December 18, 2015
By: Steven D. Beaucaire, MST, CCSP
On Dec. 18, 2015, the President signed into law “Protecting Americans from Tax Hikes (PATH) Act of 2015”. PATH makes permanent a number of tax breaks for individuals and businesses and extends a host of tax breaks some of which we will cover below.
Qualified Leasehold Improvements – PATH retroactively revives and makes permanent the §168(e)(3)(E)(iv) rule treating qualified leasehold improvement property as 15-year property. Thus, such property is eligible for a bonus depreciation deduction if placed in service before Jan. 1, 2020.
Qualified Restaurant and Qualified Retail Improvements – The Act retroactively revives and makes permanent the rules treating qualified restaurant property (§ 168(e)(3)(E)(v)) and qualified retail improvement property (§ 168(e)(3)(E)(ix)) as 15-year property. These types of property cannot get bonus depreciation under § 168(k) unless they also meet the definition of qualified leasehold improvement property.
Section 179 Expensing – PATH retroactively reinstates the increased $500,000 maximum expensing amount under § 179 and the increased $2 million investment-based phase-out amount. These increased amounts are now permanent and are indexed for inflation starting in 2016. PATH also added HVAC as eligible property after 2015. The Act also eliminates the cap of $250,000 for qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property after 2015.
Research Credit – The new law not only retroactively extends the research credit for 2015, but makes it permanent. Eligible businesses with $50 million or less in gross receipts can apply the credit against their Alternative Minimum Tax. Qualified small taxpayers can also elect to apply their credit against their payroll tax liability.
Bonus First-Year Depreciation Extended – The law extends 50% first-year bonus depreciation, at 50 percent for 2015-2017 and phased it down to 40 percent in 2018 and 30 percent in 2019 (5 Years).
Motor Sports Racing Track Facility – The classification of motor sports racing track facilities as 7 year assets was extended retroactively through December 31, 2016 (2 Years).
Indian Reservation Property – The allowance of accelerated depreciation for business property on an Indian reservation was extended for property placed in service before Jan. 1, 2016 (2 Years).
Section 179D Deductions – The new law retroactively restores and extends the energy efficient commercial buildings deduction for two years. This is for property placed in service before Jan. 1, 2017 (§ 179D(h)). For 2016 only, it also changes the reference for the qualification from the 2001 American Society of Heating Refrigerating and Air Conditioning Engineers and the Illuminating Engineering Society of North America (ASHRAE) standards, Standard 90.1-2001, to the ASHRAE 2007 standards, Standard 90.1 -2007 as in effect on the day before adoption of Standard 90.1-2010 (2 Years).
Special Note: If we have prepared a study for you in 2015 which might be positively impacted by these important retroactive changes, please feel free to contact your Bedford representative to discuss updating your report(s). We will also review our list of completed projects and reach out to those clients who may benefit from these changes.
Additionally, we will be conducting a one hour webinar on January 13th that will cover the PATH Act of 2015. Be sure sign up for this complementary session.