Government Funding and Tax Extenders Legislation Affects Investors

After weeks of negotiations, Congress reached agreement on a bipartisan bill to fund the government through September 2016. Following are provisions of particular interest to investors.

The legislation makes permanent (including retroactively for 2015) some provisions that previously had expired every few years:

• IRA / charitable contribution provision for account holders over age 70-1/2
• Tax credit for research and development expenditures
• Enhanced write-off of small business capital expenses under section 179

The legislation extends (including retroactively for 2015) other provisions:

• Extension and phase out of bonus depreciation through 2019

The legislation includes a number of new provisions:

• Repeals the forty-year-old prohibition on exports of domestically produced crude oil
• Expands 529 plan qualifying distributions to include student computers and technology

The legislation delays sources of funding and government reimbursements under the Affordable Care Act:

• “Cadillac tax”(40%) imposed on high cost employer health plans delayed until 2020; thereafter tax becomes deductible
• Medical device tax delayed until 2018
• Annual fee on health insurance provider premiums written (“belly button tax”) delayed until 2018
• Government reimbursements for insurance company losses limited to amounts collected from profitable insurers (reimbursement fund must be revenue neutral)

Of interest to financial advisors, the legislation:

• Does not prevent the Department of Labor from finalizing and implementing the proposed IRA account fiduciary rules
• Does not make significant changes to Dodd-Frank

Andrew H. Friedman is the principal of The Washington Update LLC and a former senior partner in a Washington, D.C. law firm. He and his colleague Jeff Bush speak regularly on legislative and regulatory developments and trends affecting investment, insurance, and retirement products. They may be reached at www.TheWashingtonUpdate.com.

The authors of this paper are not providing legal or tax advice as to the matters discussed herein. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. It is not intended as legal or tax advice and individuals may not rely upon it (including for purposes of avoiding tax penalties imposed by the IRS or state and local tax authorities). Individuals should consult their own legal and tax counsel as to matters discussed herein and before entering into any estate planning, trust, investment, retirement, or insurance arrangement.

Copyright Andrew H. Friedman 2015. Reprinted by permission. All rights reserved.