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Monday, December 22, 2014

Tax Extender Bill is Signed into Law



Friday night President Obama signed H.R. 5771 into law.  The bill amended the Internal Revenue Code of 1986 to extend certain expiring provision including the Section 179 limitation.

 

A summary of the bill is included below:

Summary: H.R.5771 — 113th Congress (2013-2014)
Introduced in House (12/01/2014)
Tax Increase Prevention Act of 2014 - Title I: Certain Expiring Provisions - Amends the Internal Revenue Code to extend certain expiring tax provisions relating to individuals, businesses, and the energy sector.
Subtitle A: Individual Tax Extenders - Extends through 2014:
  • the tax deduction of expenses of elementary and secondary school teachers;
  • the tax exclusion of imputed income from the discharge of indebtedness for a principal residence;
  • the equalization of the tax exclusion for employer-provided commuter transit and parking benefits;
  • the tax deduction of mortgage insurance premiums;
  • the tax deduction of state and local general sales taxes in lieu of state and local income taxes;
  • the tax deduction of contributions of real property interests for conservation purposes;
  • the tax deduction of qualified tuition and related expenses; and
  • the tax exemption of distributions from individual retirement accounts for charitable purposes.
Subtitle B: Business Tax Extenders - Extends through 2014:
  • the tax credit for increasing research activities;
  • the low-income housing tax credit rate for newly constructed non-federally subsidized buildings;
  • the Indian employment tax credit;
  • the new markets tax credit;
  • the tax credit for qualified railroad track maintenance expenditures;
  • the tax credit for mine rescue team training expenses;
  • the tax credit for differential wage payments to employees who are active duty members of the Uniformed Services;
  • the work opportunity tax credit;
  • authority for issuance of qualified zone academy bonds;
  • the classification of race horses as three-year property for depreciation purposes;
  • accelerated depreciation of qualified leasehold improvement, restaurant, and retail improvement property, of motorsports entertainment complexes, and of business property on Indian reservations;
  • accelerated depreciation of certain business property (bonus depreciation);
  • the special rule allowing a tax deduction for charitable contributions of food inventory by taxpayers other than C corporations;
  • the increased expensing allowance for business assets, computer software, and qualified real property (i.e., leasehold improvement, restaurant, and retail improvement property);
  • the election to expense advanced mine safety equipment expenditures;
  • the expensing allowance for film and television production costs and costs of live theatrical productions;
  • the tax deduction for income attributable to domestic production activities in Puerto Rico;
  • tax rules relating to payments between related foreign corporations and dividends of regulated investment companies;
  • the treatment of regulated investment companies as qualified investment entities for purposes of the Foreign Investment in Real Property Tax Act (FIRPTA);
  • the subpart F income exemption for income derived in the active conduct of a banking, financing, or insurance business;
  • the tax rule exempting dividends, interest, rents, and royalties received or accrued from certain controlled foreign corporations by a related entity from treatment as foreign holding company income;
  • the 100% exclusion from gross income of gain from the sale of small business stock;
  • the basis adjustment rule for stock of an S corporation making charitable contributions of property;
  • the reduction of the recognition period for the built-in gains of S corporations;
  • tax incentives for investment in empowerment zones;
  • the increased level of distilled spirit excise tax payments into the treasuries of Puerto Rico and the Virgin Islands; and
  • the tax credit for American Samoa economic development expenditures.
Amends the Housing Assistance Tax Act of 2008 to extend through 2014 the exemption of the basic military housing allowance from the income test for programs financed by tax-exempt housing bonds.
Subtitle C: Energy Tax Extenders - Extends through 2014:
  • the tax credit for residential energy efficiency improvements;
  • the tax credit for second generation biofuel production;
  • the income and excise tax credits for biodiesel and renewable diesel fuel mixtures;
  • the tax credit for producing electricity using Indian coal facilities placed in service before 2009;
  • the tax credit for producing electricity using wind, biomass, geothermal, landfill gas, trash, hydropower, and marine and hydrokinetic renewable energy facilities;
  • the tax credit for energy efficient new homes;
  • the special depreciation allowance for second generation biofuel plant property;
  • the tax deduction for energy efficient commercial buildings;
  • tax deferral rules for sales or dispositions of qualified electric utilities; and
  • the excise tax credit for alternative fuels and fuels involving liquefied hydrogen.
Subtitle D: Extenders Relating to Multiemployer Defined Benefit Pension Plans - Extends through 2015 the automatic extensions of amortization periods for multiemployer defined benefit pension plans and for multiemployer funding rules under the Pension Protection Act of 2006.
Title II: Technical Corrections - Tax Technical Corrections Act of 2014 - Makes technical and clerical amendments to:
  • the American Taxpayer Relief Act of 2012;
  • the Middle Class Tax Relief and Job Creation Act of 2012;
  • the FAA Modernization and Reform Act of 2012;
  • the Regulated Investment Company Modernization Act of 2010;
  • the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010;
  • the Creating Small Business Jobs Act of 2010;
  • the Hiring Incentives to Restore Employment Act;
  • the American Recovery and Reinvestment Tax Act of 2009;
  • the Energy Improvement and Extension Act of 2008;
  • the Tax Extenders and Alternative Minimum Tax Relief Act of 2008;
  • the Housing Assistance Tax Act of 2008;
  • the Heroes Earnings Assistance and Relief Tax Act of 2008;
  • the Economic Stimulus Act of 2008;
  • the Tax Technical Corrections Act of 2007;
  • the Tax Relief and Health Care Act of 2006;
  • the Safe, Accountable, Flexible, Efficient Transportation Equity Act of 2005: A Legacy for Users;
  • the Energy Tax Incentives Act of 2005; and
  • the American Jobs Creation Act of 2004.
Eliminates provisions in the Internal Revenue Code that are not used in computing current tax liabilities (referred to as deadwood provisions).
Title III: Joint Committee on Taxation - Provides that any refund or credit in excess of $5 million due to a C corporation taxpayer may not be made until the Secretary of the Treasury submits a report to the Joint Committee on Taxation providing information on such refund or credit.
Title IV: Budgetary Effects - Prohibits the entry of the budgetary effects of this Act on certain PAYGO scorecards.

For additional information please contact our office.

Merry Christmas and Happy New Year from all of us at Gardner & Billing CPAs!


Wednesday, December 17, 2014

BREAKING NEWS IN TAX EXTENDER LEGISLATION



Tuesday night the Senate passed Extender Legislation that brings back the ability to deduct capital purchases up to the $500,000 limit rather than the $25,000 limit we were dealing with earlier.  The House version is the same as the Senate, so the bill is on the way to the President’s desk for his signature.  It is expected he will sign the legislation.

The 50% bonus depreciation is also included for qualifying property.

For the purchase to qualify it needs to be placed in service prior to the end of the calendar year.   

There are 55 provisions in the latest law.  We don’t have a complete list yet of all the extended items, so call the office with any specific questions you may have.

This extender bill only applies to 2014, so the same dilemma begins for 2015. 

Monday, December 15, 2014

Montana's Minimum Wage to Increase $.15 January 1, 2015

(Helena, MT) Montanans earning minimum wage will see an increase from $7.90 per hour to $8.05 per hour on January 1, 2015. An estimated 12,850 Montana workers, or 2.9 percent of the workforce, received hourly wages less than​ $8.05 per hour in 2014 and are likely to receive higher wages due to the 2015 minimum wage increase.

Gov. Steve Bullock welcomed the increase. "People who work full time for a living shouldn’t be living in poverty. Higher wages ensure that working Montana families aren't falling behind and are able to make ends meet," Bullock said. "Montana's leading our country in economic growth by making sure our workers earn a decent wage and they have the skills for the jobs we're creating."

In 2006, Bullock led a coalition that, through a voter's initiative, raised Montana's minimum wage and provided automatic adjustments for inflation increases. That measure garnered 73 percent of the vote.

“By tying our minimum wage to the Consumer Price Index (CPI-U), we can ensure that working Montanans are able to keep up with inflation and maintain the same level of purchasing power over time,” said Labor Commissioner Pam Bucy. “This wage increase is extremely important to workers who stretch each paycheck to support their families.”

In 2013, the industry with the largest number of workers earning minimum wage was the accommodations and food services industry followed by the retail trade industry. Cashiers, Combined Food and Preparation Workers, Waiters and Waitresses, and Retail Salespersons are occupations with large number of minimum wage workers.

“Minimum wage workers represent a broad spectrum of our population,” said Bucy. “Nearly half of all workers earning minimum wage are over the age of 25, and 62 percent of Montana minimum wage workers are women.”

MCA 39-3-409 requires the Montana Department of Labor and Industry to adjust the Montana minimum wage for inflation using the CPI-U. The 2015 minimum wage has been calculated by taking the current minimum wage of $7.90 and increasing it by the CPI-U increase from August of 2013 to August 2014. The CPI-U increased by 1.7 percent over the year ending August 2014.
Information relating to Montana’s minimum wage may be downloaded from DLI’s website at www.mtwagehourbopa.com.

Tuesday, December 9, 2014

Thinking Outside the Box


The most memorable college class I took was a business course that included sessions on ‘thinking outside the box’. The purpose was to make us look beyond our limited horizons and search for alternative solutions to problems. My favorite problem was one that had been used at MIT where the class, working together, had 4 hours to solve the problem; every student received the same final grade entirely dependent upon solving the problem – A or F for all.

 The class was locked into a classroom. A full 5 gallon water dispenser was permanently attached to the counter top. Class members had to empty their pockets so brought nothing into the room but what they wore, and they were cautioned that they could not use any part of their clothing. Items in the classroom that were available for their use were pens, pencils, scissors, paper clips, thumb tacks, erasers and chalk. A six inch deep hole, 1/8th inch larger around than a ping pong ball, had been drilled into the concrete floor. The professor dropped a ping pong ball into the hole then told the class that their problem was to remove the ping pong ball without damaging it. 

I urge you to come up with your solution to the problem described above and then read on. 

 The Small Business Administration presents the following tips for making wise decisions.

1)  Define, as specifically as possible, what the decision is that needs to be made.
         Is this really your decision or should someone else make it?
         Do you really need to make a decision? (You need at least two options first!)
         When does the decision need to be made?
         Why is this decision important to you?
2)  Brainstorm, and write down as many alternatives as you can think of.
        Use your resources (experienced friends, family, the Internet, etc.) to develop alternatives
        Determine the implications of each option.
        Visualize the outcome of each alternative. Do you feel more satisfied with one or the other?
3)  Do a reality check. Cross off those alternatives that most likely will not occur.
4)  Make your decision.
        Get moving on it.
        Worrying or second-guessing yourself will only cause stress.
        You have done your very best. Remember, no decision is set in stone!

 I didn’t forget – In our class, each group brainstormed for 5 minutes, agreed upon a solution then reported to the class. Four of our groups didn’t have workable solutions but two of the six groups came up with the same solution used by the MIT students to pass their exam. That solution was presented in my group, but was deemed too repulsive to be adopted. The solution is for every person to drink as much water as they can, repeatedly, then urinate into the hole. The ping pong ball remains undamaged and floats to the top of the hole.