Tax Extenders 2015: New Legislation Extends Expiring Tax Provisions, Delays Taxes Imposed Under the Patient Protection and Affordable Care Act, and Enacts Revenue Raisers

Sullivan & Cromwell LLP - December 21, 2015

On December 18, 2015, President Obama signed into law the Protecting Americans From Tax Hikes Act Of 2015 (the “Tax Act”) and the Consolidated Appropriations Act, 2016 (the “Appropriations Act,” together with the Tax Act, the “Acts”).  The Tax Act, which makes significant changes to the U.S. federal taxation of real estate, extends or makes permanent certain provisions of the Internal Revenue Code (the “Code”) that had temporarily expired or were set to expire at the end of the year and enacts revenue raisers.  The Acts also delay certain taxes imposed under the Patient Protection and Affordable Care Act (the “PPAC Act”), including the taxes on high-cost “Cadillac” health plans, health insurance providers and sales of medical devices.

Taxes Delayed:

  • Excise Tax on “Cadillac” Health Plans
  • “Annual Fee” Tax for Health Insurance Providers
  • Excise Tax on Sales of Medical Devices

Permanent Extension:
  • Exception Under Subpart F for Active Financing Income
  • Interest-Related Dividends and Short-Term Capital Gain Dividends of Regulated Investment Companies
  • Regulated Investment Companies as “Qualified Investment Entities” Under FIRPTA Rules
  • 15-Year Straight-Line Cost Recovery for Qualified Leasehold Improvements, Qualified Restaurant Improvements, and Qualified Retail Improvements
  • Research Tax Credit
  • State and Local Sales Tax Deduction
  • Reduced 5-Year Holding Period During Which a Converted S Corporation, Real Estate Investment Trust or Regulated Investment Company Is Subject to Entity-Level Tax on Built-In Gain Property
  • Tax Treatment of Certain Payments to Controlling Exempt Organizations

Extension Through 2016:
  • Production Tax Credit for Qualified Facilities Other Than Wind Facilities

Extension Through 2019:
  • Look-Through Treatment for Payments Between Related Controlled Foreign Corporations
  • Production Tax Credit and Investment Tax Credit for Qualified Wind Facilities
  • Accelerated Expensing of Certain Capital Expenditures
  • New Markets Tax Credit

Extension Through 2021:
  • Investment Tax Credit for Solar Energy Property
  • Residential Energy Efficiency Tax Credits for Solar Energy Property

Revenue-Raising Provisions:
  • Loss Disallowance for Transfers from Tax Indifferent Parties