Congress Passes “Protecting Americans from Tax Hikes (PATH) Act of 2015” Which Extends Some Tax Provisions and Makes Some Permanent

Written on December 21, 2015

After a year of waiting, Congress has passed the “Protecting Americans from Tax Hikes (PATH) Act of 2015” which reinstates many expired tax provisions. President Obama is expected to sign this bill into law without delay. For the first time in several years, this Act extends certain tax provisions more than one year and makes some provisions permanent. Some of the key provisions of the Act are below.

Key Provisions Impacting Businesses

Deduction for Cost of Qualifying Asset Acquisitions – The “Section 179 deduction” is now permanent. It is $500,000 for 2015 and will be indexed for inflation in future years. In addition, Bonus Depreciation is extended through 2019.

Research Credit – After extending this credit for 20 years, the Act finally makes the Research and Development Credit permanent. This is a tax credit for qualified research and development activities. A key benefit is that this credit is available to offset payroll taxes.

Reduction in S Corporation Built-in Gain Period – The Act permanently changes the built-in gain period for S Corporations to five years from 10 years.

Qualified Leasehold Improvements and Restaurant Property Shortened Lives – A shortened depreciable life of 15 years, instead of 39 years, for qualified leasehold improvements and restaurant property is now permanent.

Work Opportunity Tax Credit Extended – The WOTC Credit is extended through 2019. This credit is available to employers who hire members of certain targeted groups, such as eligible veterans and eligible long-term unemployed individuals.

Key Provisions Impacting Individuals

Conservation Easements – The Act makes permanent the deductibility of Qualified Conservation Easements up to 50 percent of a taxpayer’s adjusted gross income, as well as the increased carryforward period for easements from the previous five years to 15 years.

Nontaxable IRA Transfers to Eligible Charities – The Act retroactively revives and permanently extends the ability of individuals at least 70½ years of age to exclude from gross income qualified charitable distributions from IRAs of up to $100,000 per year.

In addition to these key law changes, there are many other tax breaks that could impact you and your business. If you need any additional information on these law changes, please contact your Warren Averett advisor.

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