Taxation

The 51 Expiring Tax Breaks You Haven't Heard About


Lawmakers on Capitol Hill have spent the past few weeks sparring over whether the payroll tax cut should be extended, paying little attention to dozens of lesser-known tax benefits totaling more than $30 billion that are also set to expire on Dec. 31. Some, such as the research and development credit used by pharmaceutical companies, can be reinstated retroactively and often are. Others would have an immediate impact on businesses and families if Congress does nothing before Jan. 1. Here’s how the Joint Committee on Taxation, an advisory body to Congress, describes the obscure cuts you had no idea existed.
 
◗ Credit for certain nonbusiness energy property
 
◗ Credit for electric-drive motorcycles, three- wheeled vehicles, and low-speed vehicles
 
◗ Conversion credit for plug-in electric vehicles
 
◗ Alternative fuel vehicle refueling property (non-hydrogen refueling property)
 
◗ Incentives for alcohol-based fuels
  ✱ Alcohol fuels income tax credit (alcohol fuel, alcohol used to produce a qualified mixture, and small ethanol producers)
  ✱ Alcohol fuel mixture excise tax credit and outlay payments
 
◗ Work opportunity tax credit
  ✱ Socially Responsible Hiring: Companies that hire welfare recipients, ex-felons, and other members of disadvantaged groups get a tax credit for a portion of those employees’ first-year wages. In most cases, that credit tops out at $2,400.
 
◗ Incentives for biodiesel and renewable diesel
  ✱ Income tax credits for biodiesel fuel, biodiesel used to produce a qualified mixture, and small agri-biodiesel producers
  ✱ Income tax credits for renewable diesel fuel and renewable diesel used to produce a qualified mixture
  ✱ Excise tax credits and outlay payments for biodiesel fuel mixtures
  ✱ Excise tax credits and outlay payments for renewable diesel fuel mixtures
 
◗ Tax credit for research and experimentation expenses
 
◗ Credit for energy-efficient appliances
  ✱ Incentive to Make Green Machines: Manufacturers of the most efficient dishwashers, refrigerators, and washing machines get tax credits of up to $225 per appliance. Beneficiaries: Whirlpool and General Electric.
 
◗ Placed-in-service date for facilities eligible to claim the refined coal production credit (other than refined coal facilities that produce steel industry fuel)
 
◗ Indian employment tax credit
 
◗ New markets tax credit
 
◗ Credit for certain expenditures for maintaining railroad tracks
 
◗ Credit for construction of new energy-efficient homes
 
◗ Mine rescue team training credit
 
◗ Employer wage credit for activated military reservists
 
◗ Grants for specified energy property in lieu of tax credits
 
◗ Qualified zone academy bonds–allocation of bond limitation
 
◗ Deduction for certain expenses of elementary and secondary school teachers
   ✱ Teachers can deduct up to $250 for out-of-pocket expenses on items for their classrooms
 
◗ Premiums for mortgage insurance deductible as interest that is qualified residence interest
 
◗ Deduction for state and local general sales taxes
 
◗ 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements
 
◗ Accelerated depreciation for business property on an Indian reservation
 
◗ Treatment of military basic housing allowances under low-income housing credit
 
◗ Special rules for contributions of capital gain real property made for conservation purposes
 
◗ Enhanced charitable deduction for contributions of food inventory
 
◗ Enhanced charitable deduction for contributions of book inventories to public schools
 
◗ Enhanced charitable deduction for corporate contributions of computer equipment for educational purposes
 
◗ Expensing of “brownfields” environmental remediation costs
 
◗ Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico
 
◗ Above-the-line deduction for qualified tuition and related expenses
 
◗ Tax-free distributions from individual retirement plans for charitable purposes
 
◗ Election to expense advanced mine safety equipment
 
◗ Special expensing rules for certain film and television productions
 
◗ Special rule for sales or dispositions to implement Federal Energy Regulatory Commission (FERC) or state electric restructuring policy
 
◗ Modification of tax treatment of certain payments to controlling exempt organizations
 
◗ Suspension of 100 percent-of-net-income limitation on percentage depletion for oil and gas from marginal wells
 
◗ Parity for exclusion from income for employer-provided mass transit and parking benefits
  ✱ A Bump for Straphangers: In 2011, commuters had $230 of pretax money to spend on mass transit every month. If Congress doesn’t act, only $125 will be tax-free in 2012.
 
◗ Look-through treatment of payments between related controlled foreign corporations under the foreign personal holding company rules
 
◗ Treatment of certain dividends of regulated investment companies (RICs)
 
◗ RIC qualified investment entity treatment under FIRPTA (Foreign Investment in Real Property Tax Act)
 
◗ Exceptions under subpart F for active financing income
 
◗ Basis adjustment to stock of S corporations making charitable contributions of property
 
◗ Reduction in S-corporation recognition period for built-in gains tax
 
◗ Seven-year recovery period for motor-sports entertainment complexes
   ✱ Speedways: A Public Good: Owners of auto-racing tracks can write off certain capital expenses over 7 years rather than adhering to the usual 15- or 39-year schedules. Faster write-offs mean bigger deductions and smaller tax bills.
 
◗ Empowerment zone tax incentives
  ✱ Designation of an empowerment zone and of additional empowerment zones
  ✱ Increased exclusion of gain (attributable to periods through 12/31/16) on the sale of qualified business stock of an empowerment zone business
  ✱ Empowerment zone tax-exempt bonds
  ✱ Empowerment zone employment credit
  ✱ Increased expensing under section 179
  ✱ Nonrecognition of gain on rollover of empowerment zone investments
 
◗ Definition of gross estate for RIC stock owned by a nonresident not a citizen of the U.S.
 
◗ Temporary increase in limit on cover over of rum excise tax revenues (from $10.50 to $13.25 per proof gallon) to Puerto Rico and the Virgin Islands
 
◗ Incentives for alternative fuel and mixtures (other than liquefied hydrogen)
  ✱ Excise tax credits and outlay payments for alternative fuel
  ✱ Excise tax credits and outlay payments for alternative fuel mixtures
 
◗ Tax incentives for investment in the District of Columbia:
  ✱ Designation of DC Zone, employment tax credit, and additional expensing
  ✱ DC Zone tax-exempt bonds
  ✱ Acquisition date for eligibility for zero percent capital gains rate for investment in DC for gains through 12/31/16
  ✱ Tax credit for first-time DC homebuyers
 
◗ American Samoa economic development credit

Rubin is a reporter for Bloomberg News in Washington.

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