Along with the many inquiries as to whether Congress will extend the Bush tax cuts, we are often asked, “What happened to the tax extenders bill?” Earlier this year, Congress had proposed to extend through 2010 many temporary tax incentives that expired on December 31, 2009.
In June 2010, the House proposed the original package of tax extenders in H.R. 4213, which was initially titled the “American Jobs and Closing Tax Loopholes Act.” In July 2010, H.R. 4213 was renamed the “Unemployment Compensation Extension Act of 2010,” and the package of tax extenders was stripped from the bill to force a vote after the contentious debate over extending and funding 2010 unemployment benefits. Subsequently, the tax extenders legislation was left out of the provisions of the Small Business Jobs Act of 2010 (H.R. 5297), which passed on September 27, 2010.
The 2010 tax extenders legislation still has a pulse. On September 16, 2010, Senator Max Baucus, Chairman of the Senate Finance Committee, introduced a bill titled “The Job Creation and Tax Cuts Act” that reintroduces the tax extenders previously proposed in original H.R. 4213. Congress may consider this bill when the House returns from the mid-term election recess on November 15. However, this year it’s hard to predict what the mood of Congress will be for considering year-end tax legislation.
Some of the important tax extenders included in the Baucus bill are:
INDIVIDUAL TAX CUTS
- Deduction of State and Local General Sales Taxes – Extends through 2010 the election to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction permitted for state and local income taxes.
- Additional Standard Deduction for Real Property Taxes – Extends through 2010 the additional standard deduction for state and local real property taxes.
- Above-the-Line Deduction for Certain Expenses of Elementary and Secondary School Teachers - Extends through 2010 the $250 above-the-line tax deduction for teachers and other school professionals.
BUSINESS TAX RELIEF
- R & D Credit – The credit is reinstated through 2010.
- Refundable AMT Credits for Corporations Making Investments for Capital Equipment for Use in the United States - Corporations would be allowed to receive a refund of a portion of their AMT credits if they invest during 2010 in capital equipment for use in the U.S.
- Tax Benefits for Certain Real Estate Developments – The special 15-year cost recovery period for certain leasehold improvements, restaurant buildings and improvements, and retail improvements is extended through 2010.
- Employer Wage Credit for Activated Military Reservists – The credit for 20% of the sum of differential wage payments to active reservists is extended through 2010.
- Five-Year Depreciation for Family Farm Business Machinery and Equipment – Extended through 2010.
- Mine Rescue Team Training Credit - Extends through 2010 the credit for training mine rescue team members and would allow this credit to be claimed against the AMT.
- Election to Expense Advanced Mine Safety Equipment – Extends through 2010 the provision that provides businesses with 50% bonus depreciation for certain qualified underground mine safety equipment.
- Extension of Railroad Track Maintenance Credit – Extends through 2010 the railroad track maintenance credit.
- Extension of Special Expensing Rules for U.S. Film and Television Productions – Extends through 2010 the provision that allows film and television producers to expense the first $15 million of production costs incurred in the United States ($20 million if the costs are incurred in economically depressed areas in the United States).
- Expensing of Environmental Remediation Costs - Extends through 2010 the provision that allows the expensing of cleanup costs of hazardous brownfield sites.
Some of the many other tax provisions contained in the proposed extender legislation that would be extended through 2010 include:
- Extension of Provision Encouraging Contributions of Capital Gain Real Property for Conservation Purposes.
- Extension of Enhanced Charitable Deduction for Contributions of Food Inventory.
- Extension of Enhanced Charitable Deduction for Contributions of Book Inventories to Public Schools.
- Extension of Enhanced Charitable Deduction for Corporate Contributions of Computer Equipment for Educational Purposes.
- Extension of Tax-Free Distributions from Individual Retirement Plans for Charitable Purposes.
- Extension of Special Tax Treatment of Certain Payments to Controlling Exempt Organizations.
- Extension of Special Rule for S Corporations Making Charitable Contributions of Property.
- Extension of Tax Incentives for Biodiesel and Renewable Diesel.
- Credit for Electricity Produced at Certain Open-Loop Biomass Facilities.
- Extension of the Alternative Motor Vehicle Credit for Heavy Hybrids.
- Extension of Tax Incentive for Liquid Fuels Derived From Biomass, Biogas, Natural Gas and Propane Used as a Fuel in Transportation Vehicles.
- Extension of Steel Industry Fuel Tax Credit.
- Extension of Coke and Coke Gas Production Tax Credit.
- Extension of Energy-Efficient New Homes Credit.
- Extension of Tax Credit for Purchase of Energy-Efficient Windows.
- Direct Payment in Lieu of Energy-Efficient Appliance Tax Credit.
- Extension of Special Rule for Sales of Electric Transmission Property.
- Extension of Special Rule for Percentage Depletion for Marginal Wells.
To help pay for the extenders, the Baucus bill contains provisions to close perceived loopholes for investment fund managers (the “carried interest” rules). However, the Baucus bill does not include the controversial provision to impose self-employment tax on certain shareholders of S corporations that was contained in prior versions of the extenders legislation.
Please contact Ron Kramer at firstname.lastname@example.org or your Schneider Downs representative if you have any specific questions on any of the extenders that may be of interest to you or your organization.
Schneider Downs provides accounting, tax, wealth management, technology and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA and Columbus, OH.
This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.