Tax laws expiring in 2011

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Tax laws changing for 2012

by Tony Novak, CPA, MBA, MT
  published 12/20/2011, last revised 12/28/2011

New Year’s Day 2012 will find us without some of our favorite personal and business federal income tax breaks because a large number of these tax laws expire at the end of 2011.

This article is meant to simply list the sixty identified expiring tax laws in no particular order and without discussion or possible tax planning responses. Keywords are highlighted to enhance readability.

Expiring tax laws for individuals

1. deductibility of state and local sales taxes instead of state income taxes on Schedule A (Sec. 164(b))
2. expanded adoption credit (Sec. 36C) and adoption assistance program (Sec. 137) amounts
3. deduction of up to $250 for certain elementary and secondary school teacher expenses (Sec. 62(a)(2)(D))
4. District of Columbia first-time homebuyer credit (Sec. 1400C)
5. deductibility of mortgage insurance premiums as interest (Sec. 163(h))
6. above-the-line deduction of up to $4,000 for qualified tuition and related expenses (Sec. 222)
7. tax-free treatment of charitable distributions from IRAs (Sec. 408(d)(8))
8. nonbusiness energy property credit (Sec. 25C)
9. temporary 100% exclusion of gain from the sale of certain small business stock (Sec. 1202(a))

Expiring tax laws for businesses

1. allowance for 100% first-year bonus depreciation (Sec. 168(k))
2. expiration of the increased capital expense deduction amounts.Option is reduced to $25,000 for 2012, and the phase-out threshold amount is lowered to $200,000 (Sec. 179)
3.  research and development credit (Sec. 41)
4. work opportunity tax credit (Sec. 51(c)) (portions were extended for certain veterans)
5. tax credit for plug-in electric vehicles (Sec. 30)
6. plug-in electric vehicle conversion credit (Sec. 30B(i))
7. alternative fuel (nonhydrogen) vehicle refueling property credit (Sec. 30C)
8. alcohol fuels income tax credit (Secs. 40(e) and (h))
9. alcohol fuel mixture excise tax credit (Sec. 6426(b))
10. biodiesel and renewable diesel fuel credits (Sec. 40A)
11. biodiesel excise tax credit (Sec. 6426(c))
12. alternative fuel and alternative fuel mixture excise tax credits (Secs. 6426(d) and (e))
13. refined coal production facility credit (placed-in-service date) (Sec. 45(d))
14. Indian employment tax credit (Sec. 45A)
15. new markets tax credit (Sec. 45D)
16. railroad track maintenance credit (Sec. 45G)
17. new energy-efficient homes credit (Sec. 45L)
18. energy-efficient appliances credit (Sec. 45M)
19. mine rescue team training credit (Sec. 45N)
20. military reservist employer wage credit (Sec. 45P)
21. American Samoa economic development credit (P.L. 109-432).
22. 100% bonus depreciation  (Sec. 168)
23. 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements (Sec. 168(e)(3)(E))
24. seven year recovery period for motorsports entertainment complexes (Sec. 168(i)(15))
25. accelerated depreciation for certain Indian reservation property (Sec. 168(j))
26. special rules for charitable contributions of real property for conservation purposes (Sec. 170(b))
27. charitable deduction for food inventory contributions (Sec. 170(e)(3)(C))
28. increased charitable deduction for contributions of book inventory to public schools (Sec. 170(e)(3)(D))
29. increased charitable deduction for corporate contributions of computer equipment to schools (Sec. 170(e)(6))
30.  election to expense advanced mine safety equipment (Sec. 179E)
31. special film and television production expensing rules (Sec. 181)
32. Brownfields environmental remediation expensing (Sec. 198)
33. deduction for domestic production activities in Puerto Rico (Sec. 199(d)(8))
34. suspension of 100%-of-net-income limitation on percentage depletion for oil and gas from marginal wells (Sec. 613A(c))
35. grants in lieu of tax credits for specified energy property (Sec. 48(d))
36. qualified zone academy bonds (allocation of limitation) (Sec. 54E)
37. low-income housing credit special treatment of military housing allowances (Sec. 142(d))
38. modified tax treatment of certain payments to controlling tax-exempt organizations  (Sec. 512(b))
39. special treatment of dividends from regulated investment companies (Secs. 871 and 881)
40. regulated investment company treatment under FIRPTA (Sec. 897(h))
41. active financing income exceptions (Secs. 953(e) and 954(h))
42. foreign personal holding company look through rules for payments between related controlled foreign corporations (Sec. 954(c))
43. basis adjustments for S corporation charitable contributions of property (Sec. 1367(a))
44. reduced S corporation recognition period for built-in gains tax (Sec. 1374(d))
45. Empowerment Zone tax incentives (Secs. 1202, 1391, 1394, 1396, 1397A and 1397B)
46. District of Columbia investment incentives (Secs. 1400, 1400A and 1400B)
47. definition of gross estate for regulated investment company stock owned by nonresident noncitizens (Sec. 2105(d))
48. disclosure of prisoner return information to certain prison officials (Sec. 6103(k)).
49. tax-exempt employer-provided transit pass amount reverts to $125 per month (Sec. 132(f)).
50. most personal credits are not allowed against regular tax and AMT (there are exception but these are not listed here). (Sec. 26(a)).
51. AMT exemption decreases to $45,000 for married individuals filing jointly, less 25% of alternative minimum taxable income exceeding $150,000; and $33,750 for unmarried individuals, less 25% of alternative minimum taxable income exceeding $112,500 (Sec. 55(d)

This list does not consider the potential impact of any last-minute tax law that may be passed by Congress in the final week of 2011. At the time that this article was published passage of a tax compromise law is anticipated. The article will be updated, if necessary, when details of the new law are available.

In summary, these tax changes indicate an increase in taxes payable in 2012 for many business and individual taxpayers. The impact can be minimized with advance tax planning. Other articles will be available addressing these planning issues.

Other resources

Tax planning opportunities for small business owners in 2012

Status: draft

This article is under revision may be incomplete. A finished version will be available for reproduction.

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