Overview of PATH Act Tax Opportunities for Businesses

Just over a year ago, Congress passed the Protecting Americans from Tax Hikes (PATH) Act of 2015. The law contained a number of provisions affecting businesses, including key elements that were either permanently enacted or received five-year extensions. Here’s a quick summary:

  • Research and Development Credit. In making this credit permanent, the PATH Act allows companies with $50 million or less in gross receipts to offset qualifying R&D expenditures as a credit against alternative minimum tax liabilities. Certain small businesses with $5 million or less in gross receipts can choose to offset their qualifying R&D expenditures against employer payroll tax liabilities.
  • Section 179 expensing. The PATH Act also locked in the popular Section 179 deduction, which allows small businesses to permanently expense up to $500,000 in qualified asset purchases, with a phase-out cap of $2 million. Since these caps are indexed for inflation, the Section 179 deduction limits have increased to $510,000 and $2.03 million for 2017.
  • Bonus depreciation. The PATH Act’s bonus depreciation clause received a five-year extension, which is good news since it allows companies to accelerate depreciation on their 2016 tax returns for all qualified equipment or property purchased and placed into service in 2016. For 2016 and 2017, bonus depreciation is 50 percent on purchases of qualified equipment. The bonus depreciation phases down in subsequent years, falling to 40 percent in 2018 and 30 percent in 2019.

Please contact us for more information on PATH Act tax opportunities, or other business accounting issues.

March 3, 2017