Energy-Related Tax Extenders from the Tax Increase Prevention Act of 2014

In the recently enacted “Tax Increase Prevention Act of 2014,” Congress has once again extended a package of expired or expiring individual, business, and energy provisions known as “extenders.” The extenders are a varied assortment of more than 50 individual and business tax deductions, tax credits, and other tax-saving laws which have been on the books for years but which technically are temporary because they have a specific end date. Congress has repeatedly temporarily extended the tax breaks for short periods of time (e.g., one or two years), which is why they are referred to as “extenders.” The new legislation generally extends the tax breaks retroactively, most of which expired at the end of 2013, for one year through 2014.

The following energy provisions are retroactively extended through 2014 in the new law.

• The credit for nonbusiness energy property;
• The second generation biofuel producer credit (formerly cellulosic biofuels producer tax credit);
• The incentives for biodiesel and renewable diesel;
• The Indian country coal production tax credit;
• The renewable electricity production credit, and the election to claim the energy credit in lieu of the renewable electricity production credit;
• The credit for construction of energy efficient new homes;
• Second generation biofuels bonus depreciation;
• The energy efficient commercial buildings deduction;
• The special rule for sale or disposition to implement federal energy regulatory commission (FERC) or State electric restructuring policy for qualified electric utilities;
• The incentives for alternative fuel and alternative fuel mixtures; and
• The alternative fuel vehicle refueling property credit.

We hope this information is helpful. If you would like more details about these changes or any other aspect of the new law, please contact us.

Business Tax Extenders from the Tax Increase Prevention Act of 2014

In the recently enacted “Tax Increase Prevention Act of 2014,” Congress has once again extended a package of expired or expiring individual, business, and energy provisions known as “extenders.” The extenders are a varied assortment of more than 50 individual and business tax deductions, tax credits, and other tax-saving laws which have been on the books for years but which technically are temporary because they have a specific end date. Congress has repeatedly temporarily extended the tax breaks for short periods of time (e.g., one or two years), which is why they are referred to as “extenders.” The new legislation generally extends the tax breaks retroactively, most of which expired at the end of 2013, for one year through 2014.

The following business credits and special rules are generally extended through 2014 in the new law.

• The research credit;
• The temporary minimum low-income housing tax credit rate for non-federally subsidized new buildings;
• The military housing allowance exclusion for determining whether a tenant in certain counties is low-income;
• The Indian employment tax credit;
• The new markets tax credit;
• The railroad track maintenance credit;
• The mine rescue team training credit;
• The employer wage credit for activated military reservists;
• The work opportunity tax credit;
• Qualified zone academy bond program;
• Three-year depreciation for racehorses;
• 15-year straight line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements;
• 7-year recovery period for motorsports entertainment complexes;
• Accelerated depreciation for business property on an Indian reservation;
• 50% bonus depreciation (extended before Jan. 1, 2016 for certain longer-lived and transportation assets);
• The election to accelerate alternative minimum tax (AMT) credits in lieu of additional first-year depreciation;
• The enhanced charitable deduction for contributions of food inventory;
• The increase in expensing (up to $500,000 write-off of capital expenditures subject to a gradual reduction once capital expenditures exceed $2,000,000) and an expanded definition of property eligible for expensing;
• The election to expense mine safety equipment;
• Special expensing rules for certain film and television productions;
• The deduction allowable with respect to income attributable to domestic production activities in Puerto Rico;
• The exclusion from a tax-exempt organization’s unrelated business taxable income (UBTI) of interest, rent, royalties, and annuities paid to it from a controlled entity;
• The special treatment of certain dividends of regulated investment companies (RICs);
• The definition of RICs as qualified investment entities under the Foreign Investment in Real Property Tax Act;
• Exceptions under subpart F for active financing income;
• Look-through treatment for payments between related controlled foreign corporations (CFCs) under the foreign personal holding company rules;
• The exclusion of 100% of gain on certain small business stock;
• The basis adjustment to stock of S corporations making charitable contributions of property;
• The reduction in S corporation recognition period for built-in gains tax;
• The empowerment zone tax incentives;
• The American Samoa economic development credit; and
• Two provisions dealing with multiemployer defined benefit pension plans (dealing with an automatic extension of amortization periods and shortfall funding method and endangered and critical rules), are extended through 2015.

We hope this information is helpful. If you would like more details about these changes or any other aspect of the new law, please contact us.

Individual Tax Extenders from the Tax Increase Prevention Act of 2014

In the recently enacted “Tax Increase Prevention Act of 2014,” Congress has once again extended a package of expired or expiring individual, business, and energy provisions known as “extenders.” The extenders are a varied assortment of more than 50 individual and business tax deductions, tax credits, and other tax-saving laws which have been on the books for years but which technically are temporary because they have a specific end date. Congress has repeatedly temporarily extended the tax breaks for short periods of time (e.g., one or two years), which is why they are referred to as “extenders.” The new legislation generally extends the tax breaks retroactively, most of which expired at the end of 2013, for one year through 2014.

Here is an overview of the key provisions which affect individual taxpayers in the new law.

• The $250 above-the-line deduction for teachers and other school professionals for expenses paid or incurred for books, certain supplies, equipment, and supplementary material used by the educator in the classroom;
• The exclusion of up to $2 million ($1 million if married filing separately) of discharged principal residence indebtedness from gross income;
• Parity for the exclusions for employer-provided mass transit and parking benefits;
• The deduction for mortgage insurance premiums deductible as qualified residence interest;
• The option to take an itemized deduction for State and local general sales taxes instead of the itemized deduction permitted for State and local income taxes;
• The increased contribution limits and carry forward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes;
• The above-the-line deduction for qualified tuition and related expenses; and
• The provision that permits tax-free distributions to charity from an individual retirement account (IRA) of up to $100,000 per taxpayer per tax year, by taxpayers age 70 and ½ or older.

We hope this information is helpful. If you would like more details about these changes or any other aspect of the new law, please contact us.

Will the lame-duck Congress revive expired tax breaks for 2014?

With the midterm elections now behind us and control of the U.S. Senate set to shift parties in January, it’s time to revisit the valuable tax breaks that expired at the end of 2013. Will the lame-duck 113th Congress revive any of them for 2014? Or will nothing happen until the 114th Congress goes into session after the new year begins?

Here are some of the breaks in question:
• The deduction for state and local sales taxes in lieu of state and local income taxes,
• Tax-free IRA distributions to charities,
• 100% bonus depreciation,
• Enhanced Section 179 expensing,
• Accelerated depreciation for qualified leasehold improvement, restaurant and retail improvement property,
• The research tax credit,
• The Work Opportunity tax credit, and
• Various energy-related tax incentives.

For you to benefit on your 2014 tax return from any breaks that are revived, you might need to take additional action by Dec. 31. So it’s a good idea to consider what you’d need to do so you can act quickly if applicable breaks are indeed revived. If you have questions about what you can do to prepare, please contact us.

© 2014

Consider the Sec. 83(b) election to save tax on restricted stock awards

Restricted stock is stock that’s granted subject to a substantial risk of forfeiture. Income recognition is normally deferred until the stock is no longer subject to that risk or you sell it. You then pay taxes on the stock’s fair market value at your ordinary-income rate.

But you can instead make a Section 83(b) election to recognize ordinary income when you receive the stock. This election, which you must make within 30 days after receiving the stock, can be beneficial if the stock is likely to appreciate significantly. Why? Because it allows you to convert future appreciation from ordinary income to long-term capital gains income and defer it until the stock is sold.

There are some potential disadvantages, however:

• You must prepay tax in the current year — which also could push you into a higher income tax bracket or trigger or increase the additional 0.9% Medicare tax.
• Any taxes you pay because of the election can’t be refunded if you eventually forfeit the stock or sell it at a decreased value.

If you’ve recently been awarded restricted stock or expect to be awarded such stock this year, work with us to determine whether the Sec. 83(b) election is appropriate for you.

© 2014