Howard, LLP

Howard Tax Insights: PATH Act

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Dallas, Texas, December 2015 – Recently, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015 (PATH Act).  This Act extends and modifies numerous provisions that previously expired, and makes many of them permanent.  The changes to the law include:

  • The Research & Development credit (made permanent, and made creditable against AMT for qualified small businesses)
  • The increased expensing limitations under Section 179 (made permanent, indexed for inflation)
  • The exclusion of 100% of gain on certain small business stock (made permanent)
  • Reduction in S Corporation recognition period for built-in gains tax from 10 to 5 years (made permanent)
  • The enhanced Child Tax Credit (made permanent, refundable up to an unindexed $3,000)
  • The enhanced American Opportunity Tax Credit (made permanent)
  • The enhanced Earned Income Tax Credit (made permanent)
  • The above-the-line deduction for certain educator expenses (made permanent, $250 limitation indexed for inflation)
  • Parity for exclusion from income for employer-provided mass transit and parking benefits (made permanent)
  • The deduction of State and Local general sales taxes (made permanent)
  • The enhanced rule for Qualified Conservation Contributions of real property (made permanent)
  • Tax-free distributions from individual retirement plans for charitable purposes (made permanent)
  • The charitable deduction for contributions of food inventory (made permanent)
  • The tax treatment of certain payments to controlling exempt organizations (made permanent)
  • Basis adjustment to stock of S Corporations making charitable contributions of property (made permanent)
  • The employer wage credit for employees who are active duty members of the uniformed services (made permanent)
  • 15 year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements (made permanent)
  • The treatment of certain dividends of regulated investment companies (made permanent)
  • The Subpart F exception for active financing income (made permanent)

The Act modified and extended through 2019 several additional provisions of the Tax Code, including:

  • Bonus depreciation, at 50% for 2015-2017, and phased down to 40% in 2018 and 30% in 2019
  • The Work Opportunity Tax Credit, modified and enhanced for employers who hire long-term unemployed individuals
  • The New Markets Tax Credit, providing $3.5 billing allocation each year through 2019, the carryover period for the credit has also been extended to 2024

And finally, several additional items were modified and extended through 2016, including:

  • Modification of the exclusion of mortgage debt discharge
  • Mortgage insurance premiums treated as qualified residence interest
  • The above-the-line deduction for qualified tuition and related expenses

If you have any questions on how the PATH Act will affect you or your business, we encourage you to contact the Howard team to discuss what options are available to you.