Provisions Offer Additional Tax Benefits
In late July the Senate Finance Committee approved a modified and expanded version of the tax extenders bill that would provide a two-year retroactive extension of more than 50 expired business and individual tax provisions. Most noteworthy are enhancements to the research and development tax credit; §179 expensing provision; and the §179D deduction for sustainable design and construction of commercial properties.
R&D tax credit expansion would benefit small and medium sized businesses
The proposed R&D tax credit extension includes an AMT patch, which would allow companies paying AMT with less than $50 million in average sales over the prior three years to claim the credit. Start ups, defined as companies with less than $5 million in gross receipts and less than five years old, would be able to use the credit to offset up to $250,000 in payroll taxes annually.
Fixed asset benefits from enhancements to bill
The proposed bill would index the increased §179 expensing and phase-out limits ($500,000 and $2 million, respectively) to inflation. This is in addition to the extension of bonus depreciation and 15-year recovery for qualified properties.
Energy-efficient commercial building deduction expanded
The §179D commercial green building deduction would be expanded to allow nonprofits and tribal organizations to allocate the deduction to the primary designer of the property, a provision currently in place for government or other public entities.
If passed, all of the extenders would be set to expire on December 31, 2016. The modifications proposed for the extenders listed here could potentially provide significantly higher benefits for many small to medium sized businesses. The bill now has to make its way to the full Senate, although congressional debate will likely delay enactment until year-end.
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