Yesterday, Senate Finance Committee Chairman Orrin Hatch (R-Utah) and Ranking Member Ron Wyden (D-Ore.) announced progress on a bipartisan bill to extend multiple pro-business and pro-individual tax provisions that expired at the end of 2014.
In December, while Congress passed "tax extenders" legislation that extended more than 50 expired tax provisions retroactively to the beginning of 2014, those provisions were only extended through 2014. This week, however, the Finance Committee issued its recommendations to extend some of these tax benefits for two more years (2015 and 2016), including:
- 50% bonus depreciation
- Increased expensing thresholds under IRC Section 179
- Research and experimentation credit (R&E)
- 15-year straight-line depreciation for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements
- Section 45L energy efficient homes tax credit
- Section 179D energy efficient commercial buildings deduction.
A complete list of the provisions recommended for extension can be found in the Summary of Provisions in the Chairman’s Mark of a Bill to Extend Certain Expiring Tax Provisions.
The successful passage of the extenders bill through the Finance Committee is notable for its strong bipartisan support (it passed 23-3). This implies a likelihood of support from both Republicans and Democrats as the bill moves to the Senate, and ultimately to the House. Congress has faced recurring criticism that uncertainty regarding the availability of provisions discussed in the Finance Committee’s bill hinders business spending decisions. In their comments, Senators Hatch and Wyden recognized the importance of issuing guidance to taxpayers as soon as possible to allow taxpayers to plan and take action. In keeping with their stated commitment to moving the extenders forward, members of the committee agreed to defer the contentious issue of making the extenders permanent, a goal of many in Congress.
In general, the tax provisions approved are identical to those that expired Dec. 31, 2014; however, an amendment to the R&E tax credit rules should be of particular benefit to science and technology start-up companies. Such companies often incur tax losses in the early years of operation, making the R&E tax credit substantially less valuable as an incentive to investment in research. However, the Finance Committee’s amendment would allow a qualifying company to take a credit up to $250,000 against payroll taxes paid on employee wages. This would effectively make the R&E tax credit refundable for qualifying companies. As currently proposed, to qualify, a company must have existed less than five years and have less than $5 million in annual gross receipts.
The next step for this extenders bill will be the Senate, where it will be voted on. It is expected to pass. The bill will then be reconciled with a House research and experimentation bill. No timeline has been given for the Senate vote and subsequent reconciliation.