Tax Provisions Included in the Consolidated Omnibus Appropriations Act, 2016 and the Protecting Americans from Tax Hikes Act of 2015

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1 Tax Prvisins Included in the Cnslidated Omnibus Apprpriatins Act, 2016 and the Prtecting Americans frm Tax Hikes Act f 2015 Permanent Tax Prvisins The fllwing incentives fr grwth, jbs, investment and innvatin are made permanent: Research and develpment credit; Emplyer wage credit fr emplyees wh are active duty members f the unifrmed services; 15-year straight-line cst recvery fr qualified leasehld imprvements, qualified restaurant buildings and imprvements, and qualified retail imprvements; Increased expensing limitatins and treatment f certain real prperty as sectin 179 prperty; Treatment f certain dividends f regulated investment cmpanies; Exclusin f 100 percent f gain n certain small business stck; Reductin in S-crpratin recgnitin perid fr built-in gains tax; and Subpart F exceptin fr active financing incme. The fllwing prvisins prviding tax relief t families and individuals are made permanent: Enhanced child tax credit; Enhanced American pprtunity tax credit; Enhanced earned incme tax credit; Deductin fr certain expenses f elementary and secndary schl teachers; Parity fr exclusin frm incme fr emplyer-prvided mass transit and parking benefits; and Deductin f state and lcal general sales taxes. The fllwing prvisins t encurage charitable giving are made permanent: Special rule fr cntributins f capital gain real prperty made fr cnservatin purpses; Tax-free distributins frm individual retirement plans fr charitable purpses; Charitable deductin fr cntributins f fd inventry; Tax treatment f certain payments t cntrlling exempt rganizatins; and Basis adjustment t stck f S crpratins making charitable cntributins f prperty. The fllwing incentives t prmte investment in real estate are made permanent: Minimum 9% lw-incme husing tax credit rates fr nn-federally subsidized buildings; Military husing allwance exclusin fr determining whether a tenant in certain cunties is lw-incme; and 1

2 Regulated Investment Cmpany (RIC) qualified investment entity treatment under the Freign Investment in Real Prperty Tax Act (FIRPTA). Prvisins Extended r Enacted fr Five Years The fllwing incentives fr energy prductin are extended fr five years: Wind energy prductin tax credit and investment tax credit (December 31, 2019) with a phase-ut; Slar energy investment tax credit (December 31, 2021) with a phase-ut; and Tax treatment f transprtatin csts f independent refiners (December 31, 2021). The fllwing incentives fr business investment and grwth are extended fr five years: Bnus depreciatin with a phase-ut; New markets tax credit; Wrk pprtunity tax credit; and Lk-thru treatment f payments between related cntrlled freign crpratins under freign persnal hlding cmpany rules. Prvisins Extended fr Tw Years The fllwing incentives fr energy prductin are extended fr tw years: Credit fr nnbusiness energy prperty; Credit fr alternative fuel vehicle refueling prperty; Credit fr 2-wheeled plug-in electric vehicles; Secnd generatin bifuel prducer credit; Bidiesel and renewable diesel incentives; Prductin credit fr Indian cal facilities; Credits with respect t facilities prducing energy frm certain renewable resurces: clsed-lp bimass facilities, pen-lp bimass facilities, gethermal facilities, landfill gas facilities, trash facilities, qualified hydr facilities, and marine & hydr kinetic renewable energy facilities; Credit fr energy-efficient new hmes; Special allwance fr secnd generatin bifuel plant prperty; Energy efficient cmmercial buildings deductin; Special rule fr sales r dispsitins t implement FERC r State electric restructuring plicy fr qualified electric utilities; 2

3 Excise tax credits relating t alternative fuels; and Credit fr new qualified fuel cell mtr vehicles. The fllwing prvisins prviding tax relief fr families and individuals are extended fr tw years: Exclusin frm grss incme f discharge f qualified principal residence indebtedness; Mrtgage insurance premiums treated as qualified residence interest; and Abve-the-line deductin fr qualified tuitin and related expenses. The fllwing incentives fr grwth, jbs, investment, and innvatin are extended fr tw years: Indian emplyment tax credit; railrad track maintenance credit; mine rescue team training credit; qualified zne academy bnds; classificatin f certain race hrses as 3-year prperty; 7-year recvery perid fr mtrsprts entertainment cmplexes; accelerated depreciatin fr business prperty n an Indian reservatin; electin t expense mine safety equipment; special expensing rules fr certain film and televisin prductins; deductin allwable with respect t incme attributable t dmestic prductin activities in Puert Ric; empwerment zne tax incentives; temprary increase in limit n cver ver f rum excise taxes t Puert Ric and the Virgin Islands; American Sama ecnmic develpment credit; and Mratrium n medical device excise tax. Miscellaneus Prvisins The fllwing prvisins address prgram integrity t prevent fraud and abuse: Mdificatin f filing dates f returns and statements relating t emplyee wage infrmatin and nnemplyee cmpensatin t imprve cmpliance; Safe harbr fr de minimis errrs n infrmatin returns and payee statements; Requirements fr the issuance f Individual Taxpayer Identificatin Numbers (ITINs); Preventin f retractive claims f earned incme credit after issuance f scial security number; Preventin f retractive claims f child tax credit; Preventin f retractive claims f American pprtunity tax credit; Prcedures t reduce imprper claims; Restrictins n taxpayers wh imprperly claimed credits in prir year; 3

4 Treatment f credits fr purpses f certain penalties; Increase the penalty applicable t paid tax preparers wh engage in willful r reckless cnduct; Emplyer identificatin number required fr American pprtunity tax credit; and Higher educatin infrmatin reprting nly t include qualified tuitin and related expenses actually paid. The fllwing prvisins prvide tax relief t families: Exclusin fr amunts received under the Wrk Clleges Prgram; Imprvements t sectin 529 accunts; Eliminatin f residency requirement fr qualified ABLE prgrams; Exclusin fr wrngfully incarcerated individuals; Clarificatin f special rule fr certain gvernmental plans; Rllvers permitted frm ther retirement plans int simple retirement accunts; Technical amendment relating t rllver f certain airline payment amunts; Treatment f early retirement distributins fr nuclear materials curiers, United States Capitl Plice, Supreme Curt Plice, and diplmatic security special agents; and Preventin f extensin f tax cllectin perid fr members f the Armed Frces wh are hspitalized as a result f cmbat zne injuries. The fllwing prvisins address the tax treatment f Real Estate Investment Trusts (REITs): Restrictin n tax-free spinffs invlving REITs; Reductin in percentage limitatin n assets f REIT which may be taxable REIT subsidiaries; Prhibited transactin safe harbrs; Repeal f preferential dividend rule fr publicly ffered REITs; Authrity fr alternative remedies t address certain REIT distributin failures; Limitatins n designatin f dividends by REITs; Debt instruments f publicly ffered REITs and mrtgages treated as real estate assets; Asset and incme test clarificatin regarding ancillary persnal prperty; Hedging prvisins; Mdificatin f REIT earnings and prfits calculatin t avid duplicate taxatin; Treatment f certain services prvided by taxable REIT subsidiaries; Exceptin frm FIRPTA fr certain stck f REITs; Exceptin fr interests held by freign retirement r pensin funds; Increase in rate f withhlding f tax n dispsitins f United States real prperty interests; 4

5 Interests in RICs and REITs nt excluded frm definitin f United States real prperty interests; and Dividends derived frm RICs and REITs ineligible fr deductin fr United States surce prtin f dividends frm certain freign crpratins. The fllwing prvisins address specific tax prvisins: Deductibility f charitable cntributins t agricultural research rganizatins; Remval f bnd requirements and extending filing perids fr certain taxpayers with limited excise tax liability; Mdificatins t alternative tax fr certain small insurance cmpanies; Treatment f timber gains; Mdificatin f definitin f hard cider; and Clarificatin regarding aggregatin f church retirement plans. The fllwing prvisins raise a small amunt f revenue: Updated ASHRAE standards fr energy efficient cmmercial buildings deductin Excise tax credit equivalency fr liquefied petrleum gas and liquefied natural gas; Exclusin frm grss incme f certain clean cal pwer grants t nn-crprate taxpayers; Clarificatin f valuatin rule fr early terminatin f certain charitable remainder unitrusts; Preventin f transfer f certain lsses frm tax indifferent parties; and Treatment f certain persns as emplyers with respect t mtin picture prjects. Tax Administratin Prvisins The fllwing prvisins refrm the peratins f the Internal Revenue Service: Duty t ensure that IRS emplyees are familiar with and act in accrd with certain taxpayer rights; IRS emplyees prhibited frm using persnal accunts fr fficial business; Release f infrmatin regarding the status f certain investigatins; Administrative appeal relating t adverse determinatins f tax-exempt status f certain rganizatins; Organizatins required t ntify Secretary f intent t perate under 501(c)(4); Declaratry judgments fr 501(c)(4) and ther exempt rganizatins; Terminatin f emplyment f Internal Revenue Service emplyees fr taking fficial actins fr plitical purpses; Gift tax nt t apply t cntributins t certain exempt rganizatins; Extend Internal Revenue Service authrity t require truncated Scial Security numbers n Frm W-2; Clarificatin f enrlled agent credentials; and Crrectin and clarificatin f technical issues in partnership audit rules. 5

6 The fllwing prvisins refrm the United States Tax Curt: Five prvisins t enhance taxpayer access t the Tax Curt; Tw prvisins regarding Tax Curt administratin; and Clarificatin the Tax Curt is nt an agency f, and shall be independent f the Executive Branch. Trade-Related Prvisins The fllwing prvisins address internatinal trade issues: Mdificatin f effective date f prvisins relating t tariff classificatin f recreatinal perfrmance uter wear and Agreement by Asia-Pacific Ecnmic C-peratin members t reduce rates f duty n certain envirnmental gds. Fllw us n 2016 Van Ness Feldman, LLP. All Rights Reserved. This dcument has been prepared by Van Ness Feldman fr infrmatinal purpses nly and is nt a legal pinin, des nt prvide legal advice fr any purpse, and neither creates nr cnstitutes evidence f an attrney-client relatinship. 6