Tax Extenders Approved for 2015

On 18 December, the United Stated Congress approved a massive legislative package (H.R. 2029) that combined a bill to renew dozens of expired tax deductions, credits, and incentives with legislation that sets spending levels for U.S. government agencies for the remainder of fiscal year 2016. The president signed the measure into law shortly after it reached his desk on the same day.

The Protecting Americans from Tax Hikes (Path) Act—the extenders component of H.R. 2029—makes permanent several lapsed business, individual, and charitable giving incentives, such as the research credit, the subpart F exception for active financing income, and tax-free IRA distributions for charitable contributions by individuals age 70-1/2 and older. It also renews a handful of provisions—such as bonus depreciation, the work opportunity and new markets credits, and production and investment tax credits for wind and solar energy—for five years. Other provisions are extended through 2016. In some cases, provisions are extended with modifications, while certain others are extended subject to a phase-out.

Of particular importance to multinational taxpayers, the Path Act makes permanent, without modification, the exception from subpart F for certain foreign income derived in the active conduct of a banking, financing, securities, or insurance business.

The Act also extends through 2019, without modification, the application of the look-through rule which excludes from subpart F certain payments of interest, dividends, rents, and royalties between related controlled foreign corporations (CFCs) under the foreign personal holding company rules.

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