Smith Dickson, An Accountancy Corporation 

Special Bulletin - December 2015
CONGRESS FINALIZES THE "PROTECTING AMERICANS FROM TAX HIKES ACT OF 2015"

The Protecting Americans from Tax Hikes (PATH) Act of 2015 was passed by Congress on December 16th and signed by President Obama on December 18th.  

The
Act is a culmination of recent work done in both chambers of Congress and renews and makes permanent important tax incentives that support both individuals and job creators. Per House Ways and Means Committee Chairman Kevin Brady, "The most important thing for the American people to know is that this bill prevents their taxes from increasing, helps create more jobs in their communities, and makes it easier for them to do their taxes ... By delivering permanent tax relief, we're making it easier for Americans to keep more of their own money, find new jobs, and increase their wages. Businesses will also be able to invest with confidence in new equipment, research and jobs to grow the local economy. This bill is an important piece of our plan to replace our broken tax code with a simpler, fairer system that actually works for the American people.  By passing this bill now, Congress will have the freedom in the New Year to move forward with comprehensive tax reform that grows our economy."

Some key provisions of the Act include:


Made permanent:
  • Above-the-line educator deduction
  • Built-in gains holding period
  • Enhanced American Opportunity Tax Credit
  • Enhanced Child Tax Credit
  • Enhanced Earned Income Tax Credit
  • Enhanced exclusion of gain on sale of small business stock
  • Enhanced mass transit and parking pass benefits
  • IRA-to-charity - California automatically conforms
  • Section 179 will be permanent at the $500,000 level. Businesses exceeding a total of $2 million of purchases in qualifying equipment will have the Section 179 deduction phase-out dollar-for-dollar and completely eliminated above $2.5 million. Additionally, the Section 179 cap will be indexed to inflation in $10,000 increments in future years.
  • R&D credit
  • Sales tax deduction 
Extended through 2016:
  • COD principal residence exclusion
  • Mortgage insurance premium deductible as interest
  • Non-business Energy Property Credit
  • Qualified tuition deduction 
Extended through 2019:
  • Bonus depreciation - phases out
  • First year bonus depreciation on automobiles - enhanced
  • Work Opportunity Tax Credit 
SIX WAYS THE "PROTECTING AMERICANS FROM TAX HIKES" ACT HELPS TAXPAYERS 
The Act was designed to help our economy grow and help American taxpayers keep more of their hard-earned dollars. Per the House Ways & Means Committee, this bipartisan, pro-growth bill:
 
Delivers Certainty to American Taxpayers: By making a number of temporary tax provisions permanent, this legislation delivers predictability, clarity, and certainty for individuals, families and job creators. Americans will no longer have to worry each December if Congress will take action to extend certain tax relief policies.
 
Prevents Tax Increases:The provisions in this bill will prevent a significant immediate tax increase on millions of Americans. And in years to come, individual Americans and U.S. businesses will no longer have to worry if Congress will take action to extend important tax relief policies like:
  • Allowing State sales tax deductions;
  • Providing small business tax relief, including increased small business expensing; and
  • Offering incentives for innovation, including the research and development tax credit.
Grows our Economy: By delivering permanent tax relief to America's job creators, this legislation will make it easier for employers to plan ahead, hire new workers, grow their businesses, and invest in their communities.

Serves as a Bridge to Comprehensive Tax Reform:This bill lays the groundwork for historic reforms that will fix our broken tax code. Instead of spending months each year debating temporary tax extensions, Congress will be able to focus on the comprehensive tax reform we all agree our country needs. Americans deserve a simpler, fairer and flatter tax code that's built for growth, and this bill will help make that possible.

Prevents Fraud and Abuse: This legislation includes a number of provisions designed to strengthen the integrity of tax credit programs that today have high rates of improper payments, fraud, and abuse.   In the New Year, Congress will take more actions to ensure the right amount of tax credits are paid out and that people can't take advantage of the current broken tax system.

Reins in the IRS: This bill includes a series of reforms that have previously passed the House designed to rein in the power of the IRS and better protect taxpayers, such as:
  • Firing IRS employees who take politically motivated actions against taxpayers;
  • Requiring IRS employees to respect the taxpayer bill of rights; and
  • Prohibiting IRS employees from using personal e-mail accounts for official business.
For a section-by-section summary of the Act, see: http://waysandmeans.house.gov/wp-content/uploads/2015/12/SECTION-BY-SECTION-SUMMARY-OF-THE-PROPOSED-PATH-ACT.pdf. Please contact Smith Dickson with any questions.

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ABOUT SMITH DICKSON

 

Smith Dickson is a full-service Southern California CPA firm that specializes in providing high-quality services designed to create long-term value for our clients. Our services include accounting, tax compliance and planning, litigation support, business consulting and estate/trust tax compliance. Please contact us with your questions.

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