Dear Client:
President Obama recently signed and enacted H.R. 5771 “Tax Increase Prevention Act of 2014,” which provides a one year extension on a number of tax relief provisions in the Internal Revenue Code (IRC) that had expired either at the end of 2013 or during 2014. With its passage, Congress has once again extended a package of expired or expiring individual, business, and energy provisions known as “extenders.” The extenders are a wide-ranging collection of over 50 individual and business tax deductions, tax credits, and other tax-saving legislation which have been on the books for years, but which are officially temporary because they have a specific end date. Congress has repeatedly extended the tax breaks for short periods of time. The new legislation extends the tax breaks retroactively, most of which expired at the end of last year, for one more year through tax year 2014.

Here is a general overview of the significant tax breaks that were extended by the new law. Please call our office for information on how the new changes may affect you or your business.

Business Tax Extenders

• Code Section 179 limits remain the same for 2014 as they were in 2013. You can currently expense up to $500,000 on up to $2,000,000 of qualifying purchases as well as keeping the expanded definition of Code Section 179 property;
• 50% bonus depreciation (including the election to accelerate AMT credits in lieu of bonus depreciation);
• the increased expensing allowance for business assets, computer software, and qualified real property (i.e., leasehold improvement, restaurant, and retail improvement property);
• accelerated depreciation of qualified leasehold improvement, restaurant, and retail improvement property, of motorsports entertainment complexes, and of business property on Indian reservations;
• the tax credit for increasing research activities;
• the low-income housing tax credit rate for newly constructed non-federally subsidized buildings;
• the Indian employment tax credit;
• the new markets tax credit;
• the tax credit for mine rescue team training expenses;
• the tax credit for differential wage payments to employees who are active duty members of the Uniformed Services;
• the work opportunity tax credit;
• the classification of race horses as three-year property for depreciation purposes;
• the special rule allowing a tax deduction for charitable contributions of food inventory by taxpayers other than C corporations;
• the expensing allowance for film and television production costs and costs of live theatrical productions;
• tax rules relating to payments between related foreign corporations and dividends of regulated investment companies;
• the treatment of regulated investment companies as qualified investment entities for purposes of the Foreign Investment in Real Property Tax Act (FIRPTA);
• the subpart F income exemption for income derived in the active conduct of a banking, financing, or insurance business;
• the tax rule exempting dividends, interest, rents, and royalties received or accrued from certain controlled foreign corporations by a related entity from treatment as foreign holding company income;
• the 100% exclusion from gross income of gain from the sale of small business stock;
• the basis adjustment rule for stock of an S corporation making charitable contributions of property;
• the reduction of the recognition period for the built-in gains of S corporations;
• tax incentives for investment in empowerment zones; and
• amends the Housing Assistance Tax Act of 2008 to extend through 2014 the exemption of the basic military housing allowance from the income test for programs financed by tax-exempt housing bonds.

Joint Committee on Taxation – Provides that any refund or credit in excess of $5 million due to a C corporation taxpayer may not be made until the Secretary of the Treasury submits a report to the Joint Committee on Taxation providing information on such refund or credit.

Extenders Relating to Multiemployer Defined Benefit Pension Plans – Extends through 2015 the automatic extensions of amortization periods for multiemployer defined benefit pension plans and for multiemployer funding rules under the Pension Protection Act of 2006.

Individual Tax Extenders
• the tax deduction of expenses of elementary and secondary school teachers;
• the tax exclusion of imputed income from the discharge of indebtedness for a principal residence;
• the equalization of the tax exclusion for employer-provided commuter transit and parking benefits;
• the tax deduction of mortgage insurance premiums;
• the tax deduction of state and local general sales taxes in lieu of state and local income taxes;
• the tax deduction of contributions of real property interests for conservation purposes;
• the tax deduction of qualified tuition and related expenses; and
• the tax exemption of distributions from individual retirement accounts for charitable purposes.

Energy Tax Extenders
• the tax credit for energy efficient new homes;
• the tax credit for residential energy efficiency improvements;
• the income and excise tax credits for biodiesel and renewable diesel fuel mixtures;
• the tax credit for producing electricity using Indian coal facilities placed in service before 2009; and
• the tax deduction for energy efficient commercial buildings

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