MEMORANDUM
To:
Manufacturing Clients
From: The Franklin Partnership
Date: December 16, 2015 – 8:10AM EST
RE:
Expired Tax Provisions Measure Moving
A few hours after a crucial 9:00pm meeting of the House Republican Caucus ended on Tuesday,
Congress officially released a massive 2,009 page federal spending and policy measure along with
another 233 pages extending or making permanent key tax provisions on which we have lobbied for
several years. At first glance, it appears we succeeded in securing virtually every priority sought by
small and medium sized manufacturers. We include several brief highlights below following the
procedural update.
Tax Extenders and Federal Spending Bill Process
The House Rules Committee will take up the measure TODAY at 3:00pm, setting up possible votes
beginning in the U.S. House of Representatives as early as Thursday afternoon. The House will vote
separately on the spending and tax bills, but combine them together before sending a single massive
bill to the Senate. Consideration in the upper Chamber may slip into Saturday or possibly early next
week as a number of procedural hurdles require specific time pass before the final vote. The
President has indicated he will sign the bill after negotiators removed a number of the more
controversial policy riders, including those supported by manufacturers to block EPA action on
Waters of the U.S. and to stop the Department of Labor and NLRB from acting on recent changes to
how financial brokers advise clients and the classification of temporary workers.
Opposition still remains from conservative Republicans and Liberal Democrats. House Democratic
leaders publicly opposed the tax portion on Tuesday evening, saying the measure had grown too
large for businesses, despite negotiators including several of their priorities such as the Earned
Income Tax Credit, Child Tax Credit, and American Opportunity Tax Credit, and a number of energy
related provisions. We are expecting anywhere from 10-40 Republicans to vote against the spending
and/or tax bill, and possibly more, requiring at least 20 or so House Democrats to support passage. A
combined spending and tax extenders bill makes it more difficult for liberal Senate Democrats to
oppose, however, we do not expect easy sailing the next few days in either the House or Senate and
are asking all manufacturers to contact their elected officials in support of the bill.
The below focuses on select tax provisions included in the Tax Extenders bill. While we worked on a
number of priorities in the broader spending measure such as delaying the Cadillac Tax (included),
addressing the EPA’s Clean Power Plan and climate change agenda (not included). If the final
spending measure passes, we will provide a more detailed summary of key provisions included in
that bill as well.
444 N. Capitol St., NW, Suite 605
Washington, DC 20001 Phone: (202) 393-8250 Fax: (866) 876-9163
www.franklinpartnership.com
The Franklin Partnership, LLP
Expired Tax Provisions Measure Summary
December 16, 2015 – 8:10AM EST
Expired Tax Provisions Measure Select Summary (Tax Extenders)
Permanent R&D with AMT Claim – Extends R&D Tax Credit for 2015; Starting in 2016, R&D is
made permanent and allows small businesses ($50 million or less in gross receipts) to claim the
credit against their Alternative Minimum Tax (AMT) liability.
Permanent Section 179 Equipment Expensing – Extends Section 179 for 2015 restored to the
$500,000 with a $2 million phase-out indexed to inflation starting in 2016. Also treats air
conditioning and heating units placed in service beginning after 2015 as eligible for expensing.
Extends Bonus Depreciation through 2019 with AMT Claim – Extends from January 1, 2015 through
2019 Bonus Depreciation through 2019 with an additional year for certain property with a longer
production period. The depreciation percentage is 50 percent for property placed in service during
2015, 2016 and 2017 and phases down, with 40 percent in 2018, and 30 percent in 2019. The
provision continues to allow taxpayers to elect to accelerate the use of Alternative Minimum (AMT)
credits in lieu of Bonus Depreciation for property placed in service during 2015 and beginning in
2016, increases the amount of unused AMT credits a taxpayer may claim in lieu of Bonus.
Two-Year Moratorium on Medical Device Excise Tax – The measure suspends for all of 2016 and
2017, the 2.3-percent excise tax imposed on the sale of medical devices imposed under the
Affordable Care Act.
Commercial Building Energy Efficiency Deduction Extended – Extends through 2016 the above-theline deduction for energy efficiency improvements to lighting, heating, cooling, ventilation, and hot
water systems of commercial buildings.
Extends Hiring Long-Term Unemployed Credit – Extends through 2019 the work opportunity tax
credit and beginning in 2016, allows employers who hire qualified long-term unemployed individuals
(27 weeks or more) to claim up to 40 percent of the first $6,000 of wages paid.
Extends Empowerment Zones for Two-Years – Extends through 2016 the tax benefits for certain
businesses and employers operating in empowerment zones (economically distressed areas), and the
tax benefits available include tax-exempt bonds, employment credits, increased expensing, and gain
exclusion from the sale of certain small-business stock.
Exclusion of Small Business Stock Held for Five Years – Extends the temporary exclusion of 100
percent of the gain on certain small business stock for non-corporate taxpayers to stock acquired and
held for more than five years.
Permanent Five Year Built-in Gains for S-Corporations – Permanently extends the rule reducing to
five years from ten the period for which an S-Corporation must hold its assets following conversion
from a C-Corporation to avoid the tax on built-in gains.
S-Corporation Charitable Donations – Permanently extends the rule providing that a shareholder’s
basis in the stock of an S corporation is reduced by the shareholder’s pro rata share of the adjusted
basis of property contributed by the S corporation for charitable purposes.
501(c)(4) Gift Tax Exemption – Treats transfers to organizations exempt from tax under section
501(c)(4), (c)(5), and (c)(6) as exempt from the gift tax.
www.franklinpartnership.com