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Tax Extenders And More Signed into Law

By   Linda Albrecht

December 23, 2015

Late on Dec. 18, President Obama signed the Consolidated Appropriations Act, 2016, that not only funds the federal government for the next fiscal year but also makes permanent a number of tax "extender" provisions and temporarily renews others.

A few key tax extenders included in the act have received the bulk of the attention from media outlets and trade associations. These include significant provisions affecting business taxpayers across a wide spectrum, including banks, involving:

  •  R&D Credits
  • "Bonus" depreciation (50 percent with a phase-out from 2018 through 2019)
  • Small business "expensing" limit for section 179 property ($500,000 with a $2 million phase-out threshold)
  • 15-year depreciation period for qualified leasehold improvements, qualified restaurant property and qualified retail improvement property
  • Period for which an S corporation must hold assets following conversion from a C corporation to avoid the built-in gains tax (permanently five years rather than 10 years)

Click hereThis link takes you to an external website. to read a more complete analysis of the act.

For Financial Institutions
While the provisions listed above are clearly important to financial institutions, there are other, less-publicized items in the act that also may be of interest. These include:

  • The Work Opportunity Tax Credit (WOTC) is extended through 2019 with enhanced credit for employers that hire certain long-term unemployed individuals
  • Mortgage insurance premiums are once again treated as deductible interest that is qualified residence interest through 2016
  • Individuals at least 70 ½ years of age are permanently allowed to exclude from income qualified charitable distributions from IRAs (up to $100,000)
  • New Markets Tax Credits are authorized for each year from 2015 through 2019
  • Qualified Zone Academy Bonds are authorized for 2016
  • Filing dates are accelerated for wage information and non-employee compensation (Forms W-2 and 1099-MISC) beginning for calendar year 2016 (due January 31, 2017)

Start of Tax Reform?
House Speaker Paul Ryan (R-WI) has been quoted as saying the act "is one of the biggest steps toward a rewrite of our tax code that we've made in many years."  No doubt, all of the extenders and other tax provisions contained in the act will be subject to review in coming years if Congress proceeds with comprehensive tax reform.

In the meantime, businesses and individuals have a little more certainty as a result of the extenders made permanent and those renewed for more than the typical one or two years. In some cases, IRS guidance will be needed on how to implement the changes made by the act, particularly with respect to worker certification for the WOTC and reporting of mortgage insurance premiums on the 2015 Form 1098.

For more on how the Appropriations Act affects you or your financial institution, do not hesitate to call your local Eide Bailly tax professional.