Tax & Accounting Blog

Congress Passes PATH Act

Blog, Indirect Tax, ONESOURCE December 22, 2015

On December 18th, President Obama signed into law the eponymous Protecting Americans from Tax Hikes Act of 2015 (PATH). PATH extends several taxpayer-friendly provisions, makes some credits permanent, and delays some less ‘jolly’ provisions (while enacting some Scrooge-ish provisions of its own). This is a relatively large bill affecting many tax provisions; however several key changes affect provisions of the Affordable Care Act and relate to excise taxes imposed by that act. Part 2 sec.174 of the act puts a moratorium on the 2.3% Federal medical device excise tax. This moratorium precludes the imposition of the medical device excise tax of Internal Revenue Code Section 4191 through the calendar years of 2016 and 2017. Based on the expressed wording of the moratorium, the tax will continue to be due for sales of medical devices that occur prior to January 1, 2016. Therefore sales of qualifying medical devices sold between the tax’s inception in 2013 through the end of 2015 would still be subject to the tax.

The bill makes quite a number of other changes which will affect businesses including making permanent the research and development tax credit in IRC Section 41 and the 1202 exclusion of capital gain on qualified small business stock. Provisions that affect individual taxpayers include making permanent the American Opportunity Tax Credit and the child tax credit as well as an exclusion for employer-provided mass transit and parking benefits and allowance of mortage insurance premiums to be treated as qualified residence interest.

However not all is good news as penalties for failure to file a return or failure to correct a return have been increased for inflation as has the 6695 return preparer penalty. To see the bill in its entirety click here.