Sarah Thomas, JD
While most of us have been catching up on Season One of Empire (can you believe it didn’t win a single Emmy?), and trying to decide whether Terrence Howard is crazy (#Terryology), Representative Paul Ryan (R-WI) and the Congressional Ways & Means Committee have been hashing out the details of their version of primetime drama: tax extenders. On September 17, the committee passed five tax bills, four of which affect businesses, and one that has teachers in mind. All five bills propose permanent changes to the tax code.
Business folks are likely most excited about the possibility that Bonus Depreciation would be here to stay, allowing a fifty percent deduction for qualified property placed in service during a taxable year. Ways & Means hopes that this will incentivize businesses to buy new equipment and help jumpstart the American job market in domestic manufacturing. Bonus!
If two other tax provisions become permanent, one regarding Active Financing Income and another about Controlled Foreign Corporations (CFCs), many companies with overseas operations will do the Dance of Joy. The former bill would create an exemption under Subpart F for Active Financing Income, allowing financial companies to defer paying tax on their overseas income (yay for kicking the can down the road!). The idea is that this bill would allow U.S. companies to be more competitive with their foreign counterparts, since the American firms wouldn’t be subject to “an onerous worldwide tax system,” according to Representative Patrick Tiberi (R-OH). The latter bill would allow U.S. companies to transfer money between CFCs without paying tax.
A fourth bill proposes a permanent deduction of $250 for “qualifying” teachers who spend such money on appropriate classroom materials. I’m certain this generous deduction will spur teachers nationwide to celebrate wildly, since it will probably amount to a margarita’s worth of reduction in their annual tax bill.
The fifth and final bill would create a (permanent) fifteen-year depreciation schedule for restaurants.
Each of the five bills will now go to the House floor for a vote.
While sending these bills to the House floor is newsworthy, many were hopeful that the tax extenders process would go more swiftly this year than during 2014. Recall that more than fifty provisions of the tax code expired at the end of 2014, leaving many Americans with lots of uncertainty regarding tax planning for 2015. Among the expired/expiring provisions, many here at BRAYN Consulting, LLC consider the research and development tax credit, Section 179 expensing, and the reduced tax on Puerto Rican rum to be the most important. We wait with bated breath to see whether Chairman Ryan will be victorious in his quest for permanent tax extenders, or if the Senate’s plan to simply temporarily extend all fifty of the provisions through the end of the 2016 tax year will succeed instead. In the meantime, Terrence Howard thinks 1 X 1=2.