Tax extenders legislation delivers holiday cheer

On Friday, the 2015 tax extenders legislation, known as the Protecting Americans from Tax Hikes Act, was signed by President Barack Obama. The act will deliver extra holiday cheer for taxpayers this year, as it not only retroactively reinstates many popular tax provisions but also makes certain provisions permanent.

Key tax provisions permanently extended include:

• Research and development credit
• Reduction in S Corporation recognition period for built-in gains tax to a 5-year period
• Section 1202 exclusion of 100 percent of the gain on certain small business stock
• The Low-Income Housing Tax Credit 9 percent credit rate freeze
• Subpart F exception for active financing income
• Nontaxable IRA transfers to eligible charities
• Enhanced Section 179 deduction (also extended for inflation)

Key tax provisions which were reinstated on a temporary basis include:

• Work Opportunity Tax Credit, extended through 2019
• CFC look-through rule for payments between related CFCs, extended through 2019
• New Markets Tax Credit, extended through 2019
• Exclusion for discharged home mortgage debt, extended through 2016
• Bonus first-year depreciation, extended through 2019

In addition, the act provides for a two-year moratorium on the 2.3 percent excise tax imposed on the sale of medical devices, so that the medical device excise tax will not apply to sales during the 2016 and 2017 calendar years.

The overall tax package is estimated to cost $622 billion but promises to lock into place many popular tax measures favored by taxpayers, which otherwise expired annually. Commentators have noted that passage of the act may set the stage for more comprehensive tax reform in the future.

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