Insights: Article

Tax Extenders in the 2018 Budget Act

February 13, 2018

In addition to providing the means to re-open the government, the Bipartisan Budget Act of 2018, Public Law 115-123, also contained much awaited tax extender legislation. Tax extenders are items that have not achieved a state of permanency in tax law, but are items that are either kept alive with extensions of use, hence the name tax extenders, or they are terminated from use. The following is a list of tax extenders that either had expired, or were to going to expire, that now have been extended, mostly for one year (2017).

 

Families and Individuals

  • Exclusion from gross income of the discharge of qualified principal resident indebtedness is now extended through December 31, 2017.
  • Amounts paid or accrued for mortgage insurance premiums are allowed to be treated as qualified residence interest through December 31, 2017.
  • The above-the-line deduction for qualified tuition and related expenses are now allowed for taxable years beginning before January 1, 2018.

Incentives for Growth, Jobs, Investment and Innovation

  • Indian employment tax credit extended to taxable years beginning before January 1, 2018.
  • Railroad track maintenance credit extended to taxable years beginning before January 1, 2018.
  • Mine rescue team training credit extended to taxable years beginning before January 1, 2018.
  • Classification of certain race horses as three-year property which is either, 1) placed in service before January 1, 2018, or 2) placed in service after December 31, 2017, and the race horse is more than 2 years old at the time placed in service.
  • Classification as seven-year recovery motor-sports entertainment complex is extended to property placed in service through December 31, 2017.
  • Classification for accelerated depreciation for Native American reservation property is extended to property placed in service through December 31, 2017.
  • Election to expense mine safety equipment is extended for property placed in service through December 31, 2017.
  • Special expensing of qualified film and television productions or qualified live theatrical productions is extended for productions commencing before January 1, 2018.
  • The ability to deduct domestic production activities in Puerto Rico with respect to the first twelve taxable years beginning after December 2005 and before January 1, 2018.
  • The special rate for qualified timber gains is extended to be applicable to any taxable year beginning in 2017.
  • Empowerment zone tax incentives are extended through December 31, 2017.
  • The American Samoa Economic Development Credit is extended one taxable year and shall apply to taxable years beginning before January 1, 2018.

Incentives for Energy Production and Conservation

  • The nonbusiness energy property credit is extended for one year to cover expenditures made with respect to any property placed in service before January 1, 2018.
  • The residential energy efficiency credit is extended for property placed in service through December 31, 2021, utilizing a phase-out determination of credit.
  • The credit for new qualified fuel cell motor vehicles is extended to apply to any property purchased before January 1, 2018.
  • The credit for alternative fuel vehicle refueling property is extended to apply to any property placed in service before January 1, 2018.
  • The credit for two-wheeled plug-in electric vehicles is extended to such vehicles acquired before January 1, 2018.
  • The credit for second generation biofuel producers is extended to apply to second generation biofuel production before January 1, 2018.
  • Biodiesel and renewable diesel incentives are extended to apply to any sale or use before January 1, 2018. And, the biodiesel mixture credit is extended to any sale, use or removal through December 31, 2017.
  • The credit allowed a producer of Native American coal is extended for one year to be applicable to production during the 12-year period beginning on January 1, 2006.
  • The credit allowed with respect to facilities producing energy from certain renewable resources is extended one year to now apply to construction which begins before January 1, 2018.
  • The credit allowed for energy efficient new homes is now applicable for any new qualified energy efficient home acquired before January 1, 2018.
  • The energy credit for certain solar, thermal, fuel cell and wind energy property has been extended to qualified property the construction of which begins before January 1, 2022. However, there is a new phase-out schedule which will reduce the current 30 percent credit to 26 percent for construction beginning after December 31, 2019, and before January 1, 2021, with a continuing drop to 22 percent for construction beginning after December 31, 2020, and before January 1, 2022. In addition, the allowable credit will be reduced to zero if the property is not placed in service before January 1, 2024. Additional changes will apply to certain other energy property, all of which become effective on the date of enactment, February 9, 2018.
  • The special depreciation allowance for second generation biofuel plant property is extended for one year to cover qualified property placed in service before January 1, 2018.
  • The deduction allowed related to the cost of constructing an energy-efficient commercial building is extended for one year to cover qualified property placed in service before January 1, 2018.
  • The special rule for sales or dispositions to implement FERC or state electric restructuring policy for qualified electric utilities is extended for one year.
  • Excise tax credits relating to alternative fuels and fuel mixtures are extended for one year and shall now apply to any sale or use through December 31, 2017.
  • The oil spill liability trust fund financing rate is changed and shall now not apply after December 31, 2018. This amendment shall apply on and after the first day of the calendar month beginning after the date of the enactment of the budget bill, which would make the effective date for this provision March 1, 2018.

As noted at the beginning, most of the items listed were extended for one year, and that extension period typically ended on December 31, 2017. As a result, since December 31, 2017, had come and gone by the time this legislation became law in 2018, there is little planning to be done. But it does provide the opportunity to recognize the benefit of the extended credit or deduction in 2017 tax returns. However, we are once again left to wonder, will they be extended for 2018 and beyond?

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