percent for construction started in CY 2020; 22 percent for CY 2021; permanent 10 percent credit for projects that begin construction after Dec. 31, 2021 and are placed in service after Dec. 31, Effective upon enactment. (Included in the Consolidated Appropriations Act, 2016.) Extended at 30 percent for projects placed in service before Jan. 1, Phase down to 26 percent if placed in service in CY 2020 and 22 percent for CY Sunset for projects placed in service after Jan. 1, Effective Jan. 1, (Included in the Consolidated Appropriations Act, 2016.) Modify to update energy-efficiency standards for eligible improvements to reflect new standards of the American Society of Heating, Refrigerating, and Air Conditioning Engineers, effective for property placed in service after Dec. 31, Modify to revise certain energy-efficiency standards for qualifying property, effective for property placed in service after Dec. 31, Tax News & Views, Dec. 18,

5 Table 2: Energy provisions Incentives for alternative fuel and alternative fuel mixtures: (1) Excise tax credits and outlay payments for alternative fuel; (2) Excise tax credits for alternative fuel mixtures Second generation biofuel producer credit (formerly cellulosic biofuel producer credit) Special depreciation allowance for second generation biofuel plant property Credit for production of Indian coal Credit for two-wheeled plugin electric vehicles Alternative motor vehicle credit for qualified fuel cell vehicles Modify to convert the measurement of the alternative fuel excise tax credit for liquefied natural gas and liquefied petroleum gas from 50 cents per gallon to 50 cents per energy equivalent of a gallon of diesel fuel, effective for fuel sold or used after Dec. 31, Modify to (1) remove placed-in-service date limitation, (2) remove nine-year limitation on the period during which coal must be produced and sold, and (3) allow credit to be claimed against the AMT. Modifications effective for coal produced and sold after Dec. 31, 2015, in taxable years ending after such date. (Note: This provision expired at the end of 2013 and was left out of the Tax Increase Prevention Act of 2014, which was signed into law last December. The PATH Act reauthorizes the credit for two-wheeled vehicles acquired in 2015 or 2016, but not It does not reauthorize the credit for three-wheeled plug-in vehicles which expired at the end of 2013 and also was not renewed in last year s extenders law.) Table 3: Infrastructure and economic development provisions New markets tax credit Extend through Work opportunity tax credit Qualified zone academy bonds: allocation of bond limitation Extend through Modify to include employers who hire individuals who have exhausted regular compensation benefits under state and federal unemployment compensation laws (40 percent credit on first $6,000 of wages paid per eligible employee). Modification effective for tax years beginning after Dec. 31, Tax News & Views, Dec. 18,

6 Table 3: Infrastructure and economic development provisions Empowerment zone incentives: (1) Designation of empowerment zone and additional empowerment zones; (2) Increased exclusion of gain on sale of qualified business stock of empowerment zone business; (3) Empowerment zone tax-exempt bonds; empowerment zone employment credit; (4) Increased section 179 expensing; (5) Nonrecognition of gain on rollover of empowerment zone investments Indian employment tax credit American Samoa economic development credit Modify to expand the definition of an employee that is a resident of an empowerment zone for purposes of the enterprise zone facility bond employment requirement, effective for bonds issued after Dec. 31, Table 4: Individual provisions Deduction for state and local general sales taxes Earned income tax credit: (1) 45 percent credit rate for three or more qualifying children; (2) Beginning and ending income levels for joint returns increased by $5,000 and indexed for inflation after 2009 Child tax credit: Earnings threshold for refundable portion reduced from $10,000 to $3,000 American Opportunity Tax Credit Above-the-line deduction for qualified tuition and related expenses Extend permanently, with new safeguards to prevent fraud and improper payments. Effective for taxable years beginning after date of enactment. Extend permanently, with new safeguards to prevent fraud and improper payments. Effective for taxable years beginning after date of enactment. Extend permanently, with new safeguards to prevent improper claims. Effective for taxable years beginning after date of enactment. Tax News & Views, Dec. 18,

7 Table 4: Individual provisions Parity for income exclusion for employer-provided mass transit and parking benefits Deduction for certain expenses of elementary and secondary school teachers Discharge of indebtedness on principal residence excluded from gross income of individuals Premiums for mortgage insurance deductible as qualified residence interest Modify to index the $250 cap for inflation and include professional development expenses, effective for tax years beginning after Dec. 31, Exclusion is available for debt discharged after 2016 pursuant to an arrangement entered into and evidenced in writing before Jan. 1, Table 5: Charitable giving provisions Tax-free distributions from individual retirement plans by individuals age 70-1/2 and older for charitable purposes Special rules for contributions of capital gain real property made for conservation purposes Enhanced charitable deduction for contributions of food inventory Modification of tax treatment of certain payments to controlling exempt organizations Basis adjustment to stock of S corps making charitable contributions of property Modify to permit Alaska Native Corporations to deduct donations of conservation easements up to 100 percent of taxable income, effective for tax years beginning after Dec. 31, Modify to: Increase contribution limit for C corps to 15 percent (from 10 percent) of taxpayer s net income for the taxable year, and increase limit for non-c corps to 15 percent of taxpayer s aggregate net income for the taxable year from all trades or businesses from which such contributions were made for the taxable year; Provide a five-year carryforward for qualifying food inventory contributions that exceed the 15 percent limit; and Add presumptions that certain taxpayers may use in determining the tax basis and the fair market value of donated food inventory. Modifications generally effective for tax years beginning after Dec Tax News & Views, Dec. 18,

8 Table 6: Changes to implementation of PPACA tax provisions Medical device excise tax Cadillac tax on high-cost employer-sponsored health plans Annual fee on health insurance providers Suspend for sales in 2016 and 2017 (included in the Protecting Americans from Tax Hikes Act of 2015). Delay implementation until 2020 (included in the Consolidated Appropriations Act, 2016). Suspend for 2017 (included in the Consolidated Appropriations Act, 2016). Tax News & Views, Dec. 18,