January 19, 2016
On the afternoon of Dec. 18, President Obama signed into law the Consolidated Appropriations Act, 2016, which contained the Protecting Americans from Tax Hikes (PATH) Act.
The PATH Act is the legislative vehicle for passing what has become known as the “tax extenders,” those 50-60 various tax provisions that have lapsed, only to be extended, many times again. However, this time around, several of the tax extender provisions gained permanent status, rather than the usual two-year extension period. In addition, many other special provisions have been included related to the Family Tax Relief Credit, Program Integrity for certain tax-related items, real estate investment trusts, IRS administration reforms and U.S. Tax Court access and administration.
The following tax extenders were granted permanent extension status:
Individual and General Provisions
Provisions gaining extension, in full or part, through 2019 include the following:
Other lapsed tax extender provisions were extended through 2016, including a moratorium on the collection of the medical device excise tax on sales occurring in the calendars years 2016 and 2017.
Program Integrity Items
There were also a number of new tax provisions included in the Program Integrity section of the PATH Act. The Program Integrity items were designed to improve compliance with tax provisions, establish safe harbor positions from certain penalties, deal with the issuance of Individual Taxpayer Identification Numbers, prevent retroactive claiming of various credits (earned income, child or American Opportunity), expand paid tax preparer due diligence, expand the rules which bar individuals from claiming the earned income tax credit, apply a 20 percent penalty for erroneous claims related to the refundable portion of tax credits, expand the penalty for taxpayers who engage in willful or reckless conduct, taxpayer reporting of the American Opportunity Tax Credit and reforms the reporting requirements for Form 1098-T by educational institutions.
Family Tax Relief Credit
Family Tax Relief provisions included in the PATH Act provide exemption from gross income for payments from certain work-learning-service programs, expand the definition of qualified higher education expenses related to 529 accounts, allow ABLE accounts to be established in any state (not just the state of residence), exclude from gross income compensation related to wrongful incarceration, extend certain benefits paid by accident and health plans of a public retirement system, allow rollover amounts from an employer-sponsored retirement plan to a qualified SIMPLE IRA, clarify the effective dates for certain airline employees related to IRA contributions from certain bankruptcies, extend relief from penalties for certain special public safety officers and prevent the tax collection period on Armed Forces members hospitalized for combat zone injuries from being extended.
There were also special provisions made for trade, real estate investment trusts, IRS administrative reforms, and changes related to how taxpayers access the U.S. Tax Court, as well as certain administrative and clarification provisions related to the operations of the U.S. Tax Court.
With the signing of the Appropriations Act into law, we will now begin the process of analyzing details of the PATH Act to provide additional comment, information and clarification for implementation. Contact your Eide Bailly professional for additional information or immediate questions.