On Wednesday, Dec. 3, the U.S. House of Representatives passed a $42 billion package that would extend the nearly 50 tax provisions in the “tax extenders” bill through the end of 2014. With the end of the tax year approaching quickly the lame duck House approved the 2014 retroactive extenders by a vote of 378-46.
The threat of a Presidential veto in essence halted a $400 billion permanent extension that had been proposed in the Senate led by Senate Majority Leader Harry Reid (D-NV) and House Ways and Means Chairman Dave Camp (R-MI). The Senate will likely to grudgingly go along with the House bill. President Obama also has indicated that he will sign the measure. It should be noted that at the time of writing this article the Senate has not yet passed similar legislation, but all signs point to this occurring in the next week for the President to sign before year end.
Below is a complete list of the House’s proposed extenders, and in the short term many popular tax breaks can be claimed on 2014 returns next year (retroactive to January 1, 2014).
A couple of highlights from individual taxpayers will be able to claim the itemized deduction for state and local sales taxes, as well as the above-the-line deductions for qualified college tuition and fees and some teacher out-of-pocket classroom expenses. In addition homeowners who lost their residences and had the debt written off won’t have to claim that amount as income. The provision to allow individuals the ability to roll over their IRA to a qualified charity was also extended.
For business owners the return of the research and development tax credit, bonus depreciation and increased Section 179 expensing limits. While not always appropriate to elect, having the option accelerate expenses in 2014 could spur some end of the year spending on certain capital expenditures.
It’s important to note that these “extensions” are currently proposed for 2014 not beyond December 31st; thus longer-term, the fight over extenders will continue. The new Republican-controlled 114th Congress must take them up again next year, with the hope of a more permanent landscape sometime before mid year (don’t hold your breath).
With Republicans energized by their midterm election victories, look for the House and Senate to try to push their tax preferences through. Democrats will fight back as much as they can, but the numbers are not on their side. And, yes, President Obama still can veto bills.
INDIVIDUAL
- Above-the-line deduction for teacher classroom expenses
- Discharge of indebtedness on principal residence excluded from gross income of individuals
- Parity for exclusion from income for employer-provided mass transit and parking benefits
- Mortgage insurance premiums treated as qualified residence interest
- Deduction for State and local general sales taxes
- Contributions of capital gain real property made for conservation purposes
- Above-the-line deduction for qualified tuition and related expenses
- Tax-free distributions from IRAs to certain public charities for individuals age 70-1/2 or older, not to exceed $100,000 per taxpayer per year
BUSINESS
- Bonus depreciation
- Increased expensing limitations/treatment of certain real property as section 179 property
- Research credit
- Minimum LIHTC rate for non-Federally subsidized new buildings (9%)
- Military housing allowance exclusion for determining area median gross income
- Indian employment tax credit
- New markets tax credit
- Railroad track maintenance credit
- Mine rescue team training credit
- Employer wage credit for activated military reservists
- Work opportunity tax credit
- Qualified zone academy bonds
- Classification of certain race horses as 3-year property
- 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements
- 7-year recovery period for motorsports entertainment complexes
- Accelerated depreciation for business property on an Indian reservation
- Enhanced charitable deduction for contributions of food inventory
- Election to expense mine safety equipment
- Special expensing rules for certain film and television productions
- Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico
- Modification of tax treatment of certain payments under existing arrangements to controlling exempt organizations
- Treatment of certain dividends of RICs
- Treatment of RICs as “qualified investment
- entities” under section 897 (FIRPTA)
- Exception under subpart F for active financing income
- Look-through treatment of payments between related CFCs under foreign personal holding company income rules
- Exclusion of 100 percent of gain on certain small business stock
- Basis adjustment to stock of S corporations making charitable contributions of property
- Reduction in S corporation recognition period for built-in gains tax
- Empowerment zone tax incentives
- 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
- American Samoa economic development credit
ENERGY
- Credit for section 25C non-business energy property
- Second generation biofuel producer credit
- Incentives for biodiesel and renewable diesel
- Credit for the production of Indian coal
- Beginning-of-construction date for renewable power facilities eligible to claim the electricity production credit or investment credit in lieu of the production credit
- Credit for construction of energy-efficient new homes
- Special allowance for second generation biofuel plant property
- Energy efficient commercial buildings deduction
- Special rule for sales or dispositions to implement Federal Energy Regulatory Commission (“FERC”) or State electric restructuring policy for qualified electric utilities
- Excise tax credits relating to certain fuels
- Alternative fuel vehicle refueling property
OTHER
- Automatic extension of amortization periods
- Extension of shortfall funding method and endangered and critical rules