Congress Approves Tax Extenders for 2014

December 16, 2014

The U.S. Senate has approved a one-year extension of the tax extenders bill, a grab bag of around 50 tax provisions for businesses and individuals. The bill will cost $42 billion over ten years and applies retroactively to the 2014 tax year. The House of Representatives passed their version of the bill last week.

The one-year extension passed by the House and Senate leaves the package to expire again at the end of this month, which will set up discussion on the tax extenders again in 2015.

We have written previously that not all tax extenders are good tax policy, and thus most should not be extended. There are a handful of provisions, though, that provide a more neutral tax code and should become permanent tax provisions. These include provisions that help more accurately define business income—such as bonus depreciation and section 179—and provide more neutral treatment—such as look-through treatment and active financing.

The table below includes a breakdown of each of the tax provisions in the bill.  

One-Year Extension of Tax Extenders by House and Senate for 2014

Provision

10-year revenue effect of 1 year extension (2015-2024, Millions of Dollars)

Individual Extenders

 

Above-the-line deduction for teacher classroom expenses

-$214

Discharge of indebtedness on principal residence excluded from gross income of individuals

-$3,143

Parity for exclusion from income for employer-
 provided mass transit and parking benefits

-$10

Mortgage insurance premiums treated as qualified  residence interest

-$919

Deduction for State and local general sales taxes

-$3,142

Contributions of capital gain real property made for conservation purposes

-$129

 Above-the-line deduction for qualified tuition and related expenses

-$300

Tax-free distributions from IRAs to certain public
 charities for individuals age 70-1/2 or older, not
 to exceed $100,000 per taxpayer per year

-$384

Business Extenders

 

Research credit

-$7,629

Minimum LIHTC rate for non-Federally subsidized new buildings (9%)

$2

Military housing allowance exclusion for determining area median gross income

$2

Indian employment tax credit

-$62

New markets tax credit

-$978

Railroad track maintenance credit

-$207

Mine rescue team training credit

-$3

Employer wage credit for activated military reservists

-$1

Work opportunity tax credit

-$1,375

Qualified zone academy bonds

-$126

Classification of certain race horses as 3-year  property

$0

15-year straight-line cost recovery for qualified  leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements

-$2,382

 7-year recovery period for motorsports entertainment complexes

-$33

Accelerated depreciation for business property
 on an Indian reservation

-$79

Bonus depreciation

-$1,492

Enhanced charitable deduction for contributions
 of food inventory

-$143

Increased expensing limitations and treatment of
 certain real property as section 179 property

-$1,434

Election to expense mine safety equipment

$0

Special expensing rules for certain film and
 television productions

-$6

Deduction allowable with respect to income
 attributable to domestic production activities in
 Puerto Rico

-$109

Modification of tax treatment of certain payments
 under existing arrangements to controlling exempt
 organizations

-$18

Treatment of certain dividends of RICs

-$97

Treatment of RICs as "qualified investment
 entities" under section 897 (FIRPTA)

-$44

Exception under subpart F for active financing
 income

-$5,082

Look-through treatment of payments between
 related CFCs under foreign personal holding company
 income rules

-$1,154

Exclusion of 100 percent of gain on certain
 small business stock

-$881

Basis adjustment to stock of S corporations
 making charitable contributions of property

-$51

Reduction in S corporation recognition period for
 built-in gains tax

-$94

Empowerment zone tax incentives

-$251

Temporary increase in limit on cover over of rum
 excise tax revenues (from $10.50 to $13.25 per proof
 gallon) to Puerto Rico and the Virgin Islands

-$168

American Samoa economic development credit

-$14

Energy Tax Extenders

 

Credit for section 25C nonbusiness energy
 property

-$832

Second generation biofuel producer credit

-$25

Incentives for biodiesel and renewable diesel

-$1,297

Credit for the production of Indian coal

-$38

Beginning-of-construction date for renewable
 power facilities eligible to claim the electricity
 production credit or investment credit in lieu of
 the production credit

-$6,392

Credit for construction of energy-efficient new
 homes

-$267

Special allowance for second generation biofuel
 plant property

$2

Energy efficient commercial buildings deduction

-$127

Special rule for sales or dispositions to
 implement Federal Energy Regulatory Commission
 ("FERC") or State electric restructuring policy for
 qualified electric utilities

$0

Excise tax credits relating to certain fuels

-$397

Alternative fuel vehicle refueling property

-$41

Other

 

Automatic extension of amortization periods

-$28

Extension of shortfall funding method and
 endangered and critical rules

$0

Total

-$41,599

Note: Details differ from total due to rounding.

Source: Joint Committee on Taxation

 

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