On Dec. 3, the House of Representatives, by a vote of 378 to 46, passed H.R.5771, the “Tax Increase Prevention Act of 2014” (TIPA), a $41.6 billion bill which would generally extend for one year through the end of 2014 a number of tax relief provisions that expired at the end of 2013. The House also passed H.R.647, the “Achieving a Better Life Experience (ABLE) Act of 2014,” which will be added to the extender package in the engrossment of the bill.

TIPA would extend the following individual provisions through 2014:

• $250 above-the-line deduction for certain expenses of teachers (Code Sec. 62(a)(2)(D));
• Exclusion of up to $2 million ($1 million if married filing separately) of discharged principal residence indebtedness from gross income; (Code Sec. 108(a)(1)(E));
• Parity for exclusion for employer-provided mass transit and parking benefits (Code Sec. 132(f)(2));
• Deduction for mortgage insurance premiums treated as qualified interest (Code Sec. 163(h)(3)(E));
• Deduction for state and local sales taxes (Code Sec. 164(b)(5)(I)); and
• Above-the-line deduction for qualified tuition and related expenses. (Code Sec. 222(e))

TIPA would extend the following business provisions through 2014:

• Research and experimentation credit (Code Sec. 41);
• Low-income housing 9% credit rate freeze (extended for allocations made before Jan. 1, 2016) (Code Sec. 42);
• Military housing allowance exclusion for determining whether a tenant in certain counties is low-income (section 3005 of 2008 Housing Assistance Tax Act);
• Indian employment credit (Code Sec. 45A);
• New markets tax credit (Code Sec. 45D);
• Railroad track maintenance credit (Code Sec. 45G);
• Mine rescue team training credit (Code Sec. 45N);
• Employer wage credit for activated military reservists (Code Sec. 45P);
• Work opportunity tax credit (Code Sec. 51);
• Qualified zone academy bonds (Code Sec. 54E);
• Classification of certain race horses as 3-year property (Code Sec. 168(e)(3)(A));
• 15-year straight line cost recovery for qualified leasehold property, qualified restaurant property, and qualified retail improvements (Code Sec. 168(e)(3)(E));
• 7-year recovery period for motorsports entertainment complexes (Code Sec. 168(i)(15));
• Accelerated depreciation for business property on Indian reservations (Code Sec. 168(j));
• 50% bonus depreciation (Code Sec. 168(k));
• Increase in expensing limit and in investment based phaseout amount and expanded definition of Section 179 property for certain real property (Code Sec. 179);
• Election to expense mine safety equipment (Code Sec. 179E);
• Special expensing rules for film and television production (Code Sec. 181(f));
• Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico (Code Sec. 199);
• Modification of tax treatment of certain payments to controlling exempt organizations (Code Sec. 512);
• Special treatment of certain dividends of regulated investment companies (RICs) (Code Sec. 871(k));
• RIC qualified investment entity treatment under FIRPTA (Code Sec. 897(h));
• Exceptions under Subpart F for active financing income (Code Sec. 953, Code Sec. 954);
• Look-through treatment of payments between controlled foreign corporations (Code Sec. 954(c)(6));
• Special 100% gain exclusion for qualified small business stock (Code Sec. 1202);
• Reduction in S corporation recognition period for built-in gains tax (Code Sec. 1374);
• Empowerment zone tax incentives (Code Sec. 1391);
• Temporary increase in limit on cover over of rum excise taxes to Puerto Rico and the Virgin Islands (Code Sec. 7652); and
• American Samoa economic development credit. (section 19 of 2006 Tax Relief and Health Care Act)

TIPA would extend the following charitable provisions through 2014:

• Enhanced charitable deduction for contributions of food inventory (Code Sec. 170);
• Basis adjustment to stock of S corporations making charitable contributions of property (Code Sec. 1367);
• Special rules for contributions of capital gain real property for conservation purposes (Code Sec. 170(b)(1)(E), Code Sec. 170(b)(2)(B)); and
• Tax-free distributions for charitable purposes from individual retirement account (IRA) accounts of taxpayers age 70 1/2 or older. (Code Sec. 408(d)(8)

(F))

TIPA would extend the following energy provisions through 2014:

• Credit for nonbusiness energy property (Code Sec. 25C);
• Credit for second generation biofuel producer credit (Code Sec. 40(b));
• Incentives for biodiesel and renewable diesel (Code Sec. 40A);
• Production credit for Indian coal facilities placed in service before 2009 (Code Sec. 45(e)(10));
• Credits with respect to facilities producing energy from certain renewable resources (Code Sec. 45(d));
• Credit for construction of energy efficient new homes (Code Sec. 45L);
• Special allowance for second generation biofuel plant property (Code Sec. 168(l));
• Energy efficient commercial building deduction (Code Sec. 179D(h));
• Special rule for sales or dispositions to implement FERC or State electric restructuring policy for qualified electric utilities (Code Sec. 451(i)); and
• Incentives for alternative fuel and alternative fuel mixtures. (Code Sec. 6426, Code Sec. 6427)

TIPA would extend the following provisions on multiemployer defined benefit pension plans through 2015:

• Automatic extension of amortization periods (Code Sec. 431(d)(1)(C)); and
• Shortfall funding method for plans in endangered or critical status. (sec. 221(c) of the Pension Protection Act of 2006, P.L. 109-280)

Please note that the bill will become law only after signature by the President.
 
The passing of this tax bill (once signed into law by the President), will clarify tax planning for December 31, 2014. Please feel free to contact us at Rackers & Fernandez to discuss your year end tax planning and Happy Holidays to all of our valued clients!

Best regards,
 
Rackers & Fernandez, LLC
 
334 Jungermann Rd.
St. Peters, MO 63376
o. 636-498-1900
f. 636-498-1905