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PATH Act and Extenders – Key Tax Breaks for Businesses in 2015

Congress has once again extended the “extenders,” a varied assortment of more than 50 individual and business tax deductions, tax credits, and other tax-saving laws which have been on the books for years but which technically are temporary because they have a specific end date. This package of tax breaks has repeatedly been temporarily extended for short periods of time (e.g., one or two years), which is why they are referred to as “extenders.” Most of the tax breaks expired at the end of 2014, but now, in the recently enacted Protecting Americans from Tax Hikes Act of 2015 (i.e., the 2015 PATH Act), the extenders have been revived and extended once again, but this time Congress has taken a new tack. Instead of just rolling the package of provisions over for a year or two, it actually made some of the provisions permanent and extended the remaining provisions for either five or two years, while making significant modifications to several of the provisions.

I’m writing to give you an overview of the key tax breaks affecting business that were extended by the new law. Please call our office for details of how the new changes may affect you or your business.

The extended business credits and special depreciation and expensing rules include:


  1. . . . the research credit; made permanent; additionally, beginning in 2016 eligible small businesses ($50 million or less in gross receipts) may claim the credit against alternative minimum tax (AMT) liability, and the credit can be used by certain even smaller businesses against the employer’s portion of the Social Security portion of the employer’s payroll tax (i.e., FICA) liability;
  2. . . . the minimum low-income housing tax credit rate for nonfederally subsidized new buildings; made permanent;
  3. . . . the military housing allowance exclusion for determining whether a tenant in certain counties is low-income (differential wage payment credit); made permanent;
  4. . . . the Indian employment tax credit; extended through 2016;
  5. . . . the new markets tax credit; extended through 2019;
  6. . . . the railroad track maintenance credit; extended through 2016; the new law modifies the credit to apply to expenditures for maintaining railroad track owned or leased as of Jan. 1, 2015 (rather than Jan. 1, 2005, as under prior law);
  7. . . . the mine rescue team training credit; extended through 2016;
  8. . . . the employer wage credit for activated military reservists; made permanent; beginning in 2016, the provision modifies the credit to apply to employers of any size, rather than employers with 50 or fewer employees, as under prior law;
  9. . . . the work opportunity tax credit; extended through 2019; the new law also modifies the credit beginning in 2016 to apply to employers who hire qualified long-term unemployed individuals (i.e., those who have been unemployed for 27 weeks or more) and increases the credit with respect to such long-term unemployed individuals to 50% of the first $6,000 of wages;
  10. . . . qualified zone academy bonds; extended through 2016;
  11. . . . three-year depreciation for racehorses; extended through 2016;
  12. . . . 15-year straight line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements; made permanent;
  13. . . . 7-year recovery period for motorsports entertainment complexes; extended through 2016;
  14. . . . accelerated depreciation for business property on an Indian reservation; extended through 2016; the new law also modifies the deduction to permit taxpayers to elect out of the accelerated depreciation rules;
  15. . . . 50% bonus depreciation; extended for property placed in service during 2015 through 2019 (but 2016 through 2020 for certain property with a longer production period and certain aircraft); the 50% rate is phased down to 40% for property placed in serviced during 2018 (but 2019 for the long production period property and aircraft) and 30% for property placed in serviced during 2019 (but 2020 for the long production period property and aircraft); phase down is also required for the $8,000 increase, for bonus-depreciation eligible cars, of the first-year depreciation and expensing dollar cap for cars; the provision makes qualified building improvements (no longer just qualified building leasehold improvements) bonus depreciation eligible and permits most plants bearing fruit or nuts to be eligible for bonus depreciation when planted or grafted rather than when income-producing;
  16. . . . the election to accelerate alternative minimum tax (AMT) credits in lieu of additional first-year depreciation; extended for property placed in service during 2015; the provision modifies the AMT rules beginning in 2016 by increasing the amount of unused AMT credits that may be claimed in lieu of bonus depreciation;
  17. . . . the enhanced charitable deduction for contributions of food inventory is made permanent; the new law modifies the deduction by increasing the limitation on deductible contributions of food inventory from 10% to 15% of the taxpayer’s adjusted gross income (15% of taxable income in the case of a C corporation) per year and also modifies the deduction to provide special rules for valuing food inventory;
  18. . . . increase in elective business expensing (up to $500,000 annual write-off of eligible business property costs that is phased out once those costs exceed $2,000,000 for the year) is made permanent; made permanent too is the allowance of expensing for computer software and qualified real property (certain leasehold improvement, retail improvement and restaurant property; the $500,000 and $2,000,000 limits are indexed for inflation for tax years beginning after 2015; expensing is allowed for air conditioning and heating units placed in service in tax years beginning after 2015; the $250,000 cap on the expensing of qualified real property is eliminated for tax years beginning after 2015; the election and the specifics of the election are made revocable;
  19. . . . the election to expense mine safety equipment; extended through 2016;
  20. . . . special expensing rules for certain film and television productions; extended through 2016; the new law modifies the rules to apply to the cost of live theatrical productions;
  21. . . . the deduction allowable with respect to income attributable to domestic production activities in Puerto Rico; extended through 2016;
  22. . . . the exclusion from a tax-exempt organization’s unrelated business taxable income (UBTI) of interest, rent, royalties, and annuities paid to it from a controlled entity; made permanent;
  23. . . . the special treatment of certain dividends of regulated investment companies (RICs); made permanent;
  24. . . . the definition of RICs as qualified investment entities under the Foreign Investment in Real Property Tax Act; made permanent;
  25. . . . exceptions under subpart F for active financing income; made permanent;
  26. . . . look-through treatment for payments between related controlled foreign corporations (CFCs) under the foreign personal holding company rules; extended through 2019;
  27. . . . the exclusion of 100% of gain on certain small business stock; made permanent; the new law also permanently extends the rule that eliminates such gain as an AMT preference item;
  28. . . . the basis adjustment to stock of S corporations making charitable contributions of property; made permanent;
  29. . . . the reduction in S corporation recognition period for built-in gains tax; made permanent;
  30. . . . the empowerment zone tax incentives; extended through 2016; the new law modifies the incentive by allowing employees to meet the enterprise zone facility bond employment requirement if they are residents of the empowerment zone, an enterprise community, or a qualified low-income community within an applicable nominating jurisdiction; and
  31. . . . the American Samoa economic development credit; extended through 2016.

The new legislation also includes a two-year delay in a pair of new taxes installed as part of the healthcare reform law: a levy on medical devices (which would have started in 2016) and another on high-end health insurance plans, known as the “Cadillac tax,” which would have applied beginning in 2018.

I hope this information is helpful. If you would like more details about these changes or any other aspect of the new law, please do not hesitate to call.

Very truly yours,

Your Team at Monfalcone & Garris, P.C.




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IRS Guidance on Scam Phone Calls

Need guidance on Scam Phone Calls?

Telephone scams performed by individuals posing to be IRS personnel are becoming more and more of a prevalent issue.

Sometimes callers claim to represent the IRS and demand tax payments. Some try to convince you that you’re due a refund. Sometimes scam phone callers will ask you for sensitive financial information, like credit or debit card numbers.

This is a wide spread scam being executed all over the country.  In response to this issue we’ve provided a link to IRS guidance on scam phone calls. There’s plenty of information on how to identify and respond to these suspicious calls.

The IRS Guide on how to spot scam phone calls includes info for citizens like how to file a complaint and how to report an incident with a suspicious caller.

For example – one thing to keep in mind is that the IRS will never use unsolicited email, text messages or any social media to discuss any personal tax issue.

Please follow the link below to read further and do not hesitate to call us with any questions.

IRS Guidance on Scam Phone Calls; Five Easy Ways to Spot Suspicious Calls

-Monfalcone, Garris and Company, PC

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Exciting Changes at Garris and Company, P.C.

We are pleased to announce that effective February 1, 2015, Christina Monfalcone, CPA will merge her practice, Monfalcone Accounting Group with Garris and Company, P.C..  At that time, Christina will assume the position of president of the company and will be responsible for the future operations and management of the firm.

Christina’s career in public accounting began in Charlottesville in 1999 with Joseph Saunders III, CPA Inc.  In 2008, Wills & Associates bought Joseph Saunders, III CPA and Christina assisted with the transition to Wills & Associates where she was a partner until 2013.  During 2013, Christina opened her own firm, Monfalcone Accounting Group.  She is a well-respected local accountant who has many resources and talents that you will benefit from.

With this transition, the things that you are familiar with will not change, although the firm name will change to Monfalcone, Garris and Company, PC.  The location, telephone number, email addresses and billing structure will all remain the same.  Ed Garris will continue to work with us during tax season to assist in ensuring each client’s needs are met.

We are all very eager and excited about moving forward into tax season and we will now be able to offer the preparation of audited financial statements.

Christina would love to meet you so stop by and introduce yourself, especially if you have any questions or concerns.


Thank you,

Garris and Company, P.C.



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Be on the Alert and Protect our Personal Identity

You may hrecord keepingave heard recently about proposals in Congress to require the Treasury Department to contract with private collection agencies to collect amounts owed to the Internal Revenue Service. One concern arising is how the debt collectors will be able to identify themselves as legitimate. Whether or not the measure passes in some form or another, this discussion can serve as a reminder that we should be on the alert and protect our personal identity and our financial assets from thieves claiming to be an agent of the IRS.

Attempts to defraud come in various forms including e-mails, phone calls, letters, texts or other social media contacts, and can be very convincing with logos, addresses, and lingo as the scammer tries to stay one step ahead of detection. Don’t be misled by an imposter that wants you to believe that they are an agent of the IRS in order to get personal or financial information from you. Recent aggressive phone scams have used intimidation as a motivator to make their target turn over personal information to them. They can manipulate caller ID information, use fake names and IRS agent identifying information, and employ other increasingly sophisticated methods to lure you into their deception.

The IRS does not initiate contact with taxpayers by phone or electronic means (including e-mails, texts or other social media) to request personal, tax, or financial data. You should not reply to, open attachments, or click on a link in any unsolicited e-mail that claims to come from the IRS. You can help to stop scams by forwarding any suspicious e-mail you receive to The IRS compiles such information to alert taxpayers about fraudulent schemes through news releases and on its website at

Let us know if you have any concerns that you cannot resolve, especially if you receive a notice from the IRS. We can help you determine authenticity and advise if you should take any further action.

-Nancy B. Corley, EA


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The Patient Protection and Affordable Care Act

Many of us have heard on the news or read on social media sites various opinions of the Patient Protection and Affordable Care Act also known as “Obamacare.” There is a lot of confusion on what this new Act truly means and what the effect will be on us: the citizens. The main question is: what is Obamacare? With the Act being so vast it is hard to get a clear understanding of the new law and the effect it can have on you.

First, check to see if your health care plan was in existence before March 20, 2010, if so it could be “grandfathered in” therefore it does not have to provide the required Obamacare benefits. If your health care plan does not meet this criterion, your insurance plan under Obamacare must cover:

  • Children up to age 26 can be added to your health insurance plan
  • It cannot limit the coverage you receive over your lifetime
  • It cannot deny coverage to children with pre-existing conditions
  • If you or another adult has a pre-existing condition, you will get the same protection as your child starting in 2014
  • No co-pay for wellness or pregnancy exams

By 2014, everyone will be required to have health insurance. You will be required to purchase insurance or pay a penalty of up to 1% of your income. In 2014, if your income is 133% or less than the “Federal poverty level” (in 2013 it was $15,281 for an individual and $31,321.50 for a family of four) you qualify for Federal government funded insurance: Medicaid. If you are a small business owner, with 25 employees or less, you can get a tax credit of 35% of the costs of health insurance and this can go up to 50% in 2014. If you are a small business owner, with 50 employees or less, you do not have to pay a fine if your workers get tax credits through the Health Insurance Marketplace also known as the “exchange”. With 50 or more employees you must provide health insurance or pay a penalty of $2,000 per employee (excluding the first 30 employees) starting January 2015.

Starting in 2014, if you get your health insurance coverage through the Health Insurance Marketplace, you may be eligible for the Premium Tax Credit. The open enrollment period to purchase health insurance coverage for 2014 through the Marketplace runs from October 1, 2013, through March 31, 2014.

This is only a summary of the health care law and how it can affect you. To find out more about this new law please visit:

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What Constitutes Overtime Pay for Non-Exempt Employees?

How to Determine Overtime Pay for Non-Exempt Employees

How to Determine Overtime Pay for Non-Exempt Employees

To determine if overtime pay is present the employer must first establish a workweek.  The Fair Labor Standards Act (FLSA) says a “workweek” is seven consecutive 24-hour days beginning when the employer chooses.

According to the FLSA, non-exempt employees must be paid at least the minimum wage and receive overtime pay at the rate of one and a half times their regular rate of pay for all hours worked in excess of 40 hours for the workweek. The key word here is “worked”; time spent on vacation, sick leave and holidays will not be counted as time worked. Such time should be paid as straight-time but not included as time worked when computing overtime pay.

The FLSA uses several remedies to enforce compliance. When Wage and Hour investigators find violations they will recommend ways for the employer to become compliant and to require the payment of any back wages owed. Those employers who willfully violate the minimum wage or overtime pay requirements are subject to civil penalties of up to $1,100 per violation.

-Tracy Wallace

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2012 Payroll Updates

Payroll Updates

Payroll Updates

After ringing in 2012 and packing up holiday decorations, it is time to get back to business and update files to reflect payroll updates for the new year. Below are a few of the changes to look for.

While the Social Security wage limit had remained at $106,800 for the last three years, this year the maximum amount of income subject to Social Security taxes will increase to $110,100. The reduction in the employee portion of Social Security tax rate to 4.2% we saw in 2011 will expire December 31, 2011 and the rate will revert back to 6.2% for employees and 12.4% for self-employed individuals. Employees will notice a reduction in net pay on their first paycheck in January. It may be necessary for anyone self-employed to adjust their estimated tax payments in 2012 as a result of the tax increase. Keep a close eye on this one as congress is currently battling it out over new legislation to extend and maybe even expand the payroll tax holiday.

For 2012, the taxable wage base for state unemployment tax for Virginia remains at $8,000.00. On the first of December the Virginia Employment Commission (VEC) mailed Tax Rate Notices for Calendar Year 2012. QuickBooks users must be sure to edit the payroll item for state unemployment tax with their new rate before processing their first payroll in January. If the notice has not been received the rate can be found on your VA ifile VEC link where you would submit your Quarterly Tax Report to the VEC after January 1 or via phone at 800-897-5630.

A business must determine annually which deposit schedule (semi-weekly, monthly, or quarterly) it is required to use for submitting federal and state tax deposits. The Internal Revenue Service (IRS) and Virginia Department of Taxation (VDOT) send notices at year end notifying a business of a change in deposit frequency. However, it is the responsibility of the business to determine its filing frequency and to ensure they are depositing taxes timely. Your deposit schedule for a calendar year is determined by calculating your tax liability during the “Lookback Period”. This period is defined in Circular E, Employer’s Tax Guide issued by the IRS for the federal lookback and in the Commonwealth of Virginia Withholding Tax Guide issued by VDOT for the Virginia lookback.

Distribute Forms W-4 and VA-4 to employees so they may make changes in address, marital status and withholding allowances in the new year. It is helpful to remind employees to review paycheck information and have them advise you of any changes that may affect W-2 forms before year end. If an employee claimed exemption from income tax withholding last year on Form W-4, a new form must be completed by February 15th in order to continue the exemption another year.

Hopefully some of these reminders will help get your New Year off to a good start. Best wishes for a happy and healthy 2012!

Dana Kirschnick

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The Year End is Coming Soon! Tax Planning Could Save You Money!

Nov 2011 Yellowstone Path There are two types of year-end tax planning moves: those that should be considered every year and those that apply only to the 2011 year-end. Before the inevitable year-end approaches, some good tax planning can save you some of your hard-earned money. Absent new congressional legislation, below are several tax provisions that will expire or be modified at 12/31/11.

The expiring tax provisions applicable to businesses actually have the greatest potential for saving taxes. The current provision to allow businesses to expense (Section 179) up to $500,000 of business machinery, equipment and furniture will be reduced next year to $139,000.

The current provision to allow businesses to expense (Section 179) up to $250,000 of certain real property additions, leasehold or restaurant improvements in the year of acquisition will expire after 2011. As usual, there are both caps and phaseouts for the Section 179 expensing options. Additionally, the provision allowing businesses to use 100% bonus depreciation on certain new assets will decrease to 50% next year. Another of the major expiring provisions is the Work Opportunity Tax Credit (WOTC), which currently gives employers a tax credit for certain workers hired before the end of 2011. However, as part of a new law signed by the President on November 21, 2011, the WOTC was extended by one year for hiring certain qualified veterans.

Individuals wishing to take advantage of expiring tax provisions should consider some of the following tax savings ideas. Individuals age 70½ or over are allowed to make a qualified tax-free charitable distribution of up to $100,000 from an IRA to a qualified charity before the end of the year. Although the deduction for higher education expenses expires at the end of 2011, the American Opportunity Credit for some of these same expenses extends through the end of 2012. The energy credit for homeowners who make energy efficient improvements to their main home will also expire on 12/31/11.

Tax planning strategies that apply to any year-end should also be considered. In the interest of keeping this blog to a manageable size, these will be included in the year-end company e-newsletter which will be available for download.

Barb Franko, CPA

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