Congress does the least it can for 2014 tax extenders
On December 3, 2014 the House passed H.R. 5771, the Tax Increase Prevention Act of 2014. Where did they come up with this name? Is the acronym to be TIPA? Anyway, the act is the very least Congress can do to extend some of the tax breaks that expired at the end of 2013. Now the bill goes to the Senate which has not yet scheduled a vote.
The IRS Commissioner has warned many times over the last few months that if Congress does not act before the December recess, tax season and tax refunds will be delayed. Waiting until 2015 will cause delays in form releases, programming IRS computers, programming commercial tax software, and educating taxpayers and tax preparers. Will the Senate vote to pass the extenders before going on their holiday recess? You can read more about the possible delay here, a post by Kelly Phillips Erb, the taxgirl, on Forbes.
What is in the bill?
If you are glutton for punishment, here is a link to the bill on The Library of Congress’ Thomas website. The bill is 123 pages in PDF (the link is to the html version) but as is typical, there is a lot of blank space so it is not as much reading as it appears. The extension is through 2014 only so the whole process will almost certainly be repeated again in 2015.
Selected 2014 tax extenders for Individuals
- The tax deduction for expenses of elementary and secondary school teachers, lesser of $250 or actual expenses;
- The tax exclusion for discharge of indebtedness for a principal residence;
- The deduction for certain mortgage insurance premiums;
- The deduction for sales taxes instead of state income taxes. This is a big deal for residents of states without an income tax;
- The deduction for qualified tuition and related expenses; and
- The tax exemption for IRA distributions to charities.
Selected tax extenders for Businesses
- Tax credit for increasing research activities;
- Bonus depreciation;
- Faster depreciation for certain leasehold improvements, restaurant and retail properties;
- The increased expensing allowance for business assets, computer software, and qualified real property (i.e., leasehold improvement, restaurant, and retail improvement property);
- The work opportunity tax credit (encourage businesses to hire veterans and other difficult to employ workers); and
- The tax credit for residential energy efficiency improvements (e.g. qualified windows, doors, insulation, metal roofs, heat pumps, central air conditioners, and hot water heaters).
Others of note
- The tax credit for differential wage payments to employees who are active duty members of the Uniformed Services;
- The special rule allowing a tax deduction for charitable contributions of food inventory by taxpayers other than C corporations;
- The 100% exclusion from gross income of gain from the sale of small business stock;
- The basis adjustment rule for stock of an S corporation making charitable contributions of property;
- The reduction of the recognition period for the built-in gains of S corporations; and
- The tax credit for producing electricity using wind, biomass, geothermal, landfill gas, trash, hydropower, and marine and hydrokinetic renewable energy facilities.
There are other provisions being extending and you can see the entire list in the bill text. More than half the bill is technical corrections to prior tax laws going all the way back to 2004. The bill nicely exempts itself from the PAYGO rules where Congress promised to offset any tax cuts with either tax increases or spending cuts. It must be nice to be able to change the rules that apply to you whenever you want. As the Church Lady would sarcastically say, “Well, isn’t that special?”