Dec 11

Senate Expected To Approve One-Year Extension Of Extenders, ABLE Act

The House bill extends through 2014 the state and local sales tax deduction, higher education tuition and fees deduction and:

•Exclusion of discharge of qualified principal residence indebtedness

•Mortgage insurance premium deduction

•Teachers’ classroom expense deduction

•Tax-free charitable distributions from IRAs

•Contributions of real property for conservation purposes

Business incentives

Along with extending 50 percent bonus depreciation, enhanced Code Sec. 179 expensing, the research tax credit, transit benefits parity, and the Work Opportunity Tax Credit, the House bill includes:

•Election to claim accelerated AMT credit in lieu of bonus depreciation

•15-year straight-line cost recovery for leasehold improvements, restaurant property and retail improvements

•Seven-year recovery for motor sports complexes

•Accelerated depreciation for business property on Indian reservations

•Special expensing rules for film and television productions

•Election to expense advanced mine safety equipment

•Employer wage credit for activated military reservists

•New Markets Tax Credit

•Indian employment tax credit

•Railroad track maintenance credit

•Mine rescue team training tax credit

•American Samoa economic development credit

•Basis adjustment to stock of S corp making charitable contributions

•Enhanced deduction for charitable contributions of food inventory

•Recognition period for S corp built-in gains tax

•Low-income tax credits for non-federally subsidized new building

•Low-income housing tax credit treatment of military housing allowance

•Treatment of dividends of regulated investment companies

•Treatment of RICs as qualified investment entities

•Puerto Rico production activities deduction

•Cover over of run excise taxes

•Classification of certain race horses as three-year property

•Treatment of certain real property as Code Sec. 179 property

•Subpart F exception for active financing income

•Look-through rule for related controlled foreign corporation payments

Energy extenders

The House bill renews the Code Sec. 25C residential energy property credit along with:

•Production Tax Credit

•Second generation biofuel producer credit

•Incentives for biodiesel and renewable diesel

•Production credit for Indian coal facilities

•Credit for energy-efficient new homes

•Second generation biofuel plant property

•Deduction for energy-efficient commercial buildings

•Special rules for sales of electric transmission property

•Excise tax credits for certain alternative fuels


The ABLE Act authorizes states to create an ABLE Program. Funds in ABLE accounts set up for disabled individuals would be available to pay qualified expenses, such as housing and transportation costs. The ABLE Act is offset, among other revenue raisers, by allowing the IRS to certify qualifying professional employer organizations (PEOs); excluding dividends received from a foreign subsidiary from the additional 20-percent tax on personal holding company income; indexing for inflation some civil tax penalties; and increasing levy on payments to Medicare providers for unpaid taxes. The ABLE Act also permits Section 529 account investment direction by an account contributor or designated beneficiary up two times per year.

Technical corrections

The House bill also makes technical corrections to a number of existing tax acts. The House bill also repeals some provisions in the Tax Code that relate to past tax years and generally are no longer applied in computing taxes for open tax years. These provisions are often referred to as “deadwood.”