Year-end 2016 is expected to bring a rush of tax-related legislation in Congress. Lawmakers will be up against a December 31 deadline to renew some expiring tax incentives and possibly pass new tax breaks for individuals and businesses. The year may end with what is often called a “Christmas Tree bill,” a bill that includes a variety of tax and other provisions. 

Note: At the time this article was posted, the results of the November 8 presidential election was not yet known. That outcome will shape tax legislation in 2017 and beyond.  

Tax breaks for individuals

In December 2015, many popular but temporary tax incentives for individuals were scheduled to expire at year-end. Congress renewed or made permanent most of these tax breaks in the Protecting Americans from Tax Hikes Act (PATH Act). However, some incentives were not included in the PATH Act and these are up for renewal, or possibly being made permanent, this December. They include the Code Sec. 25C residential energy credit (for energy-efficient improvements to homes) and the popular above-the-line deduction for higher education tuition and fees. 

Tax breaks for businesses

The PATH Act also extended, and in some cases made permanent, many tax incentives for businesses. Some incentives, however, were not included in the PATH Act and are expected to come up for renewal this December. They include targeted incentives for film and television productions, Native American employment, the mining industry, railroads, and motorsports complexes. Along with these, some special tax breaks for alternative fuels are scheduled to expire at year-end.  

More proposals

Along with the incentives already described, some stand-alone tax bills are expected to come to votes in Congress before year-end. The bills, if passed, impact individuals, small businesses, farmers, and tax administration. They include The Support Small Business R&D Bill, which would expand knowledge resources available to startups and small businesses in connection with their using the research and development (R&D) tax credit. The Restraining Excessive Seizure of Property through Exploitation of Civil Asset Forfeiture Tools (RESPECT) Bill, which would limit the IRS’s civil asset forfeiture authority (a companion bill has already passed the House). The Middle-Income Housing Tax Credit (MIHTC) Bill of 2016, which would provide tax credits to encourage

• The Support Small Business R&D Bill, which would expand knowledge resources available to startups and small businesses in connection with their using the research and development (R&D) tax credit.

• The Restraining Excessive Seizure of Property through Exploitation of Civil Asset Forfeiture Tools (RESPECT) Bill, which would limit the IRS’s civil asset forfeiture authority (a companion bill has already passed the House).

• The Middle-Income Housing Tax Credit (MIHTC) Bill of 2016, which would provide tax credits to encourage the development of affordable housing.

• The Retirement Enhancement and Savings Bill of 2016, which expands tax incentives for small employers to create retirement savings plans and repeals the maximum age for contributions to traditional IRAs.

• The Louisiana Flood and Storm Victims Devastation Act, which provides emergency tax relief for persons affected by severe storms and flooding in Louisiana.

• The Farm Risk Abatement and Mitigation Election (FRAME) Act, which authorizes agricultural producers to establish and contribute to tax-exempt farm risk management accounts.

Any or all of these bills, and others could be part of a year-end tax package. Our office will keep you posted of developments.