Protecting Americans from Tax Hikes Act of 2015

The group negotiating the tax and spending provisions came to agreement last night and has published the bill that will go to the House and Senate for a vote, probably on Thursday.  Representatives from the Whitehouse participated in the negotiations, so we anticipate the President will sign the bill.

A number of provisions were made permanent, so we should not need to wait to the last minute in future years to know what the law says. However, other provisions were only extended for 2015 and 2016.  A few items like bonus depreciation were extended thru 2019, but with modifications in later years.

Permanent Extensions

Incentives for Families and Individuals

  • $1,000 child tax credit made permanent.
  • American opportunity tax credit made permanent.
  • Enhanced earned income tax credit made permanent.
  • Above-the-line deduction (capped at $250) for the eligible expenses of elementary and secondary school teachers. Beginning in 2016, the provision also modifies the deduction to index the $250 cap to inflation and include professional development expenses.
  • Option to claim an itemized deduction for State and local general sales taxes in lieu of an itemized deduction for State and local income taxes.

Incentives for Charitable Giving              

  • Extension and modification of special rule for contributions of capital gain real property made for conservation purposes.
    • The provision also permanently extends the enhanced deduction for certain individual and corporate farmers and ranchers.
  • Tax-free distributions from individual retirement plans for charitable purposes.
  • Basis adjustment to stock of S corporations making charitable contributions of property.

Incentives for Growth, Jobs, Investment, and Innovation

  • Extension and modification of increased $500,000 179 expensing limitations and treatment of certain real property as section 179 property.
    • The special rules that allow expensing for computer software and qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property) also are permanently extended.
    • The provision modifies the expensing limitation by indexing both the $500,000 and $2 million limits for inflation beginning in 2016
    • Allows 179 deduction for air conditioning and heating units placed in service in tax years beginning after 2015.
    • Modifies the expensing limitation with respect to qualified real property by eliminating the $250,000 cap beginning in 2016.
  • Extension and modification of research credit.
  • Extension of 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.
  • Extension of exclusion of 100 percent of gain on certain small business stock.
  • Permanently extends the rule reducing to five years (rather than ten years) the period for which an S corporation must hold its assets following conversion from a C corporation to avoid the tax on built-in gains.

Extensions through 2019

  • Extension of new markets tax credit.
  • Extension and modification of work opportunity tax credit.
    • The provision extends the work opportunity tax credit through 2019.
    • Modifies the credit beginning in 2016 to apply to employers who hire qualified long-term unemployed individuals (i.e., those who have been unemployed for 27 weeks or more)
    • Increases the credit with respect to such long-term unemployed individuals to 40 percent of the first $6,000 of wages.
  • Extends bonus depreciation for property acquired and placed in service during 2015 through 2019.
    • Bonus depreciation percentage
      • 50 percent for property placed in service during 2015, 2016 and 2017
      • 40 percent in 2018, and
      • 30 percent in 2019.
    • The provision continues to allow taxpayers to elect to accelerate the use of AMT credits in lieu of bonus depreciation under special rules for property placed in service during 2015.
    • Modifies bonus depreciation to include qualified improvement property

Extensions through 2016

Tax Relief for Families and Individuals

  • Exclusion from gross income of discharge of qualified principal residence indebtedness.
  • Mortgage insurance premiums treated as qualified residence interest.
  • Above-the-line deduction for qualified tuition and related expenses.
  • 10% credit for purchases of nonbusiness energy property, limited to $500 lifetime.

Incentives for Growth, Jobs, Investment, and Innovation

  • Classification of certain race horses as 3-year property.


  • Modification of filing dates of returns and statements relating to employee wage information and nonemployee compensation to improve compliance.
    • Requires forms W-2, W-3, and returns or statements to report non-employee compensation (e.g., Form 1099-MISC), to be filed on or before January 31 of the year following the calendar year to which such returns relate.
    • Provides additional time for the IRS to review refund claims based on the earned income tax credit and the refundable portion of the child tax credit in order to reduce fraud and improper payments.
    • Effective for returns and statements relating to calendar years after the date of enactment (e.g., filed in 2017).
  • Safe harbor for de minimis errors on information returns and payee statements.
    • Establishes a safe harbor from penalties for the failure to file correct information returns and for failure to furnish correct payee statements by providing that if the error is $100 or less ($25 or less in the case of errors involving tax withholding), the issuer of the information return is not required to file a corrected return and no penalty is imposed.
    • A recipient of such a return (e.g., an employee who receives a Form W-2) can elect to have a corrected return issued to them and filed with the IRS.
    • The provision is effective for returns and statements required to be filed after December 31, 2016.
  • Extend Internal Revenue Service authority to require truncated Social Security numbers on Form W-2. The provision requires employers to include an “identifying number” for each employee, rather than an employee’s SSN, on Form W-2.  This change will permit the Department of the Treasury to promulgate regulations requiring or permitting a truncated SSN on Form W-2.  The provision is effective on the date of enactment.
  • Expands the paid-preparer due diligence requirements with respect to the earned income tax credit, and the associated $500 penalty for failures to comply, to cover returns claiming the child tax credit and American Opportunity Tax Credit. The provision applies to tax years beginning after December 31, 2015.
  • Increase the penalty applicable to paid tax preparers who engage in willful or reckless conduct to 75% of underpayment.
  • Employer identification number required for American opportunity tax credit.
  • Higher education information reporting only to include qualified tuition and related expenses actually paid.


Family Tax Relief

  • Exclusion for amounts received under the Work Colleges Program.
  • Improvements to section 529 accounts.
  • Elimination of residency requirement for qualified ABLE programs.
  • Rollovers permitted from other retirement plans into simple retirement accounts.