Long List of Tax Provisions Expired December 31, 2011

Now that the dust has settled from the pre-holiday Congressional activities, there are a significant number of tax provisions which have not been extended into 2012 (assuming no further Congressional actions). 

Please take a minute to review this list to determine which, if any, of the expired tax provisions will effect you in 2012.

Expiring business provisions.

    • 15-year write off for specialized realty assets, including qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property
    • 100% bonus depreciation allowance for qualified property. 100% bonus depreciation is available for qualified property placed in service before 2012; certain aircraft and long-production-period property can continue to qualify if placed in service before 2013.  For qualified property acquired and placed in service after 2011 and before 2013, a 50% bonus depreciation allowance will apply
    • 7-year straight line cost recovery period for motor sports entertainment complexes
    • Accelerated depreciation for qualified Indian reservation property
    • Increased $500,000 expensing election under Code Sec. 179, with $2 million investment ceiling (reduced to $139,000 with a $560,000 ceiling for 2012, and further reduced to $25,000 with a $200,000 ceiling for tax years beginning after 2012)
    • Election to expense 50% of the cost of advanced mine safety equipment.
    • Election to expense production costs of qualified film and television products in the United States
    • Election to expense environmental remediation costs
    • Work opportunity tax credit (WOTC). The WOTC was recently extended for one year by P.L. 112-56, the “3% Withholding Repeal and Job Creation Act,” but only with respect to employers that hire qualified veterans
    • Research credit
    • Income tax credits for biodiesel and renewable diesel
    • Alternative fuel and fuel mixture tax credits
    • Indian employment credit
    • New markets tax credit
    • Railroad track maintenance credit
    • Credit for construction of new energy efficient homes
    • Energy efficient appliance credit
    • Mine rescue team training credit
    • Enhanced charitable deduction for contributions of food inventory
    • Enhanced charitable deduction for contributions of book inventories to public schools
    • Enhanced deduction for corporate contributions of computer equipment for educational purposes
    • Empowerment Zone tax breaks
    • District of Columbia Enterprise Zone (DC Zone) tax breaks
    • The inclusion of Puerto Rico as “within the U.S.” for purposes of determining a taxpayer’s domestic production gross receipts (DPGR)
    • The election to defer gain on sales of qualifying electric transmission property
    • The exclusion from a tax-exempt organization’s unrelated business taxable income (UBTI) of interest, rent, royalties, and annuities paid to it from a controlled entity
    • The suspension of income limitations on percentage depletion for marginal wells
    • The ability of a RIC to designate all or a portion of a dividend as an “interest-related dividend”
    • Inclusion of a RIC in the definition of a “qualified investment entity”
    • Lower shareholder basis adjustments for charitable contributions by S corporations
    • Reduced S corporation recognition period for built-in gains tax
    • Exception under subpart F for certain income from the active conduct of a banking, financing, insurance, or similar business
    • Look-through treatment for payments between related controlled foreign corporations (CFCs) under the foreign personal holding company rules
    • The increased limit on cover over of run excise taxes to Puerto Rico and the Virgin Islands

Expiring individual provisions.

    • Election to deduct State and local general sales taxes  in lieu of a state and local income tax deduction
    • Above-the-line deduction for qualified tuition and related expenses
    • Treatment of mortgage insurance premiums as deductible qualified residence interest
    • Above-the-line deduction for up to $250 of certain expenses of elementary and secondary school teachers
    • Nonbusiness energy property credit
    • Tax credit for first-time District of Columbia homebuyers
    • Adoption credit and adoption assistance programs
    • Allowance of personal tax credits against regular tax and alternative minimum tax (AMT)
    • Increased AMT exemption amount
    • Exclusion of 100% of gain on certain small business stock
    • Parity for exclusion from income for employer-provided mass transit and parking benefits .The exclusion is $230 per month for each of these breaks in 2011; for 2012, the exclusion rises to $240 for qualified parking due to an inflation adjustment but falls to $125 for employer-provided transit and van pooling benefits.
    • Tax-free distributions (up to $100,000 annually for taxpayers 70- 1/2 and older) from individual retirement plans for charitable purposes
    • Special rules to encourage contributions of capital gain real property for conservation purposes
    • Look-through treatment of certain regulated investment company (RIC) stock in determining nonresidents’ gross estates

Already-expired provisions. Notable provisions that have already expired earlier in 2011 include:

    • The first-time homebuyer credit, which was available for qualifying service members on official extended duty leave outside the U.S. through Apr. 30, 2011.
    • The 0.2% federal unemployment tax (FUTA) surtax, which had been in effect on a temporary basis since ’76, expired on June 30, 2011.

As Congressional activities heat up later this year, we will keep you posted on the future of these expiring provisions.  If you have any questions regarding these expiring provisions or their impact on you, please do not hesitate to contact us.

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