Congress is embracing the holiday season by providing taxpayers a gift in the form of tax extenders. The Protecting Americans from Tax Hikes (PATH) Act of 2015 is a bipartisan agreement between both houses of Congress that permanently extends many popular business and individual incentives. President Obama signed the PATH Act into law on Dec. 18.
Below are some key provisions from the PATH Act.
R&D tax credit made permanent and modified. The provision permanently extends the research and development (R&D) tax credit. It now allows eligible small businesses ($50 million or less in gross receipts) to claim the credit against alternative minimum tax (AMT) for tax years beginning after Dec. 31, 2015. Additionally, it allows eligible startup companies (those with less than $5 million in gross receipts and earning revenue for less than five years) to claim up to $250,000 of the credit against the company's payroll tax for tax years beginning after Dec. 31, 2015.
The new provisions provide substantial benefits to qualifying small and midsized businesses. Historically, taxpayers who were in AMT positions or may not have had income tax liability have not been able to use the credit. The new provisions in the PATH Act significantly increases the number of taxpayers who can benefit from the credit.
Section 179Denergy-efficiency deductions extended for commercial buildings through 2016. Deductions of up to $1.80 per square foot for energy-efficient commercial building property will be extended for two more years through the end of 2016. Designers of government-owned buildings remain eligible for these deductions as well.
Section 45L energy-efficiency credits extended for multifamily and residential developers through 2016. Low-rise apartment developers and homebuilders are eligible for a $2,000 tax credit for each new or rehabbed energy-efficient dwelling unit that is first leased or sold by the end of 2016. Taxpayers also have the ability to amend returns to claim missed tax credits from previous years.
Bonus depreciation extended and phased down through 2019. Fifty percent bonus depreciation provisions will be extended through the end of 2017 and phases down to 40 percent in 2018 and 30 percent in 2019.
Section 179 expensing thresholds and 15-year life for qualified real property made permanent. Section 179's increased expensing amounts for small businesses have been made permanent. Additionally, the 15-year recovery period for qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property has been made permanent, and qualified property here may be eligible for expensing under the special rules of Section 179.
Hiring and employment credits extended. Work Opportunity Tax Credits are extended through 2019. Empowerment Zone tax incentives will be extended through the end of 2016.
This article was reprinted with permission from KBKG.
Kevin Zolriasatain is a partner and practice leader of KBKG’s R&D Tax Credit Services; CJ Aberin is a principal at KBKG and oversees the Green Building Tax Incentive practice; and Luis Guerrero, MBT, is principal, vice president, and co-founder of KBKG.