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Recently Expired Federal Tax Provisions: Will They Come Back?

January 7, 2014

The Congressional Research Service (CRS) is a nonpartisan branch agency within the Library of Congress. It provides Congress with policy and legal analysis for use in drafting legislation and providing oversight of enacted laws.

The CRS released a report late last year summarizing various temporary tax provisions set to expire on December 31, 2013; provisions now expired. The big question: will any of these be resurrected as part of tax reform or other legislation? If so, will they be reinstated retroactively to January 1, 2014 as has been done in years past?

Listed below are some of the more well-known provisions that expired on December 31, 2013:

Individual Provisions

  • Deduction for state and local sales taxes (this is in lieu of state income taxes; this can be particularly advantageous for taxpayers living in states with low or no income tax or that have made large purchases subject to sales tax).
  • Above-the-line deduction for certain expenses of teachers.
  • Above-the-line deduction for qualified tuition and related expenses.
  • Deduction for mortgage insurance premiums deductible as qualified interest.
  • Exclusion of discharge of principal residence indebtedness from gross income (note that North Carolina decoupled from this provision for 2013).
  • Credit for health insurance costs.

Business Provisions

  • Research and experimentation credit (aka research and development – R&D – credit).
  • Work opportunity tax credit.
  • Increase in business property expensing to $500,000 and expanded definition of Section 179 property (the maximum for 2014 is now at $25,000).
  • Bonus depreciation (businesses have enjoyed 50% or 100% rates for the past 6 years).
  • 15-year straight line cost recovery for qualified leasehold, restaurant and retail improvements (typically otherwise subject to depreciation over 39 years).
  • Special rules for qualified small business stock.
  • Reduction in S corporation recognition period for built-in gains tax

Charitable Provisions

  • Enhanced charitable deduction for contributions of food inventory.
  • Tax-free distributions from Individual Retirement Accounts (IRAs) for charitable purposes.
  • Basis adjustment to stock of S corporations making charitable contributions of property.
  • Special rules apply for contributions of certain property for conservation purposes.

Energy Provisions

  • Credit for construction of energy efficient new homes.
  • Energy efficient commercial building deduction.
  • Credit for energy efficient appliances.
  • Credit for nonbusiness energy property.
  • Incentives for alternative fuel and alternative fuel mixtures.
  • Incentives for biodiesel and renewable diesel.
  • Credit for electric drive motorcycles and three-wheeled vehicles.

A number of additional temporary tax provisions also sunset on December 31, 2013.

The cost of extending these provisions is tremendous. The Congressional Budget Office (CBO) estimated the cost of extending all tax provisions that expired at the end of 2013 plus those set to expire through 2023 to be $938 billion. Clearly this cost is being evaluated as part of the ongoing discussions about Federal tax reform.

These provisions are available for the 2013 tax year if you qualify. Stay up-to-date with changes as they progress in 2014. At JPS we are always available to help. Contact us today at 828.254.2374 or by email at AskUs@jpspa.com.