Tax Extenders Included in Spending and Pandemic Relief Bill

Late Monday, December 21, Congress passed a massive funding bill, including additional long-awaited COVID-19 relief.  The bill now awaits the president's signature.  Although most attention has focused on pandemic relief measures, the bill’s 5,593 pages contain numerous additional tax provisions, including the extension of multiple tax credits and deductions, commonly referred to as “tax extenders,” which are summarized below.

Single Year Extension (through 2021)

• Credit for electricity produced from certain renewable resources (§ 45)
• Treatment of mortgage insurance premiums as qualified residence interest (§ 163(h)(3)(E))
• Credit for health insurance costs of eligible individuals (§ 35)
• Indian employment credit (§ 45A)
• Mine rescue team training credit (§ 45N)
• Classification of certain race horses as 3-year property (§ 168(e)(3)(A))
• Accelerated depreciation for business property on Indian reservations (§ 168(j))
• American Samoa economic development credit
• Second generation biofuel producer credit (§ 40)
• Nonbusiness energy property (§ 25C)
• Qualified fuel cell motor vehicles (§ 30B)
• Alternative fuel refueling property credit (§ 30C)
• Two-wheeled plug-in electric vehicle credit (§ 30D)
• Production credit for Indian coal facilities (§ 45(e)(10))
• Energy efficient homes credit (§ 45L)
• Extension of excise tax credits relating to alternative fuels (§ 6426)
• Black lung disability trust fund excise tax (§ 4121(e)(2))
   

Two Year Extension (through 2024)

• Energy credit (§ 48)
• Residential energy-efficient property credit (also adding qualified biomass fuel property expenditures (§ 25D))
   

Five Year Extension (through 2025)

• Controlled foreign corporations look-through rule (§ 954(c)(6))
• New Markets Tax Credit (§ 45D)
• Work Opportunity Tax Credit (§ 51)
• Exclusion from gross income of principal residence mortgage forgiveness (the maximum exclusion amount has been reduced from $2,000,000 to $750,000 ($375,000 for a married taxpayer filing separately) for debt acquired in 2021 or thereafter (§ 108)
• Seven-year recovery period for motorsports entertainment complexes (§ 168(i)(15))
• Expensing rules for qualifying film, television, or live theatrical productions (§ 181)
• Oil spill liability trust fund rate (§ 4611(f))
• Empowerment zone tax incentives (the designation has been extended (§ 1391(d)), however, the increase in expensing under § 179 (§ 1397A) and nonrecognition of gain on rollover of empowerment zone investments (§ 1397B) are terminated for taxable years after December 31, 2020)
• Employer credit for paid family and medical leave (§ 45S)
• Exclusion for certain employer payments of student loans (§ 127)
• Extension of carbon oxide sequestration credit (extended two years, originally through 2023, now through 2025) (§ 45Q)
   

Made Permanent

• Reduction in medical expense deduction floor from 10% to 7.5% (§ 213)
• Energy efficient commercial buildings deduction.  The reference standards have been updated, and the deduction indexed to inflation. (§ 179D)
• Income exclusion for qualified state or local tax benefits to voluntary firefighters and EMS (§ 139B)
• Lifetime learning credit income phase out increased (§ 25A) and deduction for qualified tuition repealed (§ 222) for years after 2020
• Railroad track maintenance credit.  The credit rate has been reduced, starting in 2023, from 50% to 40%. (§ 45G)
• Changes to taxation for beer, wine, and distilled spirits, including:
  • (1) lower excise tax rates,
  • (2) import refunds administered by the Treasury Department beginning in 2023,
  • (3) no reduced rates for smuggled or illegally produced products,
  • (4) exclusion of bottling in determination of controlled group, effective in 2022, and
  • (5) modification of single taxpayer rules.
     

Should you have any questions, please do not hesitate to reach out to any member of the firm’s Tax practice.

Please note: This alert contains general, condensed summaries of actual legal matters, statutes, and opinions for information purposes. It is not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel.