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House votes to make charity provisions permanent

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The House voted 277–130 on July 17 to make three expired charitable giving provisions permanent, but a final resolution on this and 50-plus other provisions that expired at the end of 2013 still looks unlikely until late in the year.
H.R. 4719 combines six different bills approved by the Ways and Means Committee. The combined legislation would make three expired provisions permanent:

  • 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 bill would also enhance the deduction for conservation easement contributions from Alaska Native Corporations, and would lower excise taxes on private foundation investment income and allow taxpayers to claim a charitable deduction for gifts after the end of the year if made before the filing due date.

The House action is part of a longer process that House Republicans are using to address the 50-plus provisions that expired at the end of 2013. The Ways and Means Committee has voted to make just seven other expired provisions permanent:

  • Alternative simplified research credit
  • Increased Section 179 expensing limits
  • 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
  • The reduced five-year holding period for built-in-gains tax after an S corporation conversion
  • The S corporation basis reduction limit for charitable gifts

The full House has now passed all the bills except for the Subpart F exception for active financing and Subpart F look-through rule for controlled foreign corporation income. The president has threatened to veto all of them 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., is still maintaining that the Senate will not act on expired provisions until after the November elections because Republicans blocked a final vote on the EXPIRE Act. 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 still doesn’t seem imminent. Because of the high cost of permanent extensions, it appears 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. 4719 would make permanent and was passed by the House on July 17

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. 4719 would make permanent and enhance the deduction for Alaska Native Corporations. It was passed by the House on July 17.

Enhanced charitable deduction for gifts of food inventory

  • Extends through 2015
  • H.R. 4719 would make permanent and enhance the provision, and was passed by the House on July 17

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


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

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