Baldwin Haspel Burke & Mayer LLC

BHBM Tax Law Alert 12/26/14


WELCOME

In this newsletter you will find information on updates and changes in the law on both the Federal and State level. If you have any questions, please contact Andrew Sullivan at (504) 569-2900.

‘TIS THE SEASON

Happy Holidays from Baldwin Haspel Burke & Mayer. We wish you and your family a new year filled with health, happiness and prosperity.

FEDERAL TAX LAW UPDATES

Tax Increase Prevention Act of 2014

Congress recently passed the Tax Increase Prevention Act of 2014 (“TIPA”), which President Obama signed into law on Dec. 19 2014. As explained in further detail below, the Act extends (or reinstates), for one year, a number of expense and deduction provisions, including the Internal Revenue Code (the “Code”) Section 179 expense and phaseout limits and 50% bonus depreciation.

A. Bonus First-Year Depreciation Extended

Prior to the enactment of TIPA, Section 168(k) allowed an additional first-year depreciation deduction (commonly referred to as the bonus depreciation deduction) equal to 50% of the adjusted basis of qualified property acquired and placed in service after December 31, 2011, and before January 1, 2014 (or before Jan 1, 2015 for certain long-production-period property and transportation property).

TIPA extends the 50% bonus depreciation for one year so that it applies to qualified property acquired and placed in service before January 1, 2015 (or before Jan. 1, 2016 for certain long-production-period property and transportation property).

B. Increased Section 179 Expense

Under Code Section 179, certain taxpayers may elect to expense (subject to statutory limitations) the cost of new or used tangible personal property placed in service during the tax year in the taxpayer’s trade or business. The maximum annual expense amount under Section 179 is generally reduced dollar-for-dollar by the amount of Section 179 property placed in service during the tax year in excess of a specified investment ceiling.

For the 2013 tax year, the maximum expense amount under Section 179 was $500,000 and the investment-based phase-out amount (or investment ceiling) was $2,000,000. Prior to the enactment of TIPA, for the 2014 tax year, the maximum expensing amount under Section 179 was scheduled to drop to $25,000 and the investment-based phaseout amount was scheduled to drop to $200,000.

TIPA retroactively extended (for the 2014 tax year) the increased $500,000 maximum expense amount under Code Sec. 179 and the increased $2 million investment-based phaseout amount.

C. Sales and Use Taxes

TIPA provides taxpayers who itemize deductions with the ability to elect to deduct state and local sales and use taxes instead of state and local income taxes. Prior to the enactment of TIPA, this election was not available for taxpayers during the tax years beginning after December 31, 2013.

2015 Estate Tax Exemption

In late October, the Internal Revenue Service announced that the estate-tax exemption will increase to $5,430,000 per individual in 2015; up from $5,340,000 per individual in 2014 due to an inflation adjustment. The top estate tax rate on amounts in excess of the exemption remaining at forty percent (40%).

STATE TAX LAW UPDATE

Louisiana Business Corporation Act

On May 30, 2014, Governor Bobby Jindal signed the Business Corporation Act (“BCA”) (Act No. 328, 2014 Reg. Session). As the first comprehensive revision of Louisiana’s business corporation law since the current statute was originally adopted in 1968, the BCA replaces the entire Business Corporation Law (Chapter 1 of Title 12). The BCA will take effect on January 1, 2015 and will be codified as La R.S. 12:1-101 et seq.

The BCA is based on the Model Business Corporation Act, which was written by the Committee on Corporate Laws of the American Bar Association’s (ABA) Business Law Section. Approximately thirty (30) states, including all states in the Southeast, have adopted all or substantially all of the Model Act. While the BCA and the Model Act are significantly longer than the current Louisiana Business Corporation Law, lawmakers hope that the additional detail will address issues and/or questions that have arisen under the current law.

Some notable changes made to existing law by the BCA include the following:

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