End of Year Tax Legislation

Published on Tuesday, December 6, 2011

You may recall the uncertainty in late 2009 surrounding the estate tax rules and their repeal as provided for by the Economic Growth and Tax Relief Reconciliation Act of 2001, for estates of decedents dying after December 31, 2009. I don’t think many of us thought Congress would actually allow the estate tax to be repealed. It did. Congressional deadlock prevented any resolution to the repeal until late 2010 resulting in a new estate tax exemption amount of $5,000,000. In each of the last 2 years Congress has gone down to the wire before reaching agreement on very important issues. This makes planning very difficult. We again find ourselves in a similar position. The following is a list of some of the tax provisions which are set to expire unless Congress acts to extend them:

• 15 year depreciable life for certain leasehold improvements such as qualified restaurant property and qualified retail improvement property under IRC 168(e). If not extended, the depreciable life will generally be 39 years;
• 100% bonus depreciation;
• $500,000 expensing of otherwise depreciable tangible personal property under IRC 179;
• Energy efficient appliance credit;
• Enhanced charitable deduction for contributions of food inventory under IRC 170(e)(3)(C);
• Reduced S corporation recognition period for built-in gains tax;
• Reduced payroll tax which has been in the news lately;
• Deduction for qualified tuition and related expenses;
• Deduction of up to $250 for unreimbursed expenses incurred by educators;
• Credit against the tax for adoption-related expenses;
• Increased AMT exemption amount;
• Tax-free distributions from IRA’s for charitable purposes for taxpayers age 70 ½ and older;
• R & D tax credit for research and development expenditures