On April 3rd, 2014, the Senate Finance Committee passed a tax extenders bill, which included extensions of the R&D credit and the 179D deduction. Both extensions are seamless and extend these provisions through 2015. In addition to extending the R&D credit and 179D deduction, the legislation also significantly expands these tax benefits.
Regarding the R&D credit, the legislation includes an amendment introduced by Senators Chuck Schumer (D-NY) and Pat Roberts (R-KS) that allows certain companies to claim an R&D credit of up to $250,000 against payroll taxes. This provision applies to companies that are under 5 years old and that have less than $5 million in annual gross receipts. The amendment also allows individuals to claim the R&D credit against individual AMT for 2014 and 2015. This particular provision was in place in 2010 and proved to be a huge boon for businesses operating as S corporations and partnerships.
Regarding the expansion of the 179D deduction, the legislation allows charities and tribal governments to allocate 179D deductions to designers of qualifying property. Additionally, the legislation updates the standards for determining the degree of a facility’s energy efficiency. Starting in 2015, the baseline standard will be the 2007 American Society of Heating, Refrigeration, and Air-Conditioning Engineers (ASHRAE) standards.
The tax extenders bill will next head to the Senate floor for consideration. The Senate Finance Committee’s strong bipartisan support of the bill indicates a heavy vote in favor of the bill by the full Senate. It’s currently uncertain when the Senate will actually take up consideration of the bill but Senate leaders Reid (D-NV) and McConnell’s (R-KY) support for the bill indicates that the bill will be considered in the not too distant future.
The House Ways and Means Committee is now talking about tax extenders. However, the House Ways and Means Committee has not marked up a tax extenders bill in the recent past. Most likely, the Senate will pass the Senate Finance Committee’s tax extenders bill and the Senate version will serve as the starting point for the bill that will ultimately be passed into law.