My first update for 2016 will be my final one focused on the end of year Omnibus spending bill. My conclusion after a more thorough review is that this year more than prior years it is imperative to plan at the start of the year how best to take advantage of changes in 2016.
In addition to the big changes in Section 179 and IRA Charitable Rollover that will be just as important this year as they were for those who acted before the end of 2015, here are key provisions to plan for now:
Solar and Wind
First, there is more certainty, such as with the Solar and Wind credits moving from a yearly question mark. Solar now has a clear path with the 30% residential solar credit extended through 2019 and then phased out until it expires in 2022. As a Bloomberg article in December said in the article title “What Just Happened in Solar Is a Bigger Deal Than Oil Exports”, this is a BIG deal!
Wind, solar and other alternative fuels all received a boost with business credits and production tax credits extended.
Some experts anticipate this is enough time for Solar and Wind to become the lowest cost energy source in many states. Still, that assumes oil prices don’t keep dropping.
More certainty as well for those with high-cost employer-sponsored coverage, or Cadillac plans, as the legislation delays the excise tax for two years. The Health Insurance Tax received a one-year moratorium. The 2.3% tax on medical devices received a suspension for 2016 and 2017.
Research and Development
The Research and Development (R&D) credit is now permanent. For startup companies with less than $5 million in gross receipts, $250,000 of credits can be credited against income taxes AND payroll taxes for the first five years.
Small businesses received a number of benefits, including making permanent allowing rollovers from 401(k) plan balances to SIMPLE IRA balances. With many small businesses not able to afford, much less want to maintain a traditional 401(k) plan, SIMPLE IRAs provide a much lower cost solution.
Investments into restaurants and retail establishments received greater certainty as the 15-year depreciable life for these types of small business buildings was made permanent.
Provided a startup has been in business for 5 years, their owners can get bought out on a tax free basis. This is one of the changes that needs to be considered by all of the players including entrepreneurs, M&A, and investors.
Please know we are adding these and more details to the seminars and programs we are working on to prepare CPAs and other professionals to best serve their clients.