On Thursday, the House passed the Protecting Americans from Tax Hikes (PATH) Act of 2015 by a 318 to 109 vote, with three republicans voting against the measure and 77 democrats in favor. The PATH Act renews all expired provisions in some form. The bill makes certain tax incentives permanent, while proposing a two-year extension for others, and providing a one-year retrospective for 2015 and one-year prospective for 2016 for the remaining provisions. The Senate will receive the bill and likely vote on Friday, sending the tax package to the president’s desk – which he is expected to sign. To view a copy of the legislative text click here. Specifically the tax extender package includes the following AGC priorities:
PERMANENT Extensions of the Following Policies:
- R&D credit: permanently extends the research and development (R&D) tax credit. Additionally, beginning in 2016 eligible small businesses ($50 million or less in gross receipts) may claim the credit against alternative minimum tax (AMT) liability, and the credit can be utilized by certain small businesses against the employer’s payroll tax (i.e., FICA) liability.
- Section 179 expensing: permanently extends the small business expensing limitation and phase-out amounts in effect from 2010 to 2014 ($500,000 and $2 million, respectively). The provision further modifies the expensing limitation with respect to qualified real property by eliminating the $250,000 cap beginning in 2016.
- 15-year recovery for leasehold and restaurant improvements
- Charitable contributions of S corporations: permanently extends the rule providing that a shareholder’s basis in the stock of an S corporation is reduced by the shareholder’s pro rata share of the adjusted basis of property contributed by the S corporation for charitable purposes.
- 5-year recognition period for S corporation built-in-gains
FIVE-YEAR Extensions of the Following Policies:
- Bonus depreciation (50% for 2015-17, 40% in 2018, 30% in 2019)
- New Markets Tax Credit
- Work Opportunity Tax Credit
- *Production Tax Credit for Renewables (Extension & Phase-out)
TWO-YEAR Extensions of the Following Policies:
- Energy efficient commercial buildings deduction with updated ASHRAE beginning in 2016.
- Medical device tax moratorium
Items also of interest to the business community, include:
- Lifting the long-standing ban on oil exports
- A two-year suspension of the 2.3 percent medical device excise tax through 2017
- REIT-related provisions based on items included in Ways and Means Chairman Brady's recent proposal, but with further modifications and a transition rule
- Technical changes to the recently adopted partnership audit rules
Additionally, it is important to note tax provisions affecting the Production Tax Credit (wind & solar 5-year phase-out), as well as a two-year delay for the excise tax on high cost employer-sponsored health coverage (Cadillac Tax) and the ACA’s annual health insurance tax (HIT) on insurance companies that will be suspended for one year were included in the omnibus spending package. The AGC Tax Webpage will be updated with the final details if an approved package signed into law.
For more information, please contact Brian Lenihan at lenihanb@agc.org or (202) 547-4733.