Concerned about disruption in the 2015 filing season, IRS Commissioner John Koskinen had warned legislators in October 2014 that too much delay on a legislative action on a tax extenders package, “could force the IRS to postpone the opening of the 2015 filing season and delay the processing of tax refunds for millions of taxpayers.”
In a flurry of year-end activity, on December 16, Congress approved a tax package extending through 2014 the slate of more than 50 provisions that expired on Dec. 31, 2013. TheTax Increase Prevention Act of 2014 (H.R. 5771) retroactivelyextends the expired tax breaks—a number of them affectingstudents and institutions—for one year, from Jan. 1, 2014, through Dec. 31, 2014.
Senate Finance Committee Chairman Ron Wyden (D-OR) had led efforts to fight for a two-year package, and to make some provisions permanent, but with the year-end squabbling over budget, immigration, and other issues at play, Congress would only agree to a temporary one-year extension.
Early in 2014, outgoing Chairman of the House Ways and Means Committee Dave Camp (R-MI) announced intensions of “going policy by policy to determine which extenders should be made permanent.” There was no real legislative action on comprehensive tax reform in 2015 (neither individual nor corporate), and the attempt at compromise legislation based on Wyden’s two-year proposal failed, leaving Congress to ultimately extend for one year the hodgepodge of tax breaks.
NACUBO has been following several provisions in particular:
1. Tax-Free Distributions From Individual Retirement Accounts for Charitable Purposes. The IRA charitable rollover allows individuals 70 1/2 and older to donate up to $100,000 from their IRAs and Roth IRAs to public charities, including colleges and universities, without having to count the distributions as taxable income.
2. Modification of Tax Treatment of Certain Payments to Controlling Exempt Organizations. Also known as 512(b)13(E), this provision quantifies as unrelated business income (UBI) only the portion of payments to the controlling exempt organization from interest, annuities, rents, and royalties from a controlled subsidiary that exceed fair market value.
3. Above-the-Line Deduction for Qualified Tuition and Related Expenses. This deduction allows eligible taxpayers to deduct up to $4,000 in tuition expenses as an above-the-line exclusion from income.
4. Tax Credit for Research and Experimentation Expenses. Current law allows companies to claim this business tax credit for research and development activities conducted at universities or other qualifying organizations, including research consortiums that may include universities.
5. Energy Efficient Commercial Building Deduction. Section 179D permits a government building owner (for example, public institutions of higher education) to allocate the 179D deduction to one or more persons “primarily responsible for designing the property.” This party can include architects, engineers, contractors, environmental consultants, or energy services providers.
Current law does not permit such allocations by nonprofit hospitals, colleges, universities, and other community organizations that embark on energy efficient construction projects. However, NACUBO last year supported efforts to provide nonprofits the same benefit of Section 179D when their buildings (new construction or renovation) meet a certain threshold of energy savings. Sen. Wyden’s two-year tax extender legislation included a provision to this effect, but Congress failed to come to an agreement on the overall two-year extension package.
6. Mass Transit Commuter Tax Parity. This provision would equalize the tax breaks available to commuters who drive and those who use public transportation. On Jan. 1, 2014, employers could offer, pretax, a $250 per month benefit for qualified parking, but the benefit for public transportation fell to $130 per month.
Unfortunately, the one-year retroactive tax package passed too late in the year for several provisions to provide any significant benefit. Individuals and organizations had little time to arrange, for example, tax-free distributions from individual retirement accounts for charitable purposes, and it was virtually impossible for employers to provide employees with the benefits of the mass transit tax break.