Just before recessing for the holidays, the House and Senate passed the “Protecting Americans from Tax Hikes Act of 2015” (PATH Act.) On December 18th President Obama signed the PATH Act ” into law; which as a result allows over 50 expired tax provisions to be retroactively extended for the 2015 tax year. Unlike prior years, this year’s extender bill makes permanent over 20 of the expired tax provisions, including: the increased Section 179 fixed asset expensing limit, 100% gain exclusion for Qualified Small Business Stock, reduced recognition period for S-corp built in gains tax and others. In addition, many extenders have been enhanced.
Prior to approval of the Act, the Code Sec. 179 expensing dollar limit was $25,000 with an investment limit of $200,000. The Act permanently raises the dollar limit to $500,000 with an investment limit of $2,000,000 with both limits indexed to inflation starting in 2016. The Act extended the 50 percent bonus depreciation for the 2015-2017 tax years with a gradual reduction through 2019. Bonus depreciation allows taxpayers to claim an extra first-year depreciation deduction for new property placed in service during 2015-2019.
Several other important business tax provisions were either temporarily or permanently extended:
- 100% gain exclusion for Qualified Small Business Stock
- Reduced recognition period for S-corp built in gains tax- permanently a five year recognition period
- Availability of 15 year straight line cost recovery for qualified leasehold improvements
- Employer wage credits for employees who are active duty members of the armed forces
- Work opportunity tax credit extended for five years
- Energy Efficient Commercial Building deduction extended through 2016
The Act and the Omnibus budget bill passed the same day made several changes to the Affordable Care Act (Obamacare). The excise tax on the so called “Cadillac” health insurance plans was delayed for two years. Also, there is a one year moratorium on the health insurance provider fee which imposed a fee on entities providing health insurance.
The PATH Act proves to be extremely beneficial for businesses and individuals for the 2015 tax year and beyond, and is an estimated cost of over 800 billion dollars.
This article only highlights some of the many provisions in the 233 page Act.