Year-End Tax Planning: Expiring Provisions

3 minute read time.

As we look at the task of year-end tax planning, it is time to be sure we know which federal tax provisions are expiring at the end of 2014. However, while that is important, this year we also have to consider that should Congress finally act to pass legislation, some of the provisions that expired at the end of 2013, may well be extended and be available in 2014. Although I am only going to discuss those provisions affecting fixed assets management, you may be surprised to know just how many there are.

Most of the fixed assets-related provisions I will discuss expired at the end of 2013. These are:

  • Credit for certain nonbusiness energy property (Sec. 25C(g))
  • Alternative fuel vehicle refueling property (non-hydrogen refueling property) (Sec. 30C(g)(2)) <The related provision of section 30C for hydrogen refueling property expires December 31, 2014.>
  • Credit for two- or three-wheeled plug-in electric vehicles (Sec. 30D(g))
  • Tax credit for research and experimentation expenses (Sec. 41(h)(1)(B))
  • Determination of low-income housing credit rate for credit allocations with respect to nonfederally subsidized buildings (Sec. 42(b)(2))
  • Credit for certain expenditures for maintaining railroad tracks (Sec. 45G(f))
  • Credit for construction of new energy efficient homes (Sec. 45L(g))
  • Credit for energy efficient appliances (Sec. 45M(b))
  • Three-year depreciation for race horses two years old or younger (Sec. 168(e)(3)(A))
  • 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements (Secs. 168(e)(3)(E)(iv), (v), and (ix))
  • Seven-year recovery period for motorsports entertainment complexes (Secs. 168(i)(15) and 168(e)(3)(C)(ii))
  • Accelerated depreciation for business property on an Indian reservation (Sec. 168(j)(8))
  • Additional first-year depreciation for 50 percent of the basis of qualified property (Secs. 168(k)(1) and (2) and 460(c)(6)(B)) <The provision for certain longer-lived and transportation property expires December 31, 2014.>
  • Election to accelerate AMT credits in lieu of additional first-year depreciation (Sec. 168(k)(4)) < The provision for certain longer-lived and transportation property expires December 31, 2014.>
  • Special depreciation allowance for second generation biofuel plant property (Sec. 168(l))
  • Increase in expensing to $500,000/$2,000,000 and expansion of definition of section 179 property (Secs. 179(b)(1) and (2) and 179(f))
  • Energy efficient commercial buildings deduction (Sec. 179D(h))
  • Election to expense advanced mine safety equipment (Sec. 179E(a))
  • Empowerment zone tax incentives including increased expensing under Sec. 179 (Secs. 1397A and 1391(d)(1)(A)(i))

 

In comparison, there are only two tax provisions affecting fixed assets management that expire at the end of 2014:

  • Alternative motor vehicle credit for qualified fuel cell motor vehicles (Sec. 30B(k)(1))
  • Alternative fuel vehicle refueling property (hydrogen refueling property) (Sec. 30C(g)(1))

 

There has been a great deal of discussion in Congress over which, if any, of the tax provisions should be either extended or made permanent. However, as of the writing of this blog, the extenders package has still not passed. The concern is that if no decision on it is made soon, the 2015 filing season could be delayed with serious ramifications, including the late processing of tax refunds for millions of taxpayers. The AICPA has been pushing for extender legislation and counts the lack of a successful extenders bill the most important of all its legislative concerns.

                        

Fascinating Fact: Of all the expired tax provisions, the one for research and experimentation (aka, the R&D credit) is undoubtedly the most popular. While there is a push to make it permanent, the efforts to do so seem to be stymied by some lawmakers who want some changes made to it first. In fact, it seems that Section 179 expensing has the most chance of all the expired provisions for permanency mainly because it is so well established and doesn’t need much modification.