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Following the House vote on December 3, 2014, the Senate on December 16, 2014, by a vote of 76 to 16, passed the Tax Increase Prevention Act of 2014 (H.R. 5771), an extension of a number of provisions that had expired at the end of 2013.  The extension is just for one year, through 2014.  Included in the legislation are over 50 individual and business provisions that had expired.  These include, for individuals, the sales tax deduction, IRA distributions to charity, the above-the-line deductions for tuition and fees and educator expenses, and the exclusion for discharges of principal residence indebtedness.  For businesses, it includes the research credit, bonus depreciation, Code Sec. 179 expensing, the work opportunity credit, and 15-year amortization of leasehold improvements.  A few expired provisions were not included in the legislation, including provisions with respect to a health care tax credit related to the Trade Assistance Act and tax breaks for certain energy-efficient vehicles.

 

Also included is legislation to create tax-favored accounts for persons with disabilities.  There are no offsetting revenue raisers for the extenders, but revenue raisers are included to offset the cost of these new accounts.  The legislation also includes a set of technical corrections to prior tax legislation.  The legislation now moves to the President for his expected signature.

By a vote of 378 to 46, the House on December 3, 2014, passed House bill 5771 to extend most of the tax breaks that had expired at the end of 2013 through 2014.  The Senate is expected to quickly take up the legislation. Individual provisions include the sales tax deduction, IRA distributions to charity, the above-the-line deductions for tuition and fees and for educator expenses, and the exclusion for discharges of principal residence indebtedness.  Business provisions include the research credit, bonus depreciation, Code Sec. 179 expensing, the work opportunity tax credit, and 15-year amortization of leasehold improvements.  Not included in the legislation are expired provisions with respect to a health care tax credit and a tax break for electric motorcycles.

On November 6, 2014, the Sixth Circuit Court of Appeals, in a 2 to 1 decision, upheld bans on same-sex marriage in the states of Kentucky, Michigan, Ohio and Tennessee, ruling that the bans do not violate the U.S. Constitution.  This decision puts the Sixth Circuit in conflict with prior rulings by the Fourth, Seventh, Ninth and Tenth Circuits,  The Supreme Court had declined to hear appeals from the Fourth, Seventh, Ninth and Tenth Circuits.  However, now that a conflict exists, many expect the Supreme Court to take up an appeal from the Sixth Circuit.  The Supreme Court's refusal to here appeals from the earlier circuit court rulings resulted in a rapid expansion of the number of states recognizing same-sex marriage from 18 to 33 plus the District of Columbia.  The IRS requires that legally married same-sex couples file income tax returns as either joint filers or married filing separately filers regardless of whether the state of current residence recognizes the marriage.  Excluding states that do not have an income tax, the following states still require legally married same-sex couples to file single or head of household state tax returns:  Alabama, Arkansas, Georgia, Kansas, Kentucky, Lousiana, Michigan, Mississippi, Montana, Nebraska, North Dakota, Ohio, South Carolina, and Tennessee.  The stay on the court decision overturning the Kansas ban ends tomorrow, November 11, 2014.  The states of Montana and South Carolina are in circuits that have already ruled against similar bans in other states within the circuit.

The Supreme Court's refusal to hear appeals of same-sex marriage cases from the 4th, 7th, and 10th Circuit Courts of Appeal effectively expands same-sex marriage to the states of Indiana, Oklahoma, Utah, Virginia, and Wisconsin.  The fact that all of the cases had ruled against the ban on same-sex marriages may have caused the Supreme Court to defer until there is a split among the circuits on the issue.  It is anticipated that these states will now put procedures in place to permit legally married same-sex couples to file joint or married filing separately tax returns corresponding to similar tax returns filed for federal income tax purposes.  This brings to 24 states plus the District of Columbia the number of states recognizing same-sex marriages.  A couple of additional states permit state joint returns to be filed if federal joint tax returns are filed.

President Obama signed into law on March 25 the Philippines Charitable Giving Assistance Act (H.R. 3771), allowing taxpayers the option of accelerating into 2013 their charitable deduction for certain cash contributions made for the relief of victims of Typhoon Haiyan, which struck the Philippines in November 2013. Under the new law, a taxpayer may treat any otherwise qualifying cash contribution for the relief of victims made after the date of enactment (after March 25, 2014) and before April 15, 2014 as made on December 31, 2013, and not in 2014.

 

The Senate had approved the measure earlier on March 25 by unanimous consent. The House approved the measure on March 24.

 

The new law also provides that a “telephone bill” showing the name of the donee organization, the date of the contribution, and the amount of the contribution will be deemed to meet the recordkeeping requirements of Code Sec. 170(f)(17). That Code section ordinarily would require, among other things, a “written communication from the donee.” 

 

Two questions may spring from this reference to “telephone bill”:  (1) Does it include texting donations?  (2) And, if so, are donations by texting not usually deductible if not protected within specific legislation?

 

In response to Question #1, texting donations are apparently covered, if not implied to be the main reason for the provision, The bill language in this new law for the most part mirrors the language used in the Hiring Incentives to Restore Employment (HIRE) Act (P.L. 111-126), Sec. 1, which accelerated the deduction of cash contributions made in relief of the victims of the January 11, 2010 earthquake in Haiti. The Joint Committee on Taxation Report (JCX-2-10) that accompanied the HIRE Act, in elaborating on the provision, commented: Thus, for example, in the case of a charitable contribution made by text message and chargeable to a telephone or wireless account, a bill from the telecommunications company containing the relevant information will satisfy the requirement.”

 

In response to Question #2, donations by text technically probably must then ordinarily be acknowledged by the donee organization. IRS Pub 526, Charitable Contributions, under “When to Deduct” states: “Contributions made by text message are deductible in the year you send the text message if the contribution is charged to your telephone or wireless account.” However, under “Recordkeeping,” Pub 526 only recites, as sufficient substantiation, “ “bank record,” “credit card statement,” or “a receipt …. from the qualifying organization.”  A receipt from the telephone company is not included in this list.

 

  Also of note: The period within which the contributions for Typhoon relief receive favorable treatment (March 26-April 14, 2014) appears to be drafted solely to encourage an immediate rush of new cash donations, since it does not similarly reward any contribution made previously in 2014 between the Jan 1 and March 25 period.  The original version of the bill, as introduced in December, prospectively would have accelerated deductions for the January 1 through March 1, 2014 period. 

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