Bloomberg BNA Summary of the Tax Increase Prevention Act of

2014 (H.R. 5771)

By the Tax Management Staff, Arlington, VA
On December 16, 2014, the Senate passed, without change, the Tax Increase Prevention Act of
2014 (H.R. 5771), which passed the House of Representatives on December 3, 2014. The Bill
extends over 50 tax provisions. The bill now awaits the President's signature.
The Bill contains technical corrections to previously enacted legislation. The bill also
incorporates, H.R. 647 which would create tax-favored accounts for the benefit of disabled
people. The engrossed version of the House bill combines H.R. 5771 and H.R. 647.
DIVISION ATAX INCREASE AND PREVENTION ACT OF 2014
TITLE ICERTAIN EXPIRING PROVISIONS
Subtitle AIndividual Tax Extenders
Extension of deduction for certain expenses of elementary and secondary school teachers
[Bill 101]
The Bill would extend for one year (through 2014) the $250 above-the-line tax deduction for
teachers and other school professionals for expenses paid or incurred for books, supplies (other
than non-athletic supplies for courses of instruction in health or physical education), computer
equipment (including related software and service), other equipment, and supplementary
materials used by the educator in the classroom. [I.R.C. 62(a)(2)(D)]
Extension of exclusion from gross income of discharge of qualified principal residence
indebtedness [Bill 102]
he Bill would extend for one year (through 2014) the exclusion from gross income of a discharge
of qualified principal residence indebtedness. [I.R.C. 108(a)(1)(E)]
Extension of parity for employer-provided mass transit and parking benefits [Bill 103]
The Bill would extend for one year (through 2014) the monthly maximum exclusion amount for
transit passes and van pool benefits so that these transportation benefits match the exclusion for
qualified parking benefits. [I.R.C. 132(f)(2)]
Extension of mortgage insurance premiums treated as qualified residence interest [Bill
104]
The Bill would extend for one year (through 2014) the treatment of qualified mortgage insurance
premiums as interest for purposes of the mortgage interest deduction. This deduction phases out
ratably for taxpayers with adjusted gross income of $100,000 to $110,000 (half those amounts
for married taxpayers filing separately). [I.R.C. 163(h)]
Extension of deduction of State and local general sales taxes [Bill 105]
The Bill would extend for one year (through 2014) the election to take an itemized deduction for
State and local general sales taxes in lieu of the itemized deduction permitted for State and local
income taxes. [I.R.C. 164(b)(5)]
Extension of special rule for contributions of capital gain real property made for
conservation purposes [Bill 106]
The Bill would extend for one year (through 2014) the increased contribution limits and
carryforward period for amounts in excess of these limits for contributions of appreciated real
property (including partial interests in real property) for conservation purposes. The Bill would
also extend the enhanced deduction for certain individual and corporate farmers and ranchers.
[I.R.C. 170(b)(1)(E)]

Extension of above-the-line deduction for qualified tuition and related expenses [Bill 107]
The Bill would extend for one year (through 2014) the above-the-line tax deduction for qualified
education expenses. The deduction is capped at $4,000 for an individual whose adjusted gross
income (AGI) does not exceed $65,000 ($130,000 for joint filers) or $2,000 for an individual
whose AGI does not exceed $80,000 ($160,000 for joint filers). [I.R.C. 222]
Extension of tax-free distributions from individual retirement plans for charitable purposes
[Bill 108]
The Bill would extend for one year (through 2014) tax-free charitable contributions from an
individual retirement account (IRA) of up to $100,000 per taxpayer, per taxable year for
taxpayers who are at least 701/2. [I.R.C. 408(d)(8)]
Subtitle BBusiness Tax Extenders
Extension of research credit [Bill 111]
The Bill would extend for one year (through 2014) the research credit. [I.R.C. 41]
Extension of temporary minimum low-income housing tax credit rate for non-federally
subsidized buildings [Bill 112]
The Bill would extend for one year (through 2014) application of the temporary 9 percent
minimum credit rate for the low income housing tax credit for non-Federally subsidized new
buildings to allocations made before January 1, 2015. [I.R.C. 42]
Extension of military housing allowance exclusion for determining whether a tenant in
certain counties is low-income [Bill 113]
The Bill would extend for one year (through 2014) the exclusion of military basic housing
allowances from the calculation of income for determining eligibility as a low-income tenant for
purposes of low-income housing tax credit buildings. [3005 of Housing Assistance Tax Act of
2008]
Extension of Indian employment tax credit [Bill 114]
The Bill would extend for one year (through 2014) the business tax credit for employers of
qualified employees that work and live on or near an Indian reservation. [I.R.C. 45A]
Extension of new markets tax credit [Bill 115]
The Bill would extend for one year (through 2014) the new markets tax credit. The carryover of
any unused limitation would also be extended for one year (through 2019). [I.R.C. 45D]
Extension of railroad track maintenance credit [Bill 116]
The Bill would extend for one year (through 2014) the railroad track maintenance credit. [I.R.C.
45G]
Extension of mine rescue team training credit [Bill 117]
The Bill would extend for one year (through 2014) the credit for training mine rescue team
members. [I.R.C. 45N]
Extension of employer wage credit for employees who are active duty members of the
uniformed services [Bill 118]
The Bill would extend for one year (through 2014) the provision that provides eligible small
business employers with a credit against the taxpayer's income tax liability for a taxable year in
an amount equal to 20% of the sum of differential wage payments to activated military reservists.
[I.R.C. 45P]
Extension of work opportunity tax credit [Bill 119]
The Bill would extend for one year (through 2014) the work opportunity credit which provides
businesses a credit for hiring employees from specified groups that have historically been
difficult to employ. [I.R.C. 51]

Extension of qualified zone academy bonds [Bill 120]

The Bill would authorize the issuance of $400 million of qualified zone academy bonds during
2014. The bond proceeds are used for school renovations, equipment, teacher training, and
course materials at a qualified zone academy, provided that private entities have promised to
donate certain property and services to the academy with a value equal to at least 10% of the
bond proceeds. [I.R.C. 54E]
Extension of classification of certain race horses as 3-year property [Bill 121]
The Bill would extend for one year (through 2014) the 3-year recovery period for race horses to
property placed in service during 2014. [I.R.C. 168(e)(3)(A)]
Extension of 15-year straight-line cost recovery for qualified leasehold improvements,
qualified restaurant buildings and improvements, and qualified retail improvements [Bill
122]
The Bill would extend for one year (through 2014) the special 15-year cost recovery period for
certain leasehold improvements, restaurant buildings and improvements, and retail
improvements for property placed in service in 2014. [I.R.C. 168(e)(3)(E)]
Extension of 7-year recovery period for motorsports entertainment complexes [Bill 123]
The Bill would extend for one year (through 2014) the special 7-year cost recovery period for
property used for land improvement and support facilities at motorsports entertainment
complexes for property placed in service in 2014. [I.R.C. 168(i)(15)]
Extension of accelerated depreciation for business property on an Indian reservation [Bill
124]
The Bill would extend for one year (through 2014) the placed-in-service date for the special
depreciation recovery period for qualified Indian reservation property. [I.R.C. 168(j)]
Extension of bonus depreciation [Bill 125]
The Bill would extend 50% bonus depreciation to property acquired and placed in service during
2014 (2015 for certain property with a longer production period). This provision would continue
to allow taxpayers to elect to accelerate the use of AMT credits in lieu of bonus depreciation
under special rules for property placed in service during 2014. The provision would also continue
a special accounting rule involving long-term contracts and a special rule for regulated utilities.
The Bill would label qualifying property as round 4 extension property. [I.R.C. 168(k)]
Extension of enhanced charitable deduction for contributions of food inventory [Bill 126]
The Bill would extend for one year (through 2014) the provision allowing businesses to claim an
enhanced deduction for the contribution of food inventory of apparently wholesome food for
non-corporate business taxpayers. [I.R.C. 170(e)(3)(C)]
Extension of increased expensing limitations and treatment of certain real property as
section 179 property [Bill 127]
The Bill would extend for one year (through 2014) the small business expensing limitation and
phase-out amounts in effect from 2010 to 2013 ($500,000 and $2 million) to property placed in
service during 2014. Without this change, the amounts would be $25,000 and $200,000,
respectively. The special rules that allow expensing for computer software, qualified leasehold
improvement property, qualified restaurant property, and qualified retail improvement property
also would be extended through 2014. [I.R.C. 179]
Extension of election to expense mine safety equipment [Bill 128]
The Bill would extend for one year (through 2014) the election to expense mine safety
equipment to property placed in service during 2014. This election allows mining companies to

expense 50% of the cost of qualified mine safety equipment in the year the equipment is placed
into service. [I.R.C. 179E]
Extension of special expensing rules for certain film and television productions [Bill 129]
The Bill would extend for one year (through 2014) the provision that allows film and television
producers to expense the first $15 million of production costs incurred in the United States.
[I.R.C. 181]
Extension of deduction allowable with respect to income attributable to domestic
production activities in Puerto Rico [Bill 130]
The Bill would extend for one year (through 2014) the domestic production activities deduction
to activities in Puerto Rico. [I.R.C. 199]
Extension of modification of tax treatment of certain payments to controlling exempt
organizations [Bill 131]
The Bill would extend for one year (through 2014) the special rules for interest, rents, royalties
and annuities received by a tax-exempt entity from a controlled entity. [I.R.C. 512(b)(13)]
Extension of treatment of certain dividends of regulated investment companies [Bill 132]
The Bill would extend for one year (through 2014) provisions allowing for the pass-through
character of interest-related dividends and short-term capital gains dividends from regulated
investment companies to non-resident aliens. [I.R.C. 871(k)]
Extension of RIC qualified investment entity treatment under FIRPTA [Bill 133]
The Bill would extend for one year (through 2014) the provision that treats as qualified
investment entity (QIE) a RIC that is a USRPHC or would be a USRPHC if the publicly traded
exception under 897(c)(3) or the domestically controlled exception under 897(h)(2)
did not apply. The provision would not apply with respect to any payment made before the date
of enactment that was actually withheld upon. [I.R.C. 897(h)]
Extension of subpart F exception for active financing income [Bill 134]
The Bill would extend for one year (through 2014) the active financing exception from Subpart F
of the Code. [I.R.C. 953(e)]
Extension of look-thru treatment of payments between related controlled foreign
corporations under foreign personal holding company rules [Bill 135]
The Bill would extend for one year (through 2014) the look-through treatment for payments of
dividends, interest, rents, and royalties between related controlled foreign corporation. [I.R.C.
954(c)(6)]
Extension of temporary exclusion of 100 percent of gain on certain small business stock
[Bill 136]
The Bill would extend for one year (through 2014) the temporary exclusion of 100% of the gain
on certain small business stock for non-corporate taxpayers to stock acquired before January 1,
2015, and held for more than five years. This provision also would extend the rule that eliminates
such gain as an AMT preference item. [I.R.C. 1202]
Extension of basis adjustment to stock of S corporations making charitable contributions
of property [Bill 137]
The Bill would extend for one year (through 2014) the provision allowing S corporation
shareholders to take into account their pro rata share of charitable deductions even if such
deductions would exceed such shareholder's adjusted basis in the S corporation. [I.R.C. 1367]
Extension of reduction in S corporation recognition period for built-in gains tax [Bill 138]

The Bill would extend for one year (to sales of assets occurring during 2014), the rule reducing
to five years (rather than 10 years) 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. [I.R.C. 1374(d)]
Extension of empowerment zone tax incentives [Bill 139]
The Bill would extend for one year (through 2014) the designation of certain economically
depressed census tracts as empowerment zones. The tax benefits available include tax-exempt
bonds, employment credits, increased expensing, and gain exclusion from the sale of certain
small-business stock. [I.R.C. 1391(d)]
Extension of temporary increase in limit on cover over of rum excise taxes to Puerto Rico
and the Virgin Islands [Bill 140]
The Bill would extend for one year (through 2014) the provision providing for payment of
$13.25 per gallon to cover over a $13.50 per proof gallon excise tax on distilled spirits produced
in or imported into the United States. [I.R.C. 7652(f)]
Extension of American Samoa economic development credit [Bill 141]
The Bill would extend for one year (through 2014) the existing credit for taxpayers currently
operating in American Samoa. [119 of Division A of the Tax Relief and Health Care Act of
2006]
Subtitle CEnergy Tax Extenders
Extension of credit for nonbusiness energy property [Bill 151]
The Bill would extend for one year (through 2014) the 10% credit (maximum of $500) for
purchases of nonbusiness energy property. [I.R.C. 25C]
Extension of second generation biofuel producer credit [Bill 152]
The Bill would extend for one year (through 2014) the cellulosic biofuels producers credit.
[I.R.C. 40(b)]
Extension of incentives for biodiesel and renewable diesel [Bill 153]
The Bill would extend for one year (through 2014) the $1.00 per gallon production tax credit for
biodiesel and the small agri-biodiesel producer credit of 10 cents per gallon. The Bill would
extend for one year (through 2014) the $1.00 per gallon production excise tax credit for diesel
fuel created from biomass. [I.R.C. 40A]
Extension of production credit for Indian coal facilities placed in service before 2009 [Bill
154]
The Bill would extend for one year (through 2014) the $2 per ton production tax credit for coal
produced on land owned by an Indian tribe, if the facility was placed in service before 2009.
[I.R.C. 45(e)(10)]
Extension of credits with respect to facilities producing energy from certain renewable
resources [Bill 155]
The Bill would extend for one year (through 2014) the production tax credit (PTC) for wind and
certain other renewable sources of electricity to facilities for which construction has commenced
by the end of 2014. [I.R.C. 45]
Extension of credit for energy-efficient new homes [Bill 156]
The Bill would extend for one year (through 2014), the credit for the construction of energyefficient new homes. [I.R.C. 45L]
Extension of special allowance for second generation biofuel plant property [Bill 157]
The Bill would extend for one year (through 2014) 50% bonus depreciation for cellulosic biofuel
facilities. [I.R.C. 168(l)(2)]
Extension of energy efficient commercial buildings deduction [Bill 158]

The Bill would extend for one year (through 2014) the above-the-line deduction for energy
efficiency improvements to lighting, heating, cooling, ventilation, and hot water systems of
commercial buildings. [I.R.C. 179D]
Extension of special rule for sales or dispositions to implement FERC or State electric
restructuring policy for qualified electric utilities [Bill 159]
The Bill would extend for one year (for sales prior to January 1, 2015) the present law deferral of
gain on sales of transmission property by vertically integrated electric utilities to FERC-approved
independent transmission companies. Rather than recognizing the full amount of gain in the year
of sale, this provision would allow gain on such sales to be recognized ratably over an 8-year
period. [I.R.C. 451(i)]
Extension of excise tax credits relating to certain fuels [Bill 160]
The Bill would extend for one year (through 2014) the $0.50 per gallon alternative fuel tax credit
and alternative fuel mixture tax credit. [I.R.C. 6426]
Subtitle DExtenders Relating to Multiemployer Defined Benefit Pension Plans
Extension of automatic extension of amortization periods [Bill 171]
The Bill would extend for one year (through 2015) a provision that automatically grants a 5-year
extension to multiemployer defined benefit pension plans that apply for additional time to
amortize funding shortfalls. Effective for extension applications submitted after December 31,
2014. [I.R.C. 431(d)(1)(C); ERISA 304(d)(1)(C)]
Editor's Note: This provision was made permanent with the enactment of H.R. 83, Division O,
101, which repealed the sunset provision of 2006 PPA.
Extension of shortfall funding method and endangered and critical rules [Bill 172]
The Pension Protection Act of 2006 (2006 PPA) added special rules for multiemployer defined
benefit pension plans that are significantly underfunded. These rules created three categories of
underfunding (endangered, seriously endangered, and critical), with specific obligations for plans
in each category. The 2006 PPA also generally permitted multiemployer plans to start or stop
using the shortfall funding method without obtaining approval from the IRS. Under a 2006 PPA
sunset provision, these rules do not apply to plan years beginning after December 31, 2014. The
Bill would extend these rules through 2015. Effective for plan years beginning after December
31, 2014. [I.R.C. 432; ERISA 305]
Editor's Note: This provision was made permanent with the enactment of H.R. 83, Division O,
101, which repealed the sunset provision of 2006 PPA.
***
DIVISION BACHIEVING A BETTER LIFE EXPERIENCE ACT OF 2014
TITLE IQUALIFIED ABLE PROGRAMS
***
Qualified ABLE Programs [Bill 102]
The Bill would create a qualified ABLE program that states could establish and maintain. Similar
to 529 accounts, contributions to ABLE program accounts would grow tax free. Accounts
would be available only to individuals diagnosed with a disability before age 26. Beneficiaries
would be limited to one ABLE account and would have to be residents of the state administering
the program.
Earnings on an ABLE account would be exempt from income tax; distributions would be exempt
as long as they are for qualified disability expenses. Qualified expenses could include education,
housing, transportation, employment training and support, health, assistive technology, legal fees
and funeral expenses.

Money distributed from an account that is not used for a qualified purpose and counts as taxable
income would be subject to an additional 10% tax.
Under the Bill, beneficiaries could, either directly or indirectly, dictate how contributions or
earnings in an account are invested, but no more than twice a year.
Individuals would not be able to deduct their contributions for income tax purposes and any
contribution amounts that exceed the annual limit would be subject to a 6% excise tax imposed
on the beneficiary.
Contributions would qualify for the annual gift tax exclusion (which is $14,000 for 2015) and
would be exempt from the generation-skipping transfer (GST) tax. Distributions would also
generally be exempt from gift and GST taxes.
The Treasury Department would be directed, within six months of enactment, to prescribe
regulations or other guidance related to: limiting accounts to one per person; information
required to open an account; defining disability expenses; disability certifications and
determinations of disability; preventing fraud and abuses in claiming disability expenses; estate,
gift and GST taxes; and transferring accounts if an individual moves to another state.
Effective for taxable years beginning after December 31, 2014.
[I.R.C. 529A (new)]
Treatment of ABLE accounts under certain federal programs [Bill 103]
Under the Bill, ABLE accounts generally wouldn't count against income limits for means-tested
benefits, such as Supplemental Security Income (SSI) and Medicaid. If the beneficiary's
resources from an account exceed $100,000, SSI benefits would be suspended until the account
balance is less than that amount. Such a suspension wouldn't affect an individual's eligibility for
Medicaid.
Effective on the date of enactment.
Treatment of ABLE accounts in bankruptcy [Bill 104]
In the case of a bankruptcy, contributions by a parent or grandparent of a beneficiary would be
protected as long as they were made more than a year before the bankruptcy filing.
Effective with respect to bankruptcy cases commenced under Chapter 11 on or after the date of
enactment. [11 U.S.C. 541]
Investment direction rule for 529 plans [Bill 105]
The Bill would allow limited investment direction for contributors or beneficiaries of 529
accounts for education.
Effective for taxable years beginning after December 31, 2014. [I.R.C. 529]
TITLE IIOFFSETS
***
Modification relating to inland water ways trust fund financing rate [Bill 205]
The Bill would increase to 29 cents per gallon, from 20 cents, the excise tax on fuel used to
power commercial cargo vessels on certain waterways.
Effective for fuel used after March 31, 2015. [I.R.C. 4042]
Certified professional employer organizations [Bill 206]
The Bill would establish a certification program for professional employer organizations (PEOs)
that administer payrolls for businesses. Certification would allow the PEO to become solely
responsible for paying employment taxes, rather than the employer being liable if taxes aren't
withheld or transmitted. PEOs would also have to pay an annual fee of $1,000.
Effective with respect to wages for services performed on or after January 1 of the first calendar
year beginning more than 12 months after the date of the enactment. Certification program to be

established by Treasury not later than six months before the previous sentence effective date.
[I.R.C. 3511 (new), 7705 (new), 7528]
Exclusion of dividends from controlled foreign corporations from the definition of personal
holding company in come for purposes of the personal holding company rules [Bill 207]
The Bill would exclude dividends received from a foreign subsidiary from the additional 20%
tax on personal holding company income, though the dividends would remain subject to
corporate income tax.
Effective for taxable years ending on or after the date of enactment. [I.R.C. 543]
Inflation adjustment for certain civil penalties under the Internal Revenue Code of 1986
[Bill 208]
The Bill would index several tax-related civil penalties under current law to inflation: (1) failure
to file a tax return or to pay tax; (2) failure to file certain information returns, registration
statements, and certain other statements; (3) failure of a paid preparer to meet certain obligations;
(4) failure of a partnership to file or an S corporation to file a return; and (5) failure to file correct
information returns and payee statements. [I.R.C. 6651, 6652, 6695, 6698, 6699,
6721, 6722]
Increase in continuous levy [Bill 209]
The Bill would allow the IRS to levy, or seize, as much as 30% (up from 15%) of federal
payments to Medicare providers and suppliers who have unpaid taxes.
Effective for payments made after 180 days after the date of the enactment. [I.R.C. 6331]