Congress has recently passed a bill that changes S Corp and Partnership tax returns to the 15th of the third month passead their fiscal end. Entities of this type with December 31st year ends new due date will be March 15th (Up from April 15th). Also FinCEN report 114 (replacement for old FBAR Return) will be due April 15th rather than June 30th. The new due dates apply to taxable years beginning after December 31, 2015. 

Veto Threat for Republican Backed Corporate Tax Cut: It’s payback time. President Obama threatened to veto a proposed $156 billion corporate tax cut that would permanently extend the research and development tax credit. Funding would not be offset and would add the deficit. The Controversy: Democrats say the GOP rejected the emergency unemployment benefits bill, which was less costly and had no offsets, so the tax break should also be rejected.

The IRS has issued updated rules under §162(a) and §263(a) on when to deduct or capitalize amounts paid to acquire, improve, or produce tangible property.

Since the proposal of new regulations in 2006 it has taken seven years to finalize through various re-proposals. 

"The re-proposed regs deal with rules for dispositions of depreciable property. These are important because they have rules for partial dispositions of depreciation property.  For example, if you have a roof on a building and you remove the entire roof - rafters, joists, and everything - and replace it with a new roof, as you read through the rules, you would have to capitalize the major components. So if you remove the old roof and you couldn't recover the remaining basis, you would be depreciating two roofs, the new one, and the old one which was probably on the building when you purchased it. These rules allow that when a capital cost is new, you can recover the remaining basis in the old roof, and would give a loss deduction in that amount. The concept was first introduced in the temporary regs, and now the re-proposed regs. The difference is that the rules to take the partial disposition are much simpler in the re- proposed regs.  For the 2012 and 2013 tax years, taxpayers can apply the final regs, the re-proposed regs, the temporary regs, or any combination thereof but beginning in 2014, the re-proposed regs will become final. Everyone must apply the final regulations of 2014." said David Auclair, the national managing principal in Grant Thorton's Washington National Tax Office 


There is a small taxpayer exception if the taxpayer has average annual gross receipts of below $10 million and the building has an unadjusted basis of less than one million.


Also in the regulations there is a de minimis safe harbor to deduct either an invoice or item of $5,000 or less if the taxpayer has applicable financial statements if you have a written "capitalization policy" declaring what your threshold is for capitalizing vs. deducting in the year it was put in service.  For taxpayers that don't have applicable financial statements the safe harbor amount is only $500 rather than $5,000. 


Written by Barnett & Company CPAs

The research tax credit has been around since 1981.  The credit is generally available if you incur research and development expenditures for qualified research that are technology based and intended for the development of new or improved processes, products, techniques, or formulas (among other requirements).

Do you know how many times the credit has expired and been extended since it was enacted back in 1981? The answer is at least eight expirations and 15 extensions.  The credit expired as recently as the end of 2012 but was extended through 2013 with the American Taxpayer Relief Act of 2012.  If you answered that question correctly, I applaud you for keeping up with the changes.  I don’t know about you, but I am getting tired of looking up to see when the credit will be expired.

If you are tired of never-ending expirations and extensions, I have some good news to report. 


Soon after the passage of the ATRA, a few research credit bills were introduced in the 113th Congress (H.R. 119, H.R. 120, H.R. 905, and S. 193).  H.R. 119 and 905 would make the credit permanent.  H.R. 120 calls for extending the credit through 2014 and a higher credit amount.  S. 193 would allow start-up companies to use the credit against payroll taxes.  Finally, President Obama previously proposed making the credit permanent back in 2010 and again during the State of the Union back in February.  His proposal is in the President’s Fiscal Year 2014 Revenue Proposals again. In addition, the Senate Finance Committee issued a Business Investment and Innovationdiscussion paper as a series of tax reform options for committee members to consider: permanently extending the credit, modifying the current method for simplified computation and eliminating the credit completely.

However, one of the challenges to passing such legislations is the cost.  The Joint Committee on Taxation estimated a $14 billion loss of revenue over the next 10 years from the research tax credit extension in the ATRA of 2012.

I certainly hope that the 113th Congress would produce a different result, especially with strong bipartisan support in tax reform.  It remains to be seen if this Congress can do something that has never been done over 30 years.

But a bigger question is: is the credit worth the cost to you and fellow taxpayers? Would making the credit permanent bring the US economy up and help us become a leader in innovation?

Obviously some members of this Congress believe so.

The real question is do you? 

Jason Cha, Technical Manager - Taxation, American Insitute of CPAs