During a busy and historic year — with a global pandemic, disruptions to the economy, and postponements of normal tax deadlines — practitioners may have missed that many tax provisions are scheduled to expire at the end of the year. And while the annual expiration of tax provisions has become common, in most years Congress by December has at least considered legislation to extend some or all of them. This year is different, with no hint that Congress is prepared to take up extender legislation in the last few days of the year.
While many of the expiring provisions provide targeted incentives or do not affect many taxpayers, some affect many individuals or businesses, including the work opportunity credit; the exclusion from gross income of discharge of indebtedness on a principal residence; the 7.5% adjusted-gross-income (AGI) floor for medical expense deductions; and the deduction for qualified tuition and related expenses.
The following tax provisions will expire Dec. 31, 2020, if not extended by Congress:
Provisions for individuals
- Sec. 35 credit for health insurance costs of eligible individuals.
- Sec. 108(a)(1)(E) gross income exclusion for discharge of indebtedness on a principal residence.
- Sec. 139B gross income exclusion for certain benefits provided to volunteer firefighters and emergency medical responders.
- Sec. 163(h) treatment of qualified mortgage insurance premiums as qualified residence interest.
- Sec. 213(f) 7.5% (instead of 10%) AGI floor for medical expense deductions.
- Sec. 222 deduction for qualified tuition and related expenses.
- Sec. 45A Indian employment credit.
- Sec. 45D new markets tax credit.
- Sec. 45N mine rescue team training credit.
- Sec. 45S employer credit for paid family and medical leave.
- Sec. 51 work opportunity credit.
Depreciation and expensing
- Sec. 168(e)(3)(A) three-year recovery period for racehorses two years old or younger.
- Sec. 168(e)(3)(C)(ii) seven-year recovery period for motorsports entertainment complexes.
- Sec. 168(j)(9) accelerated depreciation for business property on Indian reservations.
- Sec. 181 special expensing rules for certain film, television, and live theatrical productions.
- Sec. 25C 10% credit for qualified nonbusiness energy property.
- Sec. 30B credit for qualified fuel cell motor vehicles.
- Sec. 30C 30% credit for the cost of alternative (nonhydrogen) fuel vehicle refueling property.
- Sec. 30D 10% credit for plug-in electric motorcycles and two-wheeled vehicles.
- Sec. 40(b)(6) credit for each gallon of qualified second-generation biofuel produced.
- Sec. 45(d) and Sec. 48 beginning-of-construction date for renewable power facilities eligible to claim the electricity production credit or investment credit in lieu of the production credit.
- Sec. 45(e)(10)(A)(i) production credit for Indian coal facilities.
- Sec. 45L credit for each qualified new energy-efficient home constructed by an eligible contractor and acquired by a person from the eligible contractor for use as a residence during the tax year.
- Sec. 168(l) depreciation allowance equal to 50% of the adjusted basis of qualified second-generation biofuel plant property.
- Sec. 179D deduction for energy-efficient commercial buildings.
- Sec. 451(k) special rule for sales or dispositions to implement Federal Energy Regulatory Commission or state electric restructuring policy for qualified electric utilities.
- Sec. 6426(c) excise tax credits for alternative fuels and Sec. 6427(e) outlay payments for alternative fuels.
Empowerment zone tax incentives
- Secs. 1391(d) and (h) designation of an empowerment zone and of additional empowerment zones.
- Sec. 1394 empowerment zone tax-exempt bonds.
- Sec. 1396 empowerment zone employment credit.
- Sec. 1397A increased expensing under Sec. 179.
- Sec. 1397B nonrecognition of gain on rollover of empowerment zone investments.
- Sec. 954(c)(6) lookthrough treatment of payments of dividends, interest, rents, and royalties received or accrued from related controlled foreign corporations under the foreign personal holding company rules.
- Sec. 4121 Black Lung Disability Trust Fund increase in excise tax on coal.
- Sec. 4611 Oil Spill Liability Trust Fund financing rate.
- Various provisions modifying the excise tax rates on beer, wine, and distilled spirits, and other rules under Secs. 263A(f)(4), 5001, 5041, 5051, 5212, and 5414.
- The American Samoa economic development credit (P.L. 109-432, as amended by P.L. 111-312).
— Alistair M. Nevius, J.D., (Alistair.Nevius@aicpa-cima.com) is The Tax Adviser’s editor in chief.