As the great New York Yankees catcher Yogi Berra once said, it’s déjà vu all over again. Congress is again wrestling at the last minute with extending for another year popular business tax breaks, many of which were originally passed to stimulate the economy seven years ago.
Because these tax breaks aren’t permanent, Congress must decide whether to renew them. Last year, they waited until December to do so, making them retroactive to Jan. 1, 2014.
This year, the so-called “tax extenders” were approved by the House Ways & Means Committee in September, a signal that they could be on a route for re-approval again for 2015.
But controversy about the cost of the breaks also brings the possibility that some, or all, won’t make it. Another complication is in differences between the House and Senate versions of the bill. The Senate bill generally provides for a two-year extension of the extenders — retroactive to the beginning of this year and for all of 2016. The House bill has a smaller list of extenders and the bill would extend those benefits only for 2015.
Whichever way Congress goes, it appears we are in for another waiting game. Any extensions could have significant impact on year-end tax planning. So businesses should keep in touch with their tax advisors to be ready to consider appropriate opportunities if Congress does act.
Here are several of the expired breaks that may benefit businesses if extended:
- First-year bonus depreciation that allows businesses an extra 50 percent deduction for qualifying fixed assets. The committee has proposed making this deduction permanent, meaning future extensions would no longer be necessary.
- An expense deduction of up to $500,000 in capital investment in certain property under Section 179 of the tax code, rather than having to depreciate it over time, with a phase-out for asset purchases above $2 million. The provision would also expand the definition of Section 179 property to include off-the-shelf software.
- A 15-year straight line depreciation for qualified leasehold property, qualified restaurant property and qualified retail improvements, instead of the 39-year depreciation that otherwise applies to commercial buildings.
- A one-time tax deduction under Section 179D of the tax code for building owners who spend money to make new or renovated commercial buildings more energy-efficient.
- Various incentives and credits for businesses in Empowerment Zones, which are designated areas of high unemployment or poverty.
- Enhanced charitable deductions for contributions of food inventory.
- Work Opportunity Credits for employers hiring people from certain target groups.
- A 100 percent exclusion from income any gain from certain qualified small business stock sold after five years.
Jeff Talley is a partner in the Audit, Tax and Advisory practice at LBMC, the largest regional accounting and financial services family of companies based in Tennessee. Contact Jeff at 615-309-2286 or firstname.lastname@example.org.