The Protecting Americans from Tax Hikes (PATH) Act

President Obama signed into law The Protecting Americans from Tax Hikes (PATH) Act on December 18, 2015.  The PATH Act includes renewal of number of expired tax deductions, credits, and incentives as summarized below:

• Research & Experimental Credit – Permanently extended retroactively January 1, 2015.  Certain eligible small business can now use the credit against alternative minimum tax liability and employer portion of their payroll tax liability.

• Section 179 expense – The Act makes permanent the increased expensing limit to $500,000.

• Subpart F exception for active financing income – The bill makes permanent the subpart F exception for certain foreign income derived in the active conduct of banking, financing, securities, or insurance business.

• S-Corporation built-in gains tax recognition Period – The Law permanently reduced the S-corporation built-in gains recognition period from 10 years to 5 years.

• 100% qualified small business stock gain exclusion – The Act makes qualified small business stock gain provision permanent.

• Bonus depreciation – The bill extends bonus deprecation from 2015 through 2019:  50% bonus depreciation for assets placed in service in 2015 through 2017, 40% in 2018, and 30% in 2019.

• Work opportunity tax credit (WOTC) – this hiring related tax credit is extended through 2019.

• Solar energy investment tax credit – the extender renews investment tax credit for qualified expenditures on solar energy through 2019.

• State & local sales tax deduction – individuals are allowed to deduct state and local sales taxes in lieu of income taxes permanently.

• Earned income tax credit & child tax credit – the Act extends for individuals the earned income tax credit and child tax credit through 2017.

Please contact us for further detail of provisions included in the PATH Act.