President Obama signs PATH Act of 2015

In mid-December, Congress passed and President Obama signed the PATH (Protecting Americans from Tax Hikes) Act of 2015. PATH was part of the $1.15 trillion omnibus spending package to fund the federal government through October 2016. Included with these appropriations are tax provisions that extend 50 tax credits, including numerous tax credits designed to benefit businesses.

The bill makes more than 20 tax relief provisions permanent, including provisions from 11 different bills marked up by the Ways and Means Committee in 2015, such as Section 179 expensing ($500,000 and $2 million limits with no limitation on real estate), the 15-year depreciation for leaseholds and improvements, expanding the employment wage credit for employees on active duty to all employers, five-year built-in gains tax and charitable contributions for S corporations and research and development tax credits.   

Under PATH’s R&D tax credits, businesses with less than $50 million in gross receipts can claim the credit against their Alternative Minimum Tax (AMT) or take the credit against their payroll taxes (capped at up to $250,000 per year) for up to five years.

Tax provisions that were extended for five years are bonus depreciation (50 percent for property put in service from 2015-17, 40 percent for property put in service in 2018 and 30 percent for property put in service in 2019), the New Markets Tax Credit and the Work Opportunity Tax Credit, as well as international tax relief in the form of the controlled foreign corporation look-through rule.  

The bonus depreciation provision continues to allow taxpayers to elect to accelerate the use of AMT credits instead of bonus depreciation under special rules for property placed in service during 2015. For the 2016 taxable year, the provision modifies the AMT rules by increasing the amount of unused AMT credits that may be claimed instead of bonus depreciation.

According to the Institute of Scrap Recycling Industries Inc. (ISRI), headquartered in Washington, the tax extensions under PATH add to the recycling industry-specific tax allowances from the Recycling Investment Saves Energy (RISE) Act enacted in 2008.