Protecting Americans from Tax Hikes (PATH) Act of 2015
What does PATH 2015 mean to me?
The Protecting Americans from Tax Hikes Act of 2015 ("PATH") has been signed into law, so how will it impact your tax planning in the near term?
For starters, “Bonus Depreciation” has been extended through 2019, and as usual, with an additional year included for certain properties with a longer production period. The change in bonus depreciation, however, is its gradual phasedown as an immediate write-off. Here’s how the 2015 Act breaks down:
What property is eligible for bonus depreciation?
- As of January 1, 2015 through December 31, 2017: 50%
- As of January 1, 2018 through December 31, 2018: 40%
- As of January 1, 2019 through December 31, 2019: 30%
Section 168(k) generally provides the following requirements for property to be eligible for bonus depreciation under the 2015 Act:
- The depreciable property must be a certain type (i.e., qualified property—tangible property under the Modified Accelerated Cost Recovery System (MACRS) with a recovery period of 20 years or less (including off-the-shelf software) and qualified leasehold, restaurant, and retail properties)
- The original use of the depreciable property must commence with the taxpayer after the relevant bonus depreciation date (i.e., bonus depreciation is available only for new equipment);
- The depreciable property must be acquired by the taxpayer before January 1, 2020; and
- The depreciable property must be placed in service before January 1, 2020.
Further, according to the 2015 Act, taxpayers may elect to accelerate the use of alternative minimum tax (AMT) credits in lieu of bonus depreciation under special rules for property placed in service in 2015. In 2016, the provision modifies the AMT rules by increasing the amount of unused AMT credits that may be claimed in lieu of bonus depreciation.
Other significant provisions
- The provision for the 15-year recovery period for qualified leasehold, restaurant, and retail properties under Section 168(e)(3) was made permanent.
- The Energy Efficient Commercial Buildings Deduction was extended through Dec. 31, 2016, which offers a tax deduction (Section 179D) for alternative energy sources such as solar, geothermal, wind and others, placed in service during 2016 of up to $1.80 per square foot to those investing in energy-efficient improvements to reduce energy consumption. To qualify, the building’s energy system must meet specified percentage improvements based on ASHRAE 2001 standards.
Please contact us
with any questions about how PATH 2015 affects your specific tax planning.