Senate Finance Cmte. Introduces Tax Extenders BillApril 2, 2014
The Senate Finance Committee released Chairman Ron Wyden’s (D-Ore.) mark of a tax extenders package, titled the “Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act.” The Committee also released a technical corrections package, as well as a proposal to eliminate “deadwood” provisions. The Committee will markup this bipartisan extenders package on April. 3.
A link to the Committee website with the relevant documents can be found here.
Some of the business provision highlights include:
Research and Experimentation Tax Credit: The bill extends for two years, through 2015, the 20 percent traditional research tax credit and the 14 percent alternative simplified credit. A two year extension of this provision is estimated to cost $15.4 billion over 10 years.
Work Opportunity Tax Credit: This bill extends for two years, through 2015, the provision that allows businesses to claim a work opportunity tax credit equal to 40 percent of the first $6,000 of wages paid to new hires of one of eight targeted groups. A two year extension of this provision is estimated to cost $2.85 billion over 10 years.
15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements: The bill extends for two years, through 2015, the temporary 15-year cost recovery period for certain leasehold, restaurant, and retail improvements, and new restaurant buildings, which are placed in service before Jan. 1, 2016. The extension is effective for qualified property placed in service after Dec. 31, 2013. A two year extension of this provision is estimated to cost $4.8 billion over 10 years.
Bonus Depreciation: The bill extends 50 percent bonus depreciation to qualified property purchased and placed in service before Jan. 1, 2016 (before January 1, 2017 for certain longer-lived and transportation assets). It also makes a conforming change to the percentage of completion rules for certain long term contracts. A two year extension of this provision is estimated to cost $2.85 billion over 10 years.
Acceleration of AMT credits in lieu of bonus depreciation: Under current law, a taxpayer has the option to forgo bonus depreciation in favor of accelerating corporate alternative Minimum Tax (AMT) credits acquired in tax years prior to 2006. This provision would extend the election to accelerate AMT credits for two years, through 2015. A two year extension of this provision is estimated to cost $602 million over 10 years.
Temporarily extend increase in the maximum amount and phase-out threshold under Section 179: Currently, taxpayers can only immediately expense up to $25,000 of Section 179 property annually, with a dollar for dollar phase-out of the maximum deductible amount for purchases in excess of $200,000. This proposal would increase the maximum amount and phase-out threshold in 2014 to the levels in effect in 2010 through 2013 ($500,000 and $2 million respectively). The proposal would also extend the definition of Section 179 property to include computer software and $250,000 of the cost of qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property for two years. A two year extension of this provision is estimated to cost $3.1 billion over 10 years.
Special rules for qualified small business stock: Generally, non-corporate taxpayers may exclude 50 percent of the gain from the sale of certain small business stock acquired at original issue and held for more than five years. For stock acquired after Sept. 27, 2010 and before Jan. 1, 2014, the exclusion is 100 percent and the AMT preference item attributable for the sale is eliminated. The bill extends the 100 percent exclusion of the gain from the sale of qualifying small business stock that is acquired before Jan. 1, 2016 and held for more than five years. A two year extension of this provision is estimated to cost $1.95 billion over 10 years.
Also, the Joint Committee on Taxation (JCT) has prepared documents in connection with Thursday’s markup of the extenders bill:
A JCT description of the chairman’s mark of the tax extenders;
A JCT revenue estimate of the tax extenders;
A JCT description of the chairman’s mark of tax technical corrections;
A JCT description of the chairman’s mark of the tax deadwood provisions.