Information on Important New Tax Legislation

On Friday last week, the Consolidated Appropriations Act of 2016 was passed through Congress.  Shortly after, President Obama signed the bill into law, making a wide range of tax extenders permanent.  This legislation makes the Research and Development (R&D) Tax Credit permanent, along with 50 other periodically expiring tax breaks.

Some of the tax credits made permanent by the bill include:

• The Child Care Credit
• The American Opportunity Tax Credit
• The Earned Income Tax Credit
• Section 179 Deductions

Other items addressed include:

• The Work Opportunity Tax Credit
• The New Markets Tax Credit and bonus depreciation for five years
• Various energy tax incentives

The permanent R&D Tax Credit provision, for the first time, makes certain small businesses eligible to claim credit against the alternative minimum tax liability or against the employer’s payroll tax liability.

The Section 179 provision sets a new threshold for small business expensing limitation. This new threshold is set at $500,000 and $2 million, up from the current amounts of $25,000 and $200,000 respectively. 

The following articles Journal of Accountancy article gives a very detailed outline of the legislation’s provisions.

• http://www.journalofaccountancy.com/news/2015/dec/tax-extender-legislation-introduced-in-congress-201513571.html (written before the legislation was approved)
• Protecting Americans From Tax Hikes Act of 2015

This legislation will likely have an impact on your tax planning, so we recommend consulting with one of our tax professionals.