Just when we thought all was said and done and final for the 2017 tax law, 31 items that had expired as of December 31, 2016 have been brought back, most with a new December 31, 2017 expiration date. How can that be? 2017 is done and over with! The bipartisan budget deal that was signed into law by President Trump on February 9, 2018 carried these tax provisions with it.
So what provisions got extended?
|Renewable Energy Provisions|
|§25C||10% credit for qualified nonbusiness energy property.|
|§25D||Credit for residential energy property for qualified fuel cell property, small wind energy property, geothermal heat pump property, qualified solar electric property, and solar water heating property. This credit was extended to end December 31, 2021.|
|§30B||Credit for qualified fuel cell motor vehicles.|
|§30C||30% credit for the cost of alternative fuel vehicle refueling property. This is non-hydrogen fuel.|
|§30D||10% credit for plug-in electric motorcycles and two-wheeled vehicles.|
|§40(b)(6)||Credit per gallon of qualified second-generation biofuel produced.|
|§40A||Credit for biodiesel and renewable diesel which includes the following: biodiesel mixture credit, biodiesel credit, and the small agri-biodiesel producer credit.|
|§45(e)(10)(A)(i)||Credit for production at Indian coal facilities.|
|§45||Credits for facilities producing energy from certain renewable resources.|
|§45L||Credit for each qualified new energy-efficient home constructed by an eligible contractor and acquired by a person from the eligible contractor to be used as a residence for the tax year.|
|§48||Credit for fiber optic solar lighting, geothermal heat pump, small wind energy, and combined heat and power properties. Also the credit for qualified fuel cell and microturbine plants. This is extended to December 31, 2021, but will be subject to a phase out.|
|§168(l)||Depreciation allowance of 50% of the adjusted basis of qualified second-generation biofuel plant property.|
|§179D||Deduction for energy-efficient commercial buildings.|
|§451(i)||Rules for sale or dispositions to implement Federal Energy Regulator Commission or state electric restructuring policy for qualified electric utilities.|
|§6426(c)||Excise tax credits for alternative fuels and related §6427(e) outlay payments for alternative fuels.|
|Individual Tax Provisions|
|§108(a)(1)(E)||Exclusion of discharge of qualified principal residence indebtedness income from gross income. (Foreclosures)|
|§163(h)(3)||Mortgage insurance premiums as qualified residence interest. This effects individuals who obtained mortgages that due to a low down payment, had mortgage insurance attached to their monthly payments.|
|§222||Above-the-line deduction for qualified tuition and related expenses. The state of Oregon also follows IRC §222. Prior to signing of the budget bill, the tuition and expense deduction, capped at $4,000, was disallowed for Oregon. Now it is allowed for tax year 2017.|
|Business Tax Provisions|
|§45A||Indian employment tax credit for employers of enrolled members of Indian tribes (or spouses) who work on and live on or near an Indian reservation.|
|§45G||Credit equal to 50% of the qualified railroad track maintenance expenditures paid or incurred by an eligible taxpayer.|
|§45N||Credit for mine rescue team training. This covers a portion of the training costs for qualified mine rescue team employees.|
|§168(e)(3)(A)||MACRS depreciable life for certain racehorses is to be three years rather than seven years.|
|§168(i)(15)||MACRS depreciable life for motorsports entertainment complexes is seven years.|
|§168(j)||For property primarily used in a trade or business within an Indian reservation, accelerated depreciation is permissible.|
|§179E||Election to expense 50% of mine safety equipment cost within the year the equipment is placed in service.|
|§181||Expensing rules for certain film and television productions. This allows eligible taxpayers to treat costs of any qualified film or television production as a deductible expense. This also includes live theatrical productions.|
|§199(d)(8)||Deduction for income attributable to domestic production activities (DPAD) in Puerto Rico.|
|§1391||Credits for empowerment zone tax incentives are extended through 2017.|
|§7652(f)||Temporary increase in the limit on cover over of rum excise taxes from $10.50 to $13.25 per proof gallon to Puerto Rico and the US Virgin Islands. This has been ended through December 31, 2021. In the tax cuts and jobs acts, reduced rates for wine are only through December 31, 2019.|
|Timber Gains in a C-Corp||For 2017, timber gains in a C Corporation are taxed at 23.8% rather than the graduated corporate tax brackets. Although this expired December 31, 2017, all C Corporation income is taxed at 21% for federal purposes beginning January 1, 2018.|
|§30A||American Samoa economic development credit.|
In addition to the extenders, there were a few new provisions that were put into place as well. Majority of them pertain to the wildfires which occurred in California beginning October of 2017.
If you suffered a “net disaster loss” in the California wildfire disaster area (Santa Rosa, etc) and it was on or after October 8, 2017, the 10% of Adjusted Gross Income (AGI) hurdle has been removed. This means if your qualified loss was $10,000 and your AGI was $100,000, under prior law your loss would not be deductible. If it qualifies, it is fully deductible.
For donations made to a §170 charitable organization for relief efforts related to the wildfires between October 8, 2017 and December 31, 2018, the 50% of AGI (2017) and 60% of AGI (2018) limitations do not apply. For example, if a taxpayer donated $50,000 to the wildfire relief efforts, but the taxpayer only had $75,000 of AGI, under 2017 law, the donation would be capped at $37,500. With the new provision, there would be no cap. Since this is through December 31, 2018, it can be used as a planning tool for taxpayers in 2018.
Employee Retention Tax Credit
Also for the areas in the California wildfire disaster area, those whose business were inoperable between October 17, 2017 and December 31, 2017 can received a credit of 40%, up to $6,000, $2,400 of credit, paid to an eligible employee. An eligible employee is an employee who worked for the employer between October 17, 2017 and December 31, 2017. Additionally, the business would have needed to be in business prior to October 17, 2017 to be eligible.
10% Retirement Withdrawal Penalty Relief
If due to the wildfires, a taxpayer was forced to make early withdrawals from a qualified retirement plan that would be subject to the 10% early withdrawal penalty, the penalty is waived. This applies to taxpayers whose principal home between October 8, 2017 and December 31, 2017 was located in the California disaster relief area. Additionally, eligible taxpayers can spread the income from the distributions over a three year period.
Although the federal budget and the budget deficient grabbed the headlines, there were quite a few tax items that got pushed through with the last budget. Be sure to give Fitzpatrick, Johnson & Associates CPAs a call today, (503) 472-0576, to see how we can help you.
Fitzpatrick, Johnson & Associates CPAs is a full service accounting firm with a team of Certified Public Accountants providing tax, financial statement, and bookkeeping services. We are based in McMinnville, Oregon in the heart of Oregon’s wine country, the Willamette Valley. From inception, we have been providing superb and accurate service to local wineries and vineyards.