The U.S. Senate has approved a one-year extension of the taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. 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- |
-$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 |
-$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 |
-$79 |
|
-$1,492 |
|
|
Enhanced charitable deduction for contributions |
-$143 |
|
Increased expensing limitations and treatment of |
-$1,434 |
|
Election to expense mine safety equipment |
$0 |
|
Special expensing rules for certain film and |
-$6 |
|
Deduction allowable with respect to income |
-$109 |
|
Modification of tax treatment of certain payments |
-$18 |
|
Treatment of certain dividends of RICs |
-$97 |
|
Treatment of RICs as “qualified investment |
-$44 |
|
Exception under subpart F for active financing |
-$5,082 |
|
Look-through treatment of payments between |
-$1,154 |
|
Exclusion of 100 percent of gain on certain |
-$881 |
|
Basis adjustment to stock of S corporations |
-$51 |
|
Reduction in S corporation recognition period for |
-$94 |
|
Empowerment zone tax incentives |
-$251 |
|
Temporary increase in limit on cover over of rum |
-$168 |
|
American Samoa economic development credit |
-$14 |
|
Energy Tax Extenders |
|
|
Credit for section 25C nonbusiness energy |
-$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 |
-$6,392 |
|
Credit for construction of energy-efficient new |
-$267 |
|
Special allowance for second generation biofuel |
$2 |
|
Energy efficient commercial buildings deduction |
-$127 |
|
Special rule for sales or dispositions to |
$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 |
$0 |
|
Total |
-$41,599 |
|
Note: Details differ from total due to rounding. |
|
|
Source: Joint Committee on Taxation |