Tax Extenders Clears the Senate Finance Committee

On July 21, the U.S. Senate Finance Committee cleared tax extenders legislation that, if passed by Congress, would extend and expand the R&D Tax Credit and the Section 179D tax deduction for energy-efficient commercial buildings.

In its entirety, the “tax extenders” bill is a piece of legislation that would extend more than 50 expiring provisions of the tax code. In years past, prior extenders packages have provided non-permanent extensions of these provisions, and the current tax extenders bill would be no different in offering a temporary fix. Last year’s package was passed in December 2014, providing a one-year retroactive extension for nearly all expiring provisions.

However, the initial delay and scramble to pass the bill before the extenders were set to expire at the end of last year led to Congress stripping many of the stronger aspects of the bill—key among these being specific expansions to the R&D Tax Credit and the 179D tax deduction. In this year’s version, those expansions have been added back into the extenders package.

These include provisions that would allow companies to claim the R&D credit against their Alternative Minimum Tax—a huge barrier to small and mid-sized businesses trying to claim the credit in the past—and another that would make the R&D Tax Credit refundable for small businesses, allowing companies that have existed less than five years and have less than $5 million in annual gross receipts to take a credit of up to $250,000 against payroll taxes paid on employee wages.

With respect to 179D, the deduction would be expanded so buildings owned by charities and tribal governments can allocate the tax deductions to the designers and builders that are making the energy-efficient enhancements (just as government entities are currently allowed). The R&D credit and 179D would be extended retroactively for two years, meaning both incentives would expire on Dec. 31, 2016.

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