While the public and the press were focused on if Congress would provide COVID-19 relief and, if so, what the size of the checks would be, the tax writers succeeded in adding an over $103 billion extenders bill into “must pass” year-end legislation.
And this was not just the normal extenders bill where everything that is about to expire is given extra year. This time provisions were also extended by two and five years and some were even made permanent.
Alternative energy and conservation provisions featured heavily in the legislation. The energy efficient commercial buildings deduction of §179D was made a permanent part of the Code and an inflation adjustment added to keep it fresh. Projects to produce energy from an alternative source were extended for two years and offshore wind facilities and waste energy recovery property added to the list of qualifying projects. Smaller projects were also recognized with the individual 10% credit for nonbusiness energy property extended a year and the credit for installing certain residential conservation equipment such as solar, fuel cell, small wind, geothermal heat pumps extended for two years.
It is not known what effect this will have on the push for additional alternative energy and conservation incentives in the future. The extension and expansion of these provisions by the Congress that just ended may foreshadow a willingness to entertain a further expansion of these ideas by the new Congress. At a minimum, the longer extension for many of the provisions provides a two-year window for Congressional action.
Several key social programs, such as the Work Opportunities Tax Credit and the New Markets Tax Credit were extended for five years. The Enterprise Zone program was also extended for five years with additional opportunities to designate additional zones.
Individual homeowners were also given consideration with the extension for one year of the ability to treat mortgage insurance premiums as qualified mortgage interest and a five-year extension of the exclusion from gross income of discharge of indebtedness on a principal residence. This last one came at a price, however, with the amount eligible for the exclusion reduced to $750,000 ($375,000 for a married couple filing separate returns).
On the international side, a five –year extension of the exclusion from foreign personal holding company income of dividends, interest, rents and royalties received or accrued from a foreign corporation which is a related person to the extent related or properly allocable to income of the related person which is neither subpart F income nor income treated as effectively connected with the conduct of a trade or business in the United States. The provision is now effective for years of foreign corporations beginning before January 1, 2026 and to taxable years of United States shareholders with or within which taxable years of such foreign corporations end.
Additional provisions included in the extenders legislation include:
Provisions made permanent
- Itemized deductions for medical expenses in excess of 7.5% of AGI
- Reduced tax rates for beer, wine and distilled spirits, especially for small producers
- Railroad track maintenance credit (credit rate reduced from 50% to 40% for tax years beginning after 12/31/22)
- Exclusion from gross income for benefits provided to volunteer firefighters and emergency medical responders
Provisions extended through 2025
- §45S Paid Family Leave Credit
- 7-year recovery period for motorsports entertainment complexes
- Deduction for costs of film, television or live theatrical production
Provisions extended through 2021
- Second generation biofuel production credit
- New energy efficient home credit
- Qualified fuel cell motor vehicle credit
- 30% credit for alternative fuel vehicle refueling property
- 2-wheel plug in electric vehicle credit
- Indian Employment Credit
- Credit for production of Indian coal
- Credit for health insurance costs of TAA or PBGC pension plan recipients
- 3-year recovery period for racehorses 2 years or younger
- Accelerated depreciation for business property on an Indian reservation
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