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2014 Will Ring in Uncertainty for Many US Taxpayers

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When 2013 ends, so will more than 50 US tax provisions. Nearly all of these expiring tax provisions have suffered this fate before, only to be extended retroactively after months of uncertainty for affected taxpayers.

Included among the list of expiring tax provisions are some widely used incentives, such as the research and experimentation tax credit and 50 percent “bonus” depreciation. The list of expiring tax provisions also contains a raft of energy incentives, including the production tax credit for wind energy, incentives for alternative and renewable fuels and credits for energy-efficient appliances and houses. Provisions important to individuals—such as the deduction for out-of-pocket expenses for teachers, higher exclusions for mass-transit benefits and the deduction for state and local sales taxes—will sunset at the end of this year. The same is true for provisions important to US companies with cross-border activities (for example, the “active financing exception” and the subpart F exception for dividends, interest, rents and royalties paid between related controlled foreign corporations) and businesses operating in certain designated or distressed areas. Despite their diversity, these expiring tax provisions have one thing in common: Taxpayers who use them are about to enter months of uncertainty as to their availability.

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Sander Lurie, a member of Dentons’ Public Policy and Regulation practice, co-authored this article.