This is part 1 of 2.
Several important tax developments have occurred in the past three months that may affect you, your family, your investments, and your livelihood.
Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.
New tax legislation. While in the past, Congress has been chastised by some for being gridlocked, there was a flurry of new laws containing tax provisions in the last quarter of the year:
- The Protecting Americans From Tax Hikes (PATH) Act retroactively extended 50 or so taxpayer-favorable tax “extenders”—temporary tax provisions that are routinely extended by Congress on a one- or two-year basis, that had been expired since the end of 2014. It made permanent more than a dozen of the extenders (including the enhanced child tax credit, American opportunity tax credit, and earned income tax credit; parity for exclusion from income for employer-provided mass transit and parking benefits; the deduction of State and local general sales taxes; the research credit; and 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements). It also contained a delay in the Affordable Care Act’s 2.3% excise tax on medical devices and provisions on Real Estate Investment Trusts (REITs), IRS administration, the Tax Court and numerous other rules.
- The Consolidated Appropriations Act included a delay of the Affordable Care Act’s 40% excise tax on high cost employer-sponsored health coverage (i.e., the so-called “Cadillac” tax) and a one-year suspension of the annual fee on health insurance providers, in addition to the extension and phaseout of credits for wind facilities, the election to treat qualified facilities as energy property, the solar energy credit, and qualified solar electric and water heating property credits. It also contained a provision that gives independent oil refiners a favorable way of accounting for transportation costs in calculating their domestic production activities deduction.
- The Fixing America’s Surface Transportation (FAST) Act requires the Secretary of State to deny a passport (or renewal of a passport) to a seriously delinquent taxpayer (i.e., generally, a taxpayer with any outstanding debt for Federal taxes in excess of $50,000). It also requires the IRS to enter into qualified tax collection contracts with private debt collectors for the collection of inactive tax receivables and repealed a recently enacted provision that provided for a longer automatic extension of the due date for filing Form 5500.
- The Bipartisan Budget Act of 2015 eliminated the TEFRA unified partnership audit rules (so-called because they were introduced in the Tax Equity And Fiscal Responsibility Act of ’82) and the electing large partnership rules, and replaced them with streamlined partnership audit rules. The new rules are effective for returns filed for partnership tax years beginning after Dec. 31, 2017, but taxpayers can elect to apply them earlier.
- The Protecting Affordable Coverage for Employees Act revised the non-tax definition of small and large employers for purposes of the Affordable Care Act. This, however, also ended up modifying a benefits-related tax rule under Code Sec. 125(f)(3) permitting certain qualified health plans to be offered through cafeteria plans.
Standard mileage rates down for 2016. The optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) decreased by 3.5¢ to 54¢ per mile for business travel after 2015. This rate can also be used by employers to provide tax-free reimbursements to employees who supply their own autos for business use, under an accountable plan, and to value personal use of certain low-cost employer-provided vehicles. The rate for using a car to get medical care or in connection with a move that qualifies for the moving expense decreased by 4¢ to 19¢ per mile.
To be continued…