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With Only Two Weeks Left for Taxpayers to Act, 2014 Tax Extenders Bill Finally To Become Law: Should You Celebrate, Yawn, or Yell?

December 17, 2014 Business & Tax Blog Legislation

On Tuesday, December 16 the Senate passed the “The Tax Increase Prevention Act of 2014,” popularly known as the 2014 Tax Extenders Bill. President Obama is expected to sign the bill into law. Unfortunately, even in its passage, the new law exemplifies political dysfunction and gridlock.

The bill temporarily extends popular personal and business tax breaks through 2014, but not beyond. Extended provisions include bonus depreciation, a shortening of the period corporate-level tax applies to S corporations that used to be C corporations, and a $100,000 Individual Retirement Account qualified charitable donation exemption from the normally applicable income tax deduction limitations. Past legislation has repeatedly temporarily extended these provisions, but only through 2013, necessitating a further extension through this bill.

Passage of the bill is more a cause for relief than celebration. Some might just yawn. Others will yell. While some of its tax breaks are supposed to spur investment and business acquisition activity, passing the law with two weeks remaining in 2014 gives most businesses little time to buy equipment or close transactions. It also leaves a small window for Individual Retirement Account charitable donations. The law seems unlikely to significantly benefit the economy by influencing behavior before its tax benefits expire.

The law will not spur meaningful long-term planning or activity, because no one knows with certainty whether a similar bill will become law to further extend the favorable tax provisions into 2015 or beyond. Congress willfully failed to act on this bill through almost all of 2014. It is not clear the political impetus exists for an earlier extension action–or better yet permanent adoption of the law allowing even longer-term planning—in 2015.

Here is a link to a more detailed summary and text of the bill:

Here are links to our prior posts concerning the 2014 Extenders Bill and similar bills:

E. John Wagner, II