Congress, in the waning weeks of 2014, may extend some of the more popular tax breaks for businesses that expired last year, which could have a significant effect on year-end tax planning. But congressional action is far from certain, considering legislators have gone almost the entire year with little movement.
With the midterm elections behind us, now is the time to keep a close eye on whether Congress acts to return these valuable tax breaks to American businesses.
The bills to watch include one passed by the Senate Finance Committee this spring that would renew several tax deductions that expired in 2013, and several bills by the House Ways & Means Committee, each of which would extend certain tax breaks, but not others.
While many of the expired incentives considered for extension are aimed at individuals, several could mean significant savings for business.
One of the more popular provisions for business was the first-year bonus depreciation, which allowed businesses an extra 50 or 100 percent deduction for qualifying fixed assets, depending on which year they were put in service. This incentive may or may not be included in any extender bills, but let’s not rule it out. There may be hope for this valuable incentive to be extended.
Another provision under IRC Section 179 allowed expanded expensing of up to $500,000 of eligible purchases of machinery and equipment, vehicles, computer software and other items that otherwise would have to be capitalized and depreciated. The expensing rules still exist, but after 2013, the maximum dropped to $25,000.
Other favorable business deductions that might make it back to the table:
- A 15-year depreciable life for retail and restaurants assets, instead of 39 years.
- 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.
- Energy-efficient commercial building deductions.
- Work Opportunity Credits for employers hiring people from certain target groups.
- The 100 percent exclusion from income any gain from certain qualified small-business stock sold after five years.
In all, the Senate bill, named the EXPIRE Act (Expiring Provisions Improvement Reform and Efficiency), and the House bills could extend more than 50 deductions, credits or other benefits through 2015. But calls for larger tax reform or the impact on the U.S. Treasury could just as likely derail any efforts for renewals.
Businesses should keep in touch with their tax advisers about any extensions and be ready to consider appropriate opportunities either this year or next if Congress does act.