Michael Bosma: Extender legislation has legs (Voices)

Tax Notes and other sources have reported that the administration and tax writers in Congress have come to an agreement on extender legislation. It is relatively simple legislation, in that in most cases, the expiration dates have been changed, mostly to the end of 2020.

It also includes, however, a retroactive repeal of the Unrelated Business Income Tax (UBIT) on qualified transportation fringe (QTF) benefit costs for tax-exempt organizations. The disallowance of the cost of QTF of for-profit businesses was not changed.

The bill also includes changes for disaster relief, including the disaster-related use of retirement funds, the employee retention credit, and an automatic extension of filing deadlines in case of certain taxpayers affected by Federally declared disasters.

The deadline will be extended for the period beginning on the earliest incident date specified in the declaration and ending on the date which is 60 days after the latest incident date.

The qualification of certain mutual or cooperative telephone or electric companies under 501(c)(12) will be determined without regard to certain disaster relief funds, effective to taxable years beginning after December 31, 2017.

Among the extenders included in the legislation are:

• Provision: 108(a)(1)(E) Qualified principal residence indebtedness exclusion; extended from 12/31/17 to 12/31/20.
• Provision: 163(h)(3)(E)(iv)(I) Mortgage insurance as qualified residence interest; extended from 12/31/17 to 12/31/20.
• Provision: 213(f) Medical expense deduction floor, 7.5%; extended from 2018 through 12/31/20.
• Provision: 222(e) Qualified tuition and related expenses; extended from 12/31/17 to 12/31/20.
• Provision: 45A(f) Indian employment credit; extended from 12/31/17 to 12/31/20.
• Provision: 168(j)(9) Accelerated depreciation on Indian reservations; 12/31/17 to 12/31/20.
• Provision: 1391(d)(1)(A)(i) Empowerment zone tax incentives; extended from 12/31/17 to 12/31/20.
• Provision: 40A(g) Biodiesel and renewable diesel; extended from 12/31/17 to 12/31/22. 
• Provision: 25C(g)(2) Residential energy property, lifetime, specific purchases; extended from 12/31/17 to 12/31/20.
• Provision: 30C(g) Alternative fuel refueling property credit; extended from12/31/17 to 12/31/20.
• Provision: 30D(g)(3)(E)(ii) 2-wheeled electric vehicle credit; extended from 12/31/17 to 12/31/20.
• Provision: 45(d) Closed-loop biomass, open-loop biomass, geothermal (not solar), landfill gas, trash facilities, qualified hydropower, marine and hydrokinetic renewable energy; extended from 12/31/17 to 12/31/20 — for wind, it's extended from 12/31/19 to 12/31/20.
• Provision: 45L(g) Energy efficient homes credit; extended from 12/31/17 to 12/31/20. 
• Provision: 179D(h) Energy efficient commercial buildings deduction; extended from 12/31/17 to 12/31/20.
• Provision: 6426(d)(5) and 6426(e)(3) Alternative Fuels and Alternative Fuels Mixture; extended from 12/31/17 to 12/31/20 (see clarification of qualification).
• Provision: 45D(f)(1) New Markets Tax Credit; extended $5 billion for 2020, c/o of unused limitation extended one year.
• Provision: 45S(i) Employer credit for paid family and medical leave; extended from 12/31/19 to 12/31/20.
• Provision: 51(c)(4) Work Opportunity Tax Credit (WOTC); extended from 12/31/19 to 12/31/20. 
• Provision: 5051(a) Craft beer and 5041(c)(8)(A) certain wine; extended from 12/31/19 to 12/31/20. 
• Provision: 35(b)(1)(B) Credit for health insurance costs of eligible individuals; extended from 12/31/19 to 12/31/20.

Nearly every provision included on the list was extended through Dec. 31, 2020. The list above does not include every provision, and the extension dates vary depending upon the specific provision (i.e., some expire for years beginning after the specified date, while others are for expenditures after a specific date).

For the specifics of the effective dates and to determine if a provision not listed above is included in the bill, please refer to the proposed legislation.

The biggest impact of this legislation is for 179D for real estate developers and their ability to amend 2018 tax returns and get refunds. This provision also applies to architects and electrical engineers who do public works. These taxpayers are entitled to up to 1.80 per square foot of ADDITIONAL deduction!

Also apartment building owners that have added inventory after 2017 can get up to a 2,000 per unit credit! This is basically “found money”!

While I understand that many business owners don't want to amend their previously filed returns, filing 2019 without these deductions/credits is a huge mistake!

This advice is general in nature. Please contact a CPA to discuss how to take advantage of this new legislation.

Michael Bosma, CPA, is Principal-in-Charge of the Reno office of CliftonLarsonAllen LLP. Reach him for comment at mike.bosma@claconnect.com.