Following a 76-16 vote in the Senate, President Obama signed The Tax Increase Prevention Act, also known as extenders, into law on December 19, 2014. The extenders retroactively extended over 50 tax provisions that expired on December 31, 2013 through December 31, 2014. Some of the key extenders focus on crucial tax provisions from both a business and individual perspective.
The extenders of major concern to businesses are bonus depreciation for property placed into service by 12/31/2014, the research credit, Internal Revenue Code Section 954(c)(6) ("CFC Look Through"), the active financing exception from Subpart F income, and certain S corporation provisions. While a late extension of the business provisions causes issues with financial reporting especially for publicly traded corporations, Congress has repeatedly ignored this complaint.
Some of the extenders that affect individuals are the deduction for state and local sales tax for residents of states without income taxes, and enhanced current expensing for small businesses.
Earlier in 2014, the Senate tried to a pass a two-year extension (through 2015), but the bill failed to overcome a procedural hurdle because the Republicans were frustrated with the amendment process. The House Ways and Means Committee held several hearings and marked up various individual extenders, which the House passed but the Senate refused to take up.
Later in the year, then Ways and Means Committee Chairman Dave Camp and Senate Majority Leader Harry Reid tried to broker a deal that would have permanently extended some of the expiring provisions (e.g., research credit, bonus depreciation, and current expensing for small business), but the proposed deal fell apart due to a threat of a veto from the White House because the bill did not have sufficient middle-class tax relief. The deal would have cost more than $500 billion over ten years and would have provided certainty for the business community. Accordingly, the extenders package was put together during the lame-duck sessions, and the extended provisions expired a few weeks after their retroactive extension. While this provided certainty with regard to the 2014 tax year, there remains uncertainty as to tax planning for the extender provisions in 2015.
Thus far in 2015, the House Ways and Means Committee has taken steps towards permanently extending many of the provisions that expired on December 31, 2014, including the research credit, the deduction for state and local sales tax and current expensing for small businesses. Notwithstanding the above, there has been support from members of both parties to implement these permanent extenders along with overall tax reform. Once again, the House will push forward with individual bills, and it is unclear whether the Senate will consider these individual bills. Also, tax reform will need to consider whether to extend all of the more than 50 provisions, and transition relief for those provisions that will be allowed to permanently expire.