Monday, January 25, 2016

Extension of Key Provisions of the Protecting Americans from Tax Hikes of 2015

By William E. Elwood

Congress’ parting Christmas present to the tax world was the extension of approximately 50 temporary tax provisions that had theretofore been routinely extended by Congress on only a one- or two-year basis. The Protecting Americans from Tax Hikes Act of 2015 retroactively extended a number of key business tax provisions; some, such as the research tax credit, permanently and others, like the New Markets Tax Credit, through 2019.

The now permanent business provisions include:

  • An increase in expensing (up to $500,000 write-off of capital expenditures subject to a gradual reduction once capital expenditures exceed $2,000,000) and expanded definition of property eligible for expensing;
  • a 15-year straight line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements;
  • the research credit is permanently extended and made creditable against other taxes;
  • a reduction in S corporation recognition period for built-in gains tax;
  • the exclusion from a tax-exempt organization’s unrelated business taxable income (UBTI) of interest, rent, royalties, and annuities paid to it from a controlled entity;
  • the special treatment of certain dividends of regulated investment companies (RICs);
  • the definition of RICs as qualified investment entities under the Foreign Investment in Real Property Tax Act; and
  • a 9% minimum low-income housing tax credit rate for non-Federally subsidized buildings.
 
The Act also retroactively extended the following through 2016, the empowerment zone tax incentives and a host of special interest tax provisions for industries and activities as diverse as motorsports, mines, film and TV productions and Native Americans.

And, the Act retroactively extended the following through 2019:

  • The 50% bonus depreciation (extended before Jan. 1, 2016 for certain longer-lived and transportation assets);
  • the enhanced first-year depreciation ceiling for cars and trucks;
  • the work opportunity tax credit; and
  • the new markets tax credit.
 
Please contact William E. Elwood in our Washington, D.C. office at 202-659-6972 for more information.