President Obama on December 19 signed legislation that retroactively extends for one year the bulk of the temporary tax deductions, credits, and incentives that expired at the end of 2013. The Tax Increase Prevention Act of 2014 was approved on a bipartisan basis and its enactment marks the last significant action in the tax policy arena in the 113th Congress, which has now officially adjourned.

The tax relief in the extenders package is short-lived: the retroactive renewal of more than 50 temporary provisions such as the research credit, bonus depreciation, and increased section 179 expensing limits sunsets at year end, 12/31/2014. For taxpayers who rely on these provisions for planning purposes, this means a return to uncertainty in just two weeks. For lawmakers, it means the debate over the future of these provisions begins anew in the 114th Congress.

In addition to addressing extenders, the new law also includes permanent provisions that authorize the creation of tax-preferred savings accounts for use by certain individuals with disabilities and their caregivers to pay for certain qualified disability expenses.

BUSINESS TAX EXTENDERS

• The Act extended the following business related tax credits and deductions through 2014:

• Bonus depreciation has been extended through 2014, allowing an additional first year deduction of 50 percent of the cost of the equipment.

• The Section 179 rules have been extended allowing for the expense of $500,000 on acquired property for business use.

• The exclusion from capital gains tax of 100 percent of small business stock sold by an individual.

• The practice of making a reduction in S corporation basis equal to the shareholders share of the adjusted basis of a charitable contribution.

• Reduction in S corporation recognition period for built-in gains tax to five years rather than 10 years.

• The Work Opportunity Tax Credit for hiring of military veterans and other qualified individuals

• The Research Tax Credit

• New Markets Tax Credit

Enhanced deduction for charitable contributions of food inventory