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Protecting Americans from Tax Hikes Act of 2015

Posted 3:57 PM by

Friday, Dec. 18, President Obama signed the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). The PATH Act extends many popular tax provisions that expired at the end of 2014. Unlike the tax extenders legislation we have seen in the past couple of years, the PATH Act makes many provisions permanent, extends others through 2019, and extends several provisions through 2016. Both businesses and individuals will see favorable provisions that fall into each of the categories mentioned above.

While the above link provides a comprehensive overview of the PATH Act, here is a summary of the key provisions for both businesses and individuals.

Key Provisions for Businesses

The following provisions have been permanently extended:

  • Section 179 Expensing – For 2015, the Section 179 expensing limit is $500,000 with a $2 million overall investment limit before any phase-out begins. Starting in 2016, both amounts will be indexed for inflation. Also starting in 2016, the $250,000 cap related to Section 179 expensing of qualified real property has been removed.
  • Research Tax Credit – The research tax credit has been permanently extended. Additionally, the alternative simplified credit rate goes from 14 percent to 20 percent.
  • 100 Percent Gain Exclusion on Qualified Small Business Stock – This provision allows a 100 percent exclusion from income of the gain on the sale or exchange of qualified small business stock held for more than five years by non-corporate taxpayers.
  • S Corporation Built-In Gains Period – On conversion of a C corporation to an S corporation, the built-in gains recognition period is now five years instead of 10 years.
  • Qualified leasehold improvements, restaurant property and retail improvements can be depreciated using straight line depreciation and a 15-year recovery period.
  • S Corporation shareholders do not adjust their stock basis when the S corporation contributes appreciated property to a charitable organization for the difference between the cost of such property and the fair market value of such property.  

The following provisions have been extended through 2019 (i.e., a five-year extension):

  • Bonus depreciation has been extended at the following rates:
    • 50 percent for 2015-2017
    • 40 percent for 2018
    • 30 percent for 2019
  • The Work Opportunity Credit for employers that hire certain qualified employees.

The following provisions have been extended through 2016 (i.e., a two-year extension):

  • The credit for alternative fuel refueling property
  • Excise credits for alternative fuels, including propane
  • The deduction for energy-efficient commercial buildings

Key Provisions for Individuals

The following provisions have been permanently extended:

  • The election to deduct state and local general sales tax instead of state and local income taxes
  • The American Opportunity Credit, which is the education credit with both a nonrefundable and refundable component
  • The teacher’s classroom expenses deduction of $250
  • For those who are over 70 ½ and taking required minimum distributions from their IRAs, the ability to make the distribution tax-free by contributing an amount, not to exceed $100,000, directly to a qualified charitable organization

The following provisions have been extended through 2016 (i.e., a two-year extension):

  • The $2,000 deduction for qualified tuition and fees for post-secondary education expenses
  • The $2 million exclusion of income related to the cancellation of mortgage debt on a principal residence
  • The deduction of mortgage insurance premiums
  • Residential energy credits for windows, insulation, certain heating systems, etc.

There are also several miscellaneous provisions of note:

  • The “Cadillac” plan excise tax under ACA has been deferred until 2020.
  • The 2.3 percent excise tax on the sale of qualified medical devices will not apply until 2018.
  • Computer equipment and similar technology is considered a qualifying expense for Section 529 plan distributions. This is a permanent extension.
  • Starting in 2017, for 2016 W-2s, the W-2s will also be due to the IRS Jan. 31. Additionally, there will no longer be an extended filing date for electronically filed W-2s.

This is a brief summary of key provisions contained in the PATH Act. If you have questions as to how these provisions or any others contained in the PATH ACT affect you or your business, please contact your KSM tax advisor.

About the Author
Ryan Miller is a partner in Katz, Sapper & Miller’s Tax Services Group. Ryan identifies innovative solutions to minimize taxes for his clients. Additionally, he oversees the international aspects of the firm’s tax practice, helping companies and individuals navigate the complexities of doing business abroad.

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