Two legislative initiatives passed by Congress last December contain “extenders” and other provisions affecting individual taxpayers. Several of the significant provisions of this legislation are summarized below.
The PATH Act
The “Protecting Americans from Tax Hikes (PATH) Act of 2015” deals with “extenders” — a collection of more than 50 individual and business tax deductions, credits and other tax provisions that have been in force for years, but which have been temporarily extended for short periods of time. Many of these tax-saving provisions expired at the end of 2014. In a refreshing change, Congress has made many of these tax breaks permanent and has extended other provisions for two or five years. The PATH Act also modified many of the provisions. Changes affecting individuals include the following:
The “built-in gains tax” is a corporate-level tax imposed on former C corporations that make the S corporation election, and is designed to prevent S corporation elections in contemplation of a sale of assets followed by liquidation. While S corporation rules originally required a ten-year waiting period following an S corporation election to avoid the “built-in gains tax,” the new rules permanently reduce this waiting period to five years. Shareholders contemplating the sale of assets of a former C corporation that has made the S corporation election should have their tax advisors carefully review the implications of this change.
The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015
The “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015” was also passed last December. While this Act was generally designed as a three-month stopgap extension of the Highway Trust Fund and related provisions, the Act contains a number of significant tax provisions, including the following:
This extension period is one month longer than under current law.
Please contact your Warner Norcross & Judd tax expert if you have any questions regarding this new legislation.
