The Consolidated Appropriations Act of 2016, enacted Dec. 18, 2015, extends a long list of expired tax provisions into the future. Unlike past extension legislation, Congress extended many provisions permanently. In more traditional fashion, some of the others were extended for five years, and many for two years. The Joint Committee on Taxation estimates that the total cost of the tax provisions in the bill will be $622 billion over 10 years. Without Congress extending these various provisions, millions of Americans were in danger of losing these beneficial tax breaks by 2017.
The following incentives for real estate investment have been made permanent:
- The § 42(b)(2) minimum low-income housing tax credit rate for non-federally subsidized buildings.
- § 142(d)(2)(B)(ii), under which the military basic pay allowance for housing exclusion is disregarded for a qualified building for purposes of the low-income housing credit.
- § 897(h)(4), which treats regulated investment companies (RICs) as qualified investment entities under the Foreign Investment in Real Property Tax Act.
Some provisions were extended, but not permanently. Provisions extended through 2019 include:
- The § 45D new markets tax credit which provides tax credits for investments in businesses or real estate in low-income communities.
- The § 51 work opportunity tax credit equal to 40% of the qualified first-year wages of employees who are members of a targeted group. This credit is also modified beginning in 2016 to allow it to be claimed by employers that hire qualified long-term unemployed individuals.
- § 168(k) providing a depreciation deduction equal to 50% of the adjusted basis of qualifying property in the first year it is placed in service (also known as bonus depreciation). Bonus depreciation is now allowed for “qualified improvement property.”
- § 954(c)(6), which provides for look through treatment of payments of dividends, interest, rents, and royalties received or accrued from related controlled foreign corporations under the foreign personal holding company rules.
If you have a question based upon the implication of one of the tax provisions now extended by Congress going forward in 2016 and beyond, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation, call 212-490-0704.
