As I sit here on December 15, 2014 at 7:33 p.m., the U.S. Senate has not yet passed the bill that is known by its technical name as H.R. 5711—Tax Increase Prevention Act, commonly known as The Extenders Bill.
I wonder what an American taxpayer would include in a letter to Santa for 2014. I imagine it would go something like this.
I’ve been a very good this year. I’ve worked very hard all year and tried to follow the rules. I’ve created jobs and made some profit. My problem is I don’t know what the rules are or how to compute my tax obligation.
At the beginning of the year, several tax rules expired. There was talk all summer that the rules would be renewed or extended for 2014 and beyond. However, a bill has not been passed and presented to the President to sign. I know that you are busy this time of year, but is there anything you could do to get our 100 Senators to vote on the Extenders bill before they go home for Christmas recess? I know the bill was voted on and passed by the House of Representatives by a vote of 378 to 46 on December 3. I know that it was read on the floor of the Senate for the second time on December 9. I know that it has been placed on the Senate Calendar under General Orders as item 627. I know that the House of Representatives has already recessed for Christmas and the Extenders Bill needs to be passed without amendment. All I ask is for you to coax the Senate to bring the bill to a vote so I will know how much I need to save to pay my tax bill for 2014.
Santa, I know it’s a lot to ask, but it would really help me and my fellow taxpayers to know the rules for 2014.
It would let school teachers know if they can deduct their classroom expenses. It would let homeowners know if they could exclude income from the discharge of indebtedness on their principal residence. People who itemize their taxes would know if they can deduct sales tax in lieu of income taxes. It would let parents of college-age students know if they can deduct qualified tuition and related expenses. We could also decide if we want to contribute a portion of our individual retirement account withdrawals directly to charity.
Also, Santa, it would help American businesses by letting them know if they can take the tax credits for increasing research activities, construction of low income housing, the employment of targeted individuals and several other business credits.
Business would also benefit by knowing if they can expense up to $500,000 for the purchase of business assets rather than the $25,000 they can deduct based on the rules in place today. They would also like to know if they could expense up to 50 percent of the cost of purchasing new assets that they place in service before year end. Businesses would also like to know if they can take accelerated depreciation on qualified leasehold improvements, and restaurant and retail improvement property.
Santa, the bill would also allow business to take advantage of making investments in empowerment zones, a charitable deduction of food inventory by taxpayers other than C Corporations, and reduce the recognition period for the built-in gains of S Corporations. As a special benefit, it would also allow a subpart F income exemption for income derived in the active conduct of a banking, financing or insurance business, and may help other specially targeted industries.
Santa, I have left many of the items that are included in the Extenders Bill out of this letter. If you are curious, you can call me (or have one of your elves call since I know you are so busy) with any questions you may have.
With warmest regards,
An American Taxpayer
The writer of this article acknowledges that occasionally wishes to Santa go unanswered. However, it is highly likely that we will see the extenders bill for Christmas this year!
Richard "Woj" Wojciechowski is a partner based out of our Buffalo, NY office.