TaxConnections


 

Over 50 Provisions Retroactively Extended On 12/19/14



TaxConnections Picture - Tax Bulls Eye 2 - square

On December 31, 2013, 57 provisions in the federal tax law expired. Many had expired before and been renewed. While there was discussion in the congressional tax committees since at least April 2014, as well as votes, no consensus was reached until early December. The House passed the bill – H.R. 5771, the Tax Increase Prevention Act, on December 3 by 378-46. On December 16, the Senate passed it by a vote of 76-16. On December 19, President Obama signed the bill. The Joint Committee on Taxation estimates the cost of H.R. 5771 for one year as about $81 billion, but only $42 billion for ten years (because some of the items, such as bonus depreciation involved timing of deductions).

The extension means, for example, that if a business purchased new equipment in the first 50 weeks of 2014 not expecting to be able to claim 50% bonus depreciation on it (because that rule expired 12/31/13), they get the gift of extra depreciation for 2014. This is contrary to the primary purpose of bonus depreciation which is to encourage businesses to buy new equipment.

The late extension, for just one year, also means that at 1/1/15, they are all gone again.

This is an odd way to design a tax system. When something is added temporarily, such as to help get out of an economic recession, it should be allowed to expire when the need no longer exists. If another provision is deemed appropriate for a tax system, such as allowing individuals who itemize to deduct either their sales tax or their income tax (assuming there is even a reason to deduct either), make it a permanent part of the system.

Will the needed analysis of these extenders occur in 2015? Or will we reach the end of 2015 with a repeat of what happened this year?

What do you think? Connect with me on TaxConnections.

Original Post By:  Annette Nellen

Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.

Twitter LinkedIn 

Leave a Reply

Your email address will not be published. Required fields are marked *

3 − two =

TaxConnections