Articles

December 22, 2015

PATH Act Alert

The highly anticipated tax extenders legislation was signed into law by the President on December 18, 2015

The Protecting Americans from Tax Hikes of 2015 ("PATH Act") is a comprehensive legislative package, which helps to ease the burden on taxpayers by making several expiring provisions permanent and extending other expired provisions for up to five years. Some of the provisions are extended, but subject to modifications or phase-outs. Highlights of the newly signed law are summarized here.

DEPRECIATION PROVISIONS

PERMANENT

Section 179 depreciation

  • $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 Section 179 expensing cap for qualified real property beginning in 2016

15-year straight-line recovery period for qualified leasehold improvements, qualified restaurant buildings and improvements and qualified retail improvements

EXTENDED

Bonus Depreciation (through 2019)

  • 50% rate for 2015-2017
  • 40% rate for 2018
  • 30% rate for 2019

INDIVIDUAL TAX PROVISIONS

PERMANENT

  • Tax-free IRA Contributions to charity after age 70 1/2 (up to $100,000 per year)
  • State and local sales taxes itemized deduction
  • American Opportunity Tax Credit (with new restrictions to claim credit)
  • Enhanced Child Tax Credit (with new restrictions to claim credit)
  • Basis adjustment to stock of S corporations making charitable contributions of appreciated property

EXTENDED

  • Income exclusion for discharged mortgage debt (2015 through 2016)
  • Deduction of mortgage insurance premiums (2015 through 2016)
  • Deduction of qualified tuition  fees "above-the-line" (2015 through 2016)

BUSINESS TAX PROVISIONS

PERMANENT

  • Research Tax Credit - refundable up to $250,000 against employer payroll taxes for certain businesses; could be used against Alternative Minimum Tax for companies with receipts less than 50M
  • Five-year holding period for S Corporation built-in gains for dispositions
  • Subpart F exception for active financing income
  • 100 % gain exclusion for Qualified Small Business Stock
  • Deduction for charitable contributions of food inventory

EXTENDED

  • Work Opportunity Tax Credit (through 2019)
  • CFC-related payment look-through rule (through 2019)
  • Energy Efficient Commercial Building Deduction (2015 through 2016)
  • New Markets Tax Credit (through 2019)
  • Production Tax Credit for Renewables (2015 through 2019)
  • Affordable Care Act "Cadillac Tax" - Start date postponed from 2018 to 2020
  • Affordable Care Act Medical Device Tax - Two Year Moratorium