Key Tax Provisions Made Permanent

Congress passed a major year-end tax-cut package on Friday that will permanently enact some key provisions supported by CompTIA for many years; however, most of the tax extender provisions were extended for either two or five years. The vote was 316-113 in the House, and 65-33 in the Senate.  In passing this legislation, Congress broke from its prior years’ tradition of kicking the can down the road, taking a significant step in bringing certainty to some key tax provisions that are important to technology firms.  

CompTIA is pleased that its long-standing support for these three key extenders has finally resulted in Congress voting to permanently enact these provisions:

  • Research and experimentation tax credit (aka R&D tax credit).  The R&D credit will be made permanent.  This provision allows companies to claim a tax credit based on certain research and experimentation costs.  Also, beginning in 2016, businesses with less than $50 million in receipts would be permitted to offset the credit against the alternative minimum tax, as well as the employer payroll tax (FICA). CompTIA has continually supportedextending the current economic benefits of the R&D tax credit to startups and small businesses.
  • Small business expensing – IRC sec. 179Section 179 small business expensing will bemade permanentfor qualifying purchases up to $500,000; a phase-out of the credit will begin at $2,000,000.  Further, these limits will be indexed for inflation beginning in 2016.  Popular with all small businesses, this small business expensing allows businesses to write-off the costs of qualifying asset purchases in the year of purchase, as opposed to depreciating the costs over a period of years.
  • Qualified small business stock.  This important incentive encourages investment in small business will be made permanent.  Under this provision, individual investors are allowed to exclude 100% of the gain from the sale of small business stock held for more than five years. 
  • Bonus depreciation. In addition to these three permanent provisions, the bill also included a 5-year extension of bonus depreciation through 2019.  Further, under special rules, companies would be allowed to elect to accelerate the use of alternative minimum tax credits in lieu of bonus depreciation.  Bonus depreciation allows companies to write off an additional 50% depreciation for certain equipment purchases.

CompTIA applauds the work of Congress in finally coming to grips with these tax extenders, which benefit both large and small tech firms.  We especially note that it has always been important to provide businesses with certainty in tax planning.  The decades old Congressional procedure of extending these credits for a year or two, many times retroactively, did not allow firms the opportunity to factors these tax provision into their annual tax planning, or their research and experimentation planning and budgets.  Making these important provisions permanent and providing certainty for business planning, will greatly enhance the ability of the tech industry to grow and create new and well-paying jobs in the United States.