On December 18th, 2015, the Consolidated Appropriations Act of 2016 was passed through Congress. Shortly after, President Obama signed the bill into law, making a wide range of tax extenders permanent. This legislation makes the Research and Development (R&D) Tax Credit permanent, along with 50 other tax breaks that were scheduled for expiration.
Some of the tax credits made permanent by the bill include:
- The Child Care Credit
- The American Opportunity Tax Credit
- The Earned Income Tax Credit
- Section 179 Deductions
Other items addressed include:
- The Work Opportunity Tax Credit
- The New Markets Tax Credit and bonus depreciation for five years
- Various energy tax incentives
For the first time, the R&D Tax Credit makes certain small businesses eligible to claim credits against the alternative minimum tax liability or against the employer’s payroll tax liability.
The Section 179 provision sets a new threshold for small business expensing limitation. This new threshold is set at $500,000 for qualifying asset purchases up to $2 million, which is increased from the current amounts of $25,000 for purchases up to $200,000 respectively.
The following Journal of Accountancy article (written before the legislation was approved) gives a very detailed outlined of the legislation’s provisions:
This legislation will likely have an impact on your business, so we recommend consulting with one of our tax professionals.