Monthly Archives: November 2015

2015 Tax Extenders Thanksgiving Treat?

Once again we approach the end of a year following the so-called “Tax Extenders” legislation, which addresses federal tax incentives that expire on December 31 of each year, unless renewed by Congress.  The2014 bill was enacted with retroactive effect in mid-December 2014, and expired December 31, 2014.  Will Congress give us a 2015 Thanksgiving treat by enacting a similar bill before the end of November?

Unfortunately, replicating the pattern from 2014, it appears 2015 legislation will pass no earlier than mid-December. Several bills exist which could become law before the end of the year.  As in prior years, the potential Tax Extender laws include special depreciation rules for qualified leasehold, restaurant and retail improvements, 50% bonus depreciation provisions, and first year expensing opportunities for certain capital expenditures. Also included is a reduction in S corporation recognition period for the built-in gains tax from ten years, to five years, but only for transactions closing in the year in which the Tax Extender legislation is in effect.  Potential legislation also includes special incentives for conservation-oriented transactions and charitable donations from IRAs.

We remain hopeful another Tax Extenders bill will pass before December 31, 2015.  In the best case, Congress would make some provisions permanent or extend provisions more than one year to give taxpayers a longer time horizon to plan.

If you have a 2015 transaction dependent on the legislation, be ready in advance, because you might have only a short time to act once the legislation passes.  After that, you may be stuck hoping for another chance in 2016.

Here are links to our prior posts relating to Tax Extenders legislation:

E. John Wagner, II

Applicable Federal Rates for December 2015

The Internal Revenue Code prescribes minimum imputed interest rates and time-value-of-money factors applicable to certain loan transactions and estate planning techniques. These rates are tied formulaically to market interest rates. The Internal Revenue Service updates these rates monthly.

These are commonly applicable rates in effect for December 2015:

Short Term AFR (Loans with Terms <= 3 Years)                                          0.56%

Mid Term AFR (Loans with Terms > 3 Years and <= 9 Years)                     1.68%

Long Term AFR (Loans with Terms >9 Years)                                              2.61%

7520 Rate (Used in many estate planning vehicles)                                     2.0%

Here is a link to the complete list of rates:

E. John Wagner, II

Legislation Creates Default Rule: All Partnerships to be Audited at Entity Level

On November 2, 2015, President Obama signed into law The Bipartisan Budget Act of 2015 (H.R. 1314) which, among other things, imposes a new audit regime on tax partnerships beginning in 2018. Under the new regime, unless a partnership is eligible to elect out and does so timely, IRS can now collect tax due on partnership adjustments at the entity level, which takes a fundamental premise of partnership taxation – that the entity pays no tax – and turns it on its head. The new regime has many significant impacts. Not the least of which is that the IRS can send a bill for a prior year tax underpayment to the partnership itself, and therefore the current year partners would bear this burden. Our initial analysis is that tax partnerships that are eligible will likely want to elect out of the new regime. A link to the full Act (Title XI – starting on page 42 – is the relevant portion of the Act) is here:

Michael J. Wilson