H.R. 5771 Tax Increase Prevention Act/ABLE Act Division A Title I Certain Expiring Provisions Subtitle A Individual Tax Extenders This subtitle extends for one year (through 2014) certain tax provisions that expired at the end of 2013. These extensions do not include any policy changes they simply extend the applicability of each provision for one year. Sec. 102 Mortgage debt cancellation not included in income Extending this provision would prevent people from owing taxes on the amount of debt forgiveness they receive on a principle residence. For example, without this provision, if a taxpayer is underwater on the mortgage on their principle residence and the mortgage lender agrees to forgive a portion of the debt, the taxpayer would be forced to add the amount of this forgiveness to their income and pay taxes on it. Under the 2013 provision that this section extends, the amount of forgiven debt that can be excluded from income for tax purposes is limited to $2 million. JCT estimates that this provision will reduce revenue by $3.14 billion from 2015-2024. Sec. 103 Exclusion for transit fringe benefits Qualified transportation fringe benefits provided by an employer (parking, transit passes, and vanpool benefits) are not included in an employee s income. Prior to passage of the president s stimulus law in February 2009, the maximum parking benefits that could be excluded from income was $175 per month while the maximum transit or vanpool benefit that could be excluded was $100. These amounts were indexed for inflation. The president s stimulus law increased the limit for transit/vanpool to equal the inflation-adjusted parking benefits limit. These equal amounts expired at the end of 2013. This provision would increase the transit/vanpool exclusion to equal the parking benefits exclusion for 2014. JCT estimates that this provision will reduce revenue by $10 million from 2015-2024. Sec. 104 Mortgage insurance deductibility This provision would allow homeowners to deduct mortgage insurance premiums as if these payments were mortgage interest. Private mortgage insurance insures the lender against loss if the borrower defaults. The ability to deduct borrower-paid mortgage interest effectively lowers the cost of private mortgage insurance and thus encourages more home buying (and indebtedness) by individuals and families who are unable to save the typical 20 percent down payment. JCT estimates that this provision will reduce revenue by $919 million from 2015-2024. Sec. 105 Deduction for state and local sales taxes This provision would allow taxpayers an itemized deduction for state and local sales taxes. Current law allows taxpayers to deduct various state and local taxes paid, including state and local income taxes. However, the provision that expired at the end of 2013 allowed taxpayers to deduct state and local sales taxes instead of income taxes if they wished. This allowed taxpayers residing in states that do not have an income tax to receive an itemized deduction comparable to taxpayers residing in states that do have an income tax. These taxpayers could either keep track of their sales taxes paid throughout the year, or they could use the amounts included on IRS tables that estimate the average sales tax paid in each state by taxpayers with similar characteristics (income, dependents, etc). JCT estimates that this provision will reduce revenue by $3.14 billion from 2015-2024. Sec. 106 Charitable contributions of capital gain real property for conservation purposes This provision would extend more advantageous rules for donating to charity real property used in a business if the donation is being made for conservation purposes. A special rule for farmers and ranchers donating property for conservation purposes is also extended. JCT estimates that this provision will reduce revenue by $129 million from 2015-2024.
Sec. 107 Deduction for qualified tuition and expenses This provision would extend this above-the-line deduction through 2014. When the deduction was in effect, a taxpayer did not have to itemize in order to receive this deduction. The deduction could be applied for higher education tuition and expenses for the taxpayer, their spouse, or any dependents. Taxpayers with adjusted gross income of up to $130,000 (joint) or $65,000 (single) could claim a deduction for up to $4,000 in expenses. The deduction was lowered to $2,000 for adjusted gross income of between $130,001/$65,001 and $160,000 (joint) or $80,000 (single). Taxpayers with adjusted gross incomes over the latter amounts cannot take this deduction. JCT estimates that this provision will reduce revenue by $300 million from 2015-2024. Sec. 108 IRA tax-free distributions to charity This provision would allow IRA owners to make distributions directly from their IRA to a charity without the funds counting towards the IRA owner s gross income. In order to qualify for this exclusion, the distribution cannot be made before the IRA owner is age 70.5 years old and the total distribution cannot be greater than $100,000 per year. JCT estimates that this provision will reduce revenue by $384 million from 2015-2024. Subtitle B Business Tax Extenders This subtitle extends for one year (through 2014 or for actions taking place in 2014) certain tax provisions that expired at the end of 2013. These extensions do not include any policy changes they simply extend the applicability of each provision for one year. Sec. 111 Research credit This section would extend the business research credit. JCT estimates that this provision will reduce revenue by $7.63 billion from 2015-2024. Sec. 115 New markets tax credit This section would extend the new markets tax credit for one year. JCT estimates that this provision will reduce revenue by $978 million from 2015-2024. Sec. 116 Railroad track maintenance credit This section would extend a credit provided to the owner or lessee of a railroad track for expenses incurred in maintaining their track. The credit is available for the tracks of Class II (mid-size) and Class III (short line) railroads. The credit can only be claimed once per year for a given mile of track, by either the owner of the track or the lessee. The credit cannot exceed $3,500 multiplied by the number of track miles owned or leased by the taxpayer. JCT estimates that this provision will reduce revenue by $207 million from 2015-2024. Sec. 117 Mine rescue team training This section would extend this credit for a portion of the costs spent training an employee to be a member of a mine rescue team. The credit for costs incurred during this training is the lesser of 20 percent of actual costs, or $10,000. Training must be either an initial 20-hour course approved by the Mine Safety and Health Administration, or 40 hours of refresher training. JCT estimates that this provision will reduce revenue by $3 million from 2015-2024. Sec. 118 Employer wage credit for activated military reservists The former credit that expired at the end of 2013 allowed small businesses to take a tax credit for 20 percent of differential pay the optional pay that an employer can pay to an employee who is an activated military reservist to make up the difference between their military pay and what they would have earned had they not been activated and had remained at their employer. Differential wage payments eligible for this credit were capped at $20,000 meaning that the maximum credit per activated employee would be $4,000. This section would extend this credit for one year. JCT estimates that this provision will reduce revenue by $1 million from 2015-2024. Sec. 119 Work opportunity tax credit
This credit allowed a maximum credit of $2,400 to employers who hired employees from one of nine targeted groups: (1) a member of a family receiving TANF; (2) veterans; (3) ex-felons if hired within one year of their release from prison; (4) a resident of an empowerment zone, enterprise community, renewal community, or rural renewal community; (5) people with physical or mental disabilities; (6) 16-17 year-old summer workers who are residents of an empowerment zone, enterprise community, or renewal community; (7) a member of a family receiving SNAP benefits; (8) an SSI recipient, or (9) a member of a family that has received long-term public assistance. This section would extend this credit for one year. JCT estimates that this provision will reduce revenue by $1.38 billion from 2015-2024. Sec. 123 Seven year depreciation for motorsports entertainment complexes This section would extend the seven-year depreciation schedule for motorsports entertainment complexes. JCT estimates that this provision will reduce revenue by $33 million from 2015-2024. Sec. 125 Bonus depreciation This section would extend bonus depreciation for 2014, allowing an additional first-year deduction of 50 percent of the cost of equipment. This section would also extend the ability to receive a corporate income tax credit, which is capped, for prior corporate alternative minimum taxes paid, instead of bonus depreciation. JCT estimates that the bonus depreciation provision will reduce revenue by $1.21 billion from 2015-2024, and the AMT credit provision will reduce revenue by $282 million from 2015-2024. Sec. 127 Section 179 expensing This section would extend the Section 179 expensing rules that were in place from 2010-2013. For those years, taxpayers could expense in the first tax year up to $500,000 of acquired property used in a business (equipment, machines, etc.). The phase out in 2010-2013 began at $2 million of acquired property. This Sec. 179 treatment expired at the end of 2013, and current law places the limit at $25,000 of acquired property with a phase out above $200,000. JCT estimates that this provision will reduce revenue by $1.43 billion from 2015-2024. Sec. 128 Mine safety equipment expensing This section would extend the ability to expense 50 percent of the cost of qualified advanced mine safety equipment placed in service in 2014. JCT estimates that this provision will have no revenue effect from 2015-2024. Sec. 130 Domestic production activities in Puerto Rico This section would extend the ability for a business to take a deduction available for domestic production activities as if the term United States included Puerto Rico. JCT estimates that this provision will reduce revenue by $109 million from 2015-2024. Sec. 131 Tax treatment of payments to tax-exempt organizations This section would extend the 2013 rule that allows tax-exempt organizations to exclude unrelated business taxable income, thereby avoiding a tax liability on this income. Specifically, under the 2013 rule, tax-exempt organizations do not owe tax on passive income (interest, rents, royalties, annuities, etc.) that their controlled subsidiaries earned and paid to them, provided that this income does not exceed the fair market value (i.e. that the income is the same that would have been paid in an arm s length transaction). If the payment does exceed the fair market value, then only the amount that exceeds fair market value would be subject to tax. JCT estimates that this provision will reduce revenue by $18 million from 2015-2024. Sec. 132 Dividend treatment of regulated investment companies A regulated investment company (RIC) must pass on at least 90 percent of its income to its shareholders in the form of dividends. The shareholders then pay tax on this income. Prior to this policy s expiration in 2013, dividends paid to a foreign shareholder were exempt from tax and withholding. This section would extend that treatment.
JCT estimates that this provision will reduce revenue by $97 million from 2015-2024. Sec. 133 Treatment of RICs under PIRPTA This section would extend the ability of a foreign shareholder in a RIC to be exempt from tax when they sell shares of the RIC. For comparison, this tax exempt treatment is permanent for foreign investment in a Real Estate Investment Trust. Without this provision, the foreign shareholder in a RIC would be subject to tax under the Foreign Investment in Real Property Tax Act. JCT estimates that this provision will reduce revenue by $44 million from 2015-2024. Sec. 134 Subpart F exception for active financing income Subpart F generally requires that U.S. corporations pay U.S. income tax immediately on foreign earnings of passive income (interest income, for example). However, for financial firms, a substantial part of the regular income they receive through their financial business could be seen as passive although this financial income is truly active income due to the nature of their business. Applying Subpart F to this income would put these U.S. financial firms at a disadvantage relative to their foreign financial firm competitors. This section would extend the exception for active financing income so that such income is not subject to immediate U.S. tax. JCT estimates that this provision will reduce revenue by $5.08 billion from 2015-2024. Sec. 135 Look-thru treatment of payments between related CFCs This section would extend the look-thru treatment of certain foreign income. If a foreign subsidiary ( controlled foreign corporation or CFC) of a U.S. parent corporation earns income, the U.S. tax is generally deferred on such income until the money is repatriated to the U.S. If the income of the CFC is passive or highly mobile income, however, then immediate U.S. tax is due on this income whether or not the money is repatriated to the U.S. The CFC look-thru provision says that if one CFC receives active income and then pays this money as passive income to another, related, CFC then there will be no immediate U.S. tax. Deferral would still be allowed, even though the second CFC has passive income, because the first CFC originally earned this income as active income. JCT estimates that this provision will reduce revenue by $1.15 billion from 2015-2024. Sec. 136 100 percent exclusion of gain on small business stock This section would extend the exclusion from capital gains tax of 100 percent of small business stock sold by an individual. In order to qualify for this exclusion, the stock must have been acquired at original issue and held for at least five years. Small business is defined as one having assets of less than $50 million. JCT estimates that this provision will reduce revenue by $881 million from 2015-2024. Sec. 137 Basis adjustment re: S corporations making charitable contributions When an S corporation makes a charitable contribution, each individual shareholder takes this into account on their own taxes by reducing their basis in the S corporation stock by the shareholder s pro rata share of the charitable contribution. This section would extend the practice of making this reduction equal to the shareholder s share of the adjusted basis of the charitable contribution, rather than the shareholder s share of the fair market value of the contribution. JCT estimates that this provision will reduce revenue by $51 million from 2015-2024. Sec. 138 Reduced S corporation recognition period When a C corporation chooses to change structure to a closely held corporation (with 100 or fewer shareholders), that closely held corporation is taxed by having its income flow through to its shareholders. Thereafter, assets that were held by the C corporation must be held by the S corporation for a period of time or else be taxed on the built-in gains from these assets. This time period used to be 10 years, but the law that expired in 2013 had set this time period at five years. This section would continue the five-year time period. JCT estimates that this provision will reduce revenue by $94 million from 2015-2024. Sec. 139 Empowerment zone tax incentives
This section would extend tax incentives that attempt to encourage businesses to locate in empowerment zones. These incentives include a tax credit for wages, increased section 179 expensing, tax-exempt bond financing, and deferral of capital gains on an asset if replaced with another asset. JCT estimates that this provision will reduce revenue by $251 million from 2015-2024. Subtitle C Energy Tax Extenders This subtitle extends for one year (through 2014 or for actions taking place in 2014) certain tax provisions that expired at the end of 2013. These extensions do not include any policy changes they simply extend the applicability of each provision for one year. Sec. 151 Credit for nonbusiness energy efficient property This section would extend this credit for one year. JCT estimates that this provision will reduce revenue by $832 billion from 2015-2024. Sec. 152 Second generation biofuels producer credit This section would extend this credit. The credit is $1.01 per gallon. JCT estimates that this provision will reduce revenue by $25 million from 2015-2024. Sec. 153 Biodiesel and renewable diesel credits This section would extend the biodiesel credits and renewable diesel credits. The biodiesel credits include: biodiesel mixture credit ($1 per gallon); biodiesel credit ($1 per gallon); small agri-biodiesel producer credit (10 cents per gallon); biodiesel mixture excise tax credit ($1 per gallon); payments with respect to biodiesel fuel mixtures (this makes the biodiesel mixture credit refundable in that the producer receives a payment if the mixture credit exceeds their tax liability). The renewable diesel credit is $1 per gallon. JCT estimates that this provision will reduce revenue by $1.3 billion from 2015-2024. Sec. 155 Credit for renewable energy producing facilities (including wind) This section would extend the renewable electricity production credit, as well as extending the ability to irrevocably declare property that could qualify for this credit to instead be used as energy property that can then qualify for a separate 30 percent section 48 investment credit. This tax credit includes the wind production tax credit. JCT estimates that this provision will reduce revenue by $6.39 billion from 2015-2024. (Note: JCT had originally estimated reduced revenue of $9.58 billion from 2015-2024, but revised this estimate due to a computational error. ) Sec. 156 Energy-efficient new homes credit This section would extend this credit available to home builders. The credit is either $1,000 or $2,000 depending on the home s level of energy efficiency. JCT estimates that this provision will reduce revenue by $267 million from 2015-2024. Sec. 157 Depreciation for second generation biofuel plant property This section would extend the bonus depreciation of 50 percent of the cost of second generation biofuel plant property. JCT estimates that this provision will reduce revenue by less than $500,000 from 2015-2024. Sec. 158 Energy efficient commercial buildings deductions This section would extend this above-the-line deduction for energy efficient improvements. JCT estimates that this provision will reduce revenue by $127 million from 2015-2024. Sec. 159 Special rule for sales or dispositions to implement FERC or state electric restructuring policy for electric utilities This section would extend the provision that allows a deferral of gain from property sold in electric transmission transactions. JCT estimates that this provision will have no revenue effect from 2015-2024. Sec. 160 Excise tax credits for alternative fuels including hydrogen
This section would extend the tax credits for alternative fuels and fuel mixtures including liquefied hydrogen. The provision is generally effective after December 31, 2013. But for liquefied hydrogen, this provision is effective after September 30, 2014 because current law incentives for hydrogen do not expire until this date. JCT estimates that this provision will reduce revenue by $397 million from 2015-2024. Sec. 161 Credit for alternative fuel vehicle refueling property This section would extend this credit through 2014. The credit is 30 percent of the cost of installing alternative fuel vehicle refueling property. JCT estimates that this provision will reduce revenue by $41 million from 2015-2024. Subtitle D Extenders relating to multiemployer defined benefit pension plans This subtitle extends for one year (through 2015) certain tax provisions that will expire at the end of 2014. These extensions do not include any policy changes they simply extend the applicability of each provision for one year. Secs. 171-172 Multiemployer defined benefit plans These sections would continue for one year several of the Pension Protection Act of 2006 s provisions related to multiemployer defined benefit pension plans. JCT estimates that these two provisions will reduce revenue by $28 million from 2015-2024.