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House votes to make three more expired provisions permanent

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The House of Representatives voted June 12 to make three more expired tax provisions permanent, but a final resolution on the 50-plus provisions that expired at the end of 2013 still looks unlikely until very late in the year.

The House approved a permanent extension of the increased Section 179 expensing limits in a 272–144 vote and then voted 263–155 to make permanent the reduced five-year holding period for built-in-gains tax after an S corporation conversion and the S corporation basis reduction limit for charitable gifts.

The House has now voted to make four expired provisions permanent. It approved a permanent alternative simplified research credit at an increased rate of 20% on May 9. The House Ways and Means Committee has also approved six other bills that would make expired provisions permanent, including:
  • Bonus depreciation and the election to accelerate alternative minimum tax (AMT) credits in lieu of bonus (with an expansion to include retail improvements by building owners)
  • Subpart F exception for active financing
  • Subpart F look-through rule for controlled foreign corporation income
  • Increased percentage limits and extended carryforward periods for charitable contributions of conservation easements and capital gain property
  • Tax-free individual retirement account distributions for taxpayers age 70½
  • Enhanced charitable deduction for contributions of food inventory

The president has threatened to veto all four bills passed by the House because the cost of the permanent extensions would not be offset. The administration instead supports the approach taken by the Senate Finance Committee, which would extend 51 of the expired provisions for two years as part of the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act. The EXPIRE Act remains stalled in the Senate because Republicans and Democrats cannot agree on amendments.

Senate Majority Leader Harry Reid, D-Nev., has said he will postpone action on the expired provisions until after the November elections because Republicans blocked a final vote on the bill. Republicans said they will not allow a final vote on the bill unless Reid allows them to vote on an amendment to repeal the medical device excise tax.
A final agreement between the House and the Senate on the expired provisions does not appear imminent. Because of the high cost of permanent extensions, it appears more likely that Congress will eventually agree on a temporary package similar to what the Senate has proposed. But a final resolution may not be reached until late in the year, possibly after the midterm elections in November.

The following table describes how the expired tax provisions would be treated by the EXPIRE Act and how they have been addressed in the Ways and Means Committee and on the House floor. Where the table indicates no House action, Camp proposed to repeal or allow the expiration of the provision in his tax reform discussion draft, and has not yet indicated whether he would consider an extension outside of tax reform. The EXPIRE Act column notes when a provision was modified by an amendment during the markup.

Provision

EXPIRE Act (Senate Finance Committee)

House action

Individual tax provisions

Itemized deduction for state and local sales taxes

  • Extends through 2015
  • No action yet
  • Above-the-line deduction for qualified tuition

    • Extends through 2015
  • No action yet
  • Above-the-line deduction of $250 for teacher classroom expenses

    • Extends through 2015
  • No action yet
  • Tax-free IRA contributions to charity after age 70½

    • Extends through 2015
  • H.R. 4619 would make permanent and was passed by the Ways and Means Committee
  • Deduction for mortgage insurance premiums

    • Extends through 2015
  • No action yet
  • Transit and parking fringe benefit equalization

    • Extends through 2015, and an amendment was approved that adds cost of bike share to definition of qualified transit benefit
  • No action yet
  • Exclusion for principal residence debt forgiveness income

    • Extends through 2015
  • No action yet
  • Health care tax credit for displaced workers

    • Extends through 2015
  • No action yet
  • General business tax provisions

    Research credit

    • Extends through 2015. For businesses less than five years old with less than $5 million in annual gross receipts, an amendment was approved that would allow individual research credits to offset alternative minimum tax and make up to $250,000 of credit refundable against payroll taxes.
  • H.R. 4438 would allow the traditional credit to expire but make the alternative simplified credit permanent with a 20% rate, and was passed by the House on May 9
  • Qualified small business stock

    • Extends to apply to stock acquired before Jan. 1, 2016
  • No action yet
  • New markets tax credit

    • Extends through 2015
  • No action yet
  • Reduced five-year holding period for S corporation built-in gains for dispositions

    • Extends through 2015
  • H.R. 4453 would make permanent and was passed by the House on June 12
  • Work opportunity tax credit

    • Extends through 2015 and adds a new category of eligible workers for those who have exhausted unemployment benefits
  • No action yet
  • CFC-related payment look-through rule

    • Extends through 2015
  • H.R. 4464 would make permanent and was passed by the Ways and Means Committee
  • Subpart F exemption for active-financing income

    • Extends through 2015
  • H.R. 4429 would make permanent and was passed by the Ways and Means Committee
  • Additional properties eligible for low-income housing credit

    • Extends and modifies credit rate for unsubsidized new buildings through 2015  
  • No action yet, but Camp’s tax reform discussion draft would retain and modify provision
  • Exclusion of military housing allowance for income test for low-income housing credit

    • Extends through 2015
  • No action yet
  • Indian employment tax credit

    • Extends through 2015
  • No action yet
  • Employer wage credit for active-duty employees

    • Extends through 2015, expands credit to all employers and increases rate to 100%
  • No action yet
  • RIC-qualified investment entity treatment under FIRPTA

    • Extends through 2015
  • No action yet
  • Interest and short-term capital gains-related RIC dividends

    • Extends through 2015
  • No action yet
  • Conservation contributions of capital gain real estate

    • Extends through 2015
  • H.R. 2807 would make permanent and was passed by the Ways and Means Committee
  • Enhanced charitable deduction for gifts of food inventory

    • Extends through 2015
  • H.R. 4719 would make permanent and enhance the provisions, and was passed by the Ways and Means Committee
  • Treatment of payments to controlling exempt organizations

    • Extends through 2015
  • No action yet
  • Basis adjustment to S corporation stock for charitable contributions of property

    • Extends through 2015
  • H.R. 4453 would make permanent and was passed by the House on June 12
  • Railroad track maintenance tax credit

    • Extends through 2015
  • No action yet
  • Mine rescue team training credit

    • Extends through 2015
  • No action yet
  • Depreciation provisions

    Bonus depreciation

    • Extends 50% bonus depreciation for property placed in service in 2014 and 2015 (2016 for certain long-lived and transportation property) and extends ability to claim unused alternative minimum tax credits in lieu of bonus depreciation
  • H.R. 4718 would make bonus depreciation and the election to accelerate alternative minimum tax credits permanent, and would expand eligibility to retail improvements by property owners to qualify. It would make several other minor modification and was passed by the House Ways and Means Committee
  • Section 179 expensing

    • Extends the $500,000 expensing allowance and $2 million phaseout threshold to property placed in service before Jan. 1, 2016, and indexes these figures to inflation
  • H.R. 4457 would make $500,000 expensing allowance and $2 million phaseout threshold permanent, but would not index these figures for inflation. It passed the House on June 12
  • 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements

    • Extends through 2015
  • No action yet
  • Three-year depreciation for racehorses

    • Extends through 2015
  • No action yet, but Camp’s tax reform discussion draft would retain and modify this provision
  • Seven-year cost recovery for motor-sports entertainment complexes

    • Extends through 2015
  • No action yet
  • Expensing for advanced mine safety equipment

    • Extends through 2015
  • No action yet
  • Special expensing for film and television productions

    • Extends through 2015
  • No action yet
  • Energy tax provisions

    Section 30D plug-in electrical vehicle credit

    • General credit, which will begin to phase out once 200,000 vehicles are sold, is not extended
    • Credit for three-wheeled vehicles allowed to expire, but the credit for motorcycles is extended through 2015
  • No action yet
  • Credit for production of Indian coal

    • Extends through 2015
  • No action yet
  • Cellulosic (second-generation) biofuel credit

    • Extends through 2015
  • No action yet
  • Special depreciation for cellulosic biofuel plant property

    • Extends through 2015
  • No action yet
  • Incentives for biodiesel and renewable diesel

    • Extends through 2015
  • No action yet
  • Alternative fuel and alternative fuel mixture credit

     

    • Extends through 2015 for all fuels, including propane used in forklifts
  • No action yet
  • Alternative fuel vehicle refueling property credit

    • Extends through 2015
  • No action yet
  • Special rule for qualified electric utility dispositions to implement FERC or state restructuring policy

    • Extends through 2015
  • No action yet
  • Partial expensing of refinery equipment

    • Not extended
  • No action yet
  • Section 45 renewable electricity production credit

    • Extends credit to property with construction beginning before Jan. 1, 2016, and extends ability to claim 30% Section 48 credit in lieu of Section 45. Grant in lieu of credit not extended.
  • No action yet
  • Section 45M energy-efficient appliance credit

    • Not extended
  • No action yet
  • Section 45L energy-efficient new home credit

    • Extends through 2015
  • No action yet
  • Section 25C energy-efficient home improvement tax credit

    • Extends through 2015 and expands the credit to include energy star roofing
  • No action yet
  • Section 179D deduction for energy-efficient commercial building property

    • Extends through 2015 and updates the energy efficiency standards
  • No action yet
  • Incentives for specific locations

    Accelerated depreciation for Indian reservation business property

    • Extends through 2015
  • No action yet
  • Empowerment zone tax incentives

    • Extends through 2015
  • No action yet
  • Section 199 deduction for Puerto Rican production activities

    • Extends through 2015
  • No action yet
  • Increased limit on rum excise tax cover for Puerto Rico and the Virgin Islands

    • Extends through 2015
  • No action yet
  • American Samoa economic development credit

    • Extends through 2015
  • No action yet
  • New York Liberty Zone tax-exempt bond financing

    • Not extended
  • No action yet
  • Qualified Zone Academy Bonds

    • Extends through 2015 and reduces the private contribution requirement to 5%
  • No action yet

  • Contact
    Mel Schwarz
    202.521.1564
    mel.schwarz@us.gt.com

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