Both the House and Senate passed the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), and President Obama signed the legislation on Friday, December 18th, 2015, passing significant tax legislation since the passage of the American Tax Relief Act of 2012 (ATRA). The Act does considerably more than just tax extenders legislation seen in prior years. It makes permanent over 20 key tax provisions, including the research tax credit enhanced Code 179 expensing, and the American Opportunity Tax Credit. It also extends other provision, including bonus depreciation for five years; and revives many others for two years. In addition, many others for two years. In addition, many extenders have been enhanced. The Act also imposes a two-year moratorium on the ACA medical device excise tax.
In past years, the IRS has cautioned that late tax legislation could delay the start of the filing season. At this time, the IRS has not indicated that the late passing of this tax legislation will delay the 2016 filing season.
In the omnibus fiscal year 2016 budget bill, lawmakers approved delaying for two years the ACA excise tax on so-called “Cadillac” health insurance plans and imposing a one-year moratorium on the ACA health insurance provider fee. Lawmakers also voted to increase the IRS’s fiscal year end budget for 2016.
Extenders for Individuals
The Act extends permanently many popular temporary tax incentives for individuals. It also modifies some of them as well as extends the rest for either two or five years, retroactive to January 1st, 2015.
- State & Local Sales Tax Deduction
- American Opportunity Tax Credit
- Child Tax Credit
- Earned Income Credit
- Teachers’ Classroom Expense Deduction
- Charitable Distributions from IRAs
Two Year Extensions
- Qualified Tuition Related Expenses Deduction
- Mortgage Debt Exclusion
- Mortgage Insurance Premium Deduction
Extenders for Businesses
- Code Section 179 Expensing
- Research Tax Credit
- 100 Percent Gain Exclusion on Qualified Small Business Stock
- Reduced Recognition Period for S Corporation Built-In Gains Tax
- 15-year Straight-Line Cost Recovery for Qualified Leasehold Improvements, restaurant property and retail improvements
Five Year Extensions
- Bonus Depreciation
- 50% for 2015 – 2017
- 40% in 2018
- 30% in 2019
- Work Opportunity Credit – extended through 2019
- Look-thru Treatment for CFCs
Energy Extenders – The Act extends many energy provisions for both individual and businesses.
- Code Section 25C Credit – extended through 2016
- Production Tax Credit – extended through 2019
- Credit for Alternative Fuel refueling property – extended through 2016
- Credit for 2-wheel plug-in electric vehicles – extended through 2016
- Biodiesel and renewable diesel incentives – extended through 2016
- Credit for energy-efficient new homes – extended through 2016
- Special allowance for second generation biofuel plant property – extended through 2016
- Excise credits for alternative fuels – extended through 2016