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Further Consolidated
Appropriations Act, 2020 HR
1865
On Dec. 20, 2019, the President signed the Further Consolidated
Appropriations Act, 2020 (H.R. 1865, PL 116-94), a $428 billion tax-cut plan
that would restore a mixed bag of benefits known as extenders, modify
rules for retirement plans, rescind several Obamacare taxes, offer breaks to
victims of natural disasters and keep the federal government funded for the
rest of the fiscal year.
The spending bill consists of two separate pieces of legislation most notable
to taxpayers – the Setting Every Community Up for Retirement
Enhancement (SECURE) Act and the Taxpayer Certainty and Disaster Tax
Relief Act of 2019.
Setting Every Community Up for Retirement
Enhancement (SECURE) Act–Division O
TITLE I – EXPANDING AND PRESERVING RETIREMENT SAVINGS
• Certain taxable non-tuition fellowship and stipend payments treated are as
compensation for IRA purposes. The term “compensation” shall include any
amount that is included in the individual’s gross income and paid to the
individual to aid in the pursuit of graduate or postdoctoral study. Effective
for tax years beginning after Dec. 31, 2019.
• Repeal of maximum age for traditional IRA contributions. Contributions to
a traditional IRA are now permitted for eligible taxpayers of any age.
Effective for contributions made tax years beginning after Dec. 31, 2019.
• Qualified charitable distributions (QCDs) from an IRA can only be made
after the taxpayer reaches age 70½. The amount of a taxpayer’s QCDs that
are not includible in gross income for a tax year is reduced (but not below
zero) by the excess of:
1. The total amount of IRA deductions allowed to the taxpayer for all tax
years ending on or after the date the taxpayer attains age 70½, over
2. The total amount of reductions for all tax years preceding the current tax
year. Effective for distributions made for tax years beginning after Dec. 31,
2019.
• Qualified cash or deferred arrangements must allow long-term employees
working more than 500 but less than 1,000 hours per year to participate.
Generally applies to plan years beginning after Dec. 31, 2020.
• Penalty-free withdrawals from retirement plans for individuals in case of
birth or adoption of child under the age of 18, or is physically or mentally
incapable of self-support. Distributions shall not exceed $5,000. Effective for
distributions made after Dec. 31, 2019.
• Increase in age for required minimum distributions from 70½ to 72.
Effective for distributions required to be made after Dec. 31, 2019, with
respect to individuals who attain age 70½ after that date.
• Taxpayers can elect to treat excluded difficulty of care payments as
compensation for determining retirement contribution limitations. Apply to
contributions after Dec. 20, 2019.
TITLE III – OTHER BENEFITS
• Exclusion of SALT benefits and qualified payments for volunteer
emergency responders reinstated for 2020 only. The monthly limit on the
exclusion for qualified payments is increased from $30 to $50.
• Section 529 plans are expanded to cover the cost for fees, books, supplies
and equipment required for the designated beneficiary’s participation in a
registered apprenticeship program. In addition, tax-free distributions are
allowed from 529 plans to pay principal or interest on a qualified education
loan of the designated beneficiary or a sibling of the designated beneficiary
up to a $10,000 lifetime limit. Effective for distributions made after Dec. 31,
2018.
TITLE IV – REVENUE PROVISIONS
• Modification of required distribution rules for designated beneficiaries.
After an employee (or IRA owner) dies, the remaining account balance must
be distributed to designated beneficiaries within 10 years after the date of
death. This rule applies regardless of whether the employee (or IRA owner)
dies before, on, or after the required beginning date, unless the designated
beneficiary is an eligible designated beneficiary.
An eligible designated beneficiary is an individual who, with respect to the
employee or IRA owner, on the date of his or her death, is:
o The surviving spouse of the employee or IRA owner.
o A child of the employee or IRA owner who has not reached majority.
o A chronically ill individual as specially defined in Code Sec.
401(a)(9)(E)(ii)(IV).
o Any other individual who is not more than ten years younger than the
employee or IRA owner.
• Increased failure to file penalty for tax returns due after Dec. 31, 2019
(including extensions). The failure to file penalty under §6651(a) is increased
from $330 to $435.
TITLE V – TAX RELIEF FOR CERTAIN CHILDREN
• Kiddie tax changes for gold star children and other children. The kiddie tax
provisions that were added by the TCJA are repealed. As a result, the
unearned income of children is taxed under the pre-TCJA rules and not at
trust/estate rates. This means a child will once again be taxed at the parents’
rates on net unearned income if higher than the child’s rates. This will
particularly benefit gold star children who receive payments under the
Survivor Benefits Plan (SBP), an insurance annuity provided by the
Department of Defense. SBP payments are often assigned to a child by a
surviving spouse who is receiving Dependency and Indemnity
Compensation (DIC) from the Department of Veterans Affairs. Effective for
tax years beginning after Dec. 31, 2019, but taxpayers can elect to apply it
retroactively to tax years that begin in 2018, 2019, or both.
Taxpayer Certainty and Disaster Tax Relief Act
of 2019–Division Q
TITLE I – EXTENSION OF CERTAIN EXPIRING
PROVISIONS Subtitle A – Tax Relief and Support
for Families and Individuals
• Exclusion from gross income of discharge of qualified personal residence
indebtedness. Discharges of up to $2 million of mortgage debt on taxpayer’s
main home are excluded from income. This provision expired for tax years
ending before Jan. 1, 2018, and is retroactively extended through Dec. 31,
2020.
• Treatment of mortgage insurance premiums as qualified residence
interest. Premiums paid or accrued for qualified mortgage insurance
connection with acquisition indebtedness with respect to a qualified
residence of the taxpayer is treated qualified residence interest. This
provision expired for tax years ending before Jan. 1, 2018, and is
retroactively extended through Dec. 31, 2020.
• Reduction in medical expense deduction floor. The reduction in the
medical expense deduction floor from 10% to 7.5% expired for tax years
ending before Jan. 1, 2019. This provision is extended through Dec. 31, 2020.
• Deduction for qualified tuition and related expenses. The deduction for
qualified tuition and related expenses is retroactively extended through Dec.
31, 2020. The deduction is up to $4,000 for taxpayers whose adjusted gross
income does not exceed $65,000 ($130,000 in the case of a joint return); and
up to $2,000 for taxpayers whose adjusted gross income does not exceed
$80,000 ($160,000 in the case of a joint return). The deduction is $0 for all
others.
Subtitle B – Incentives for Employment, Economic Growth and
Community Development
• Indian Employment Credit – retroactively extended through Dec. 31, 2020.
• Railroad Track Maintenance Credit – retroactively extended through Dec.
31, 2022.
• Mine Rescue Training Team Credit – retroactively extended through Dec.
31, 2019.
• Certain Race Horses Classified as 3-Year Property – retroactively extended
for any horse placed in service before Jan. 1, 2021, and placed in service
after Dec. 31, 2020, and is more than 2 years old.
• Seven-Year Recovery Period for Motorsports Entertainment Complexes –
retroactively extended through Dec. 31, 2020.
• Accelerated Depreciation for Business Property on Indian Reservations –
retroactively extended though Dec. 31, 2020.
• Election to Treat Certain Qualified Film, Television and Live Theatrical
Production Costs as Expenses –
retroactively extended through Dec. 31, 2020.
• Empowerment Zone Tax Incentives – designated empowerment zones
remain in effect retroactively through Dec. 31, 2020.
Subtitle C – Incentives for Energy Production, Efficiency, and
Green Economy
• Biodiesel and renewable diesel. Section 40A(g) provides a $1.00-per-gallon
tax credit for biodiesel and biodiesel mixtures, and the small agra-biodiesel
producer credit of 10 cents per gallon. The credit is extended for two years
for production before Jan. 1, 2021.
• Nonbusiness energy property. Retroactively extended for property placed
in service after Dec. 31, 2017, and before Jan. 1, 2021.
• Two-wheeled plug-in electric vehicle credit. Retroactively extended to
vehicles acquired before Jan. 1, 2021.
• Credit for electricity produced from certain renewable resources.
Construction of a qualifying facility must begin before Jan. 1, 2021.
• Energy efficient homes credit for manufacturers of new homes acquired
before Jan. 1, 2021.
• The deduction for energy efficiency improvements to lighting, heating,
cooling, ventilation, and hot water systems of commercial buildings
retroactively extended to property placed in service before Jan. 1, 2021.
Subtitle D – Certain Provisions Expiring at the End of 2019
• New markets tax credit. Carryover extended through 2025.
• Employer tax credit for paid family leave. Extended through 2020.
• Work opportunity tax credit. Extended through 2020.
• Health coverage tax credit (HCTC). Extended through 2020.
TITLE II – DISASTER TAX RELIEF
Definitions for purposes of this title
The term ‘‘qualified disaster area’’ means any area with respect to which a
major disaster was declared beginning Jan. 1, 2018, and ending on Feb. 19,
2020, (60 days after enactment) by the President under section 401 of the
Robert T. Stafford Disaster Relief and Emergency Assistance Act if the
incident period of the disaster with respect to which such declaration is
made begins on or before the date of the enactment of this act. Such term
shall not include the California wildfire disaster area.
The term “qualified disaster zone” means that portion of any qualified
disaster area that was determined by the President, during the period
beginning on Jan. 1, 2018, and ending on Feb. 19, 2020, to warrant individual
or individual and public assistance from the federal government under the
Robert T. Stafford Disaster Relief and Emergency Assistance Act by reason of
the qualified disaster with respect to such disaster area.
The term “qualified disaster” means, with respect to any qualified disaster
area, the disaster by reason of which a major disaster was declared with
respect to such area.
The term “incident period” means, with respect to any qualified disaster, the
period specified by the Federal Emergency Management Agency as the
period during which such disaster occurred (except that for purposes of this
title such period shall not be treated as beginning before Jan. 1, 2018, or
ending on Jan. 20, 2020.
• Allowance of qualified disaster distributions for up to $100,000 from
qualified plans if made by June 18, 2020 (180 days after date of enactment).
Repayments can be made ratably over a three-year period.
• Special disaster-related rules for use of retirement funds. New exception to
the 10% early retirement plan withdrawal penalty for qualified disaster relief
distributions (not to exceed $100,000 in qualified hurricane distributions
cumulatively). The new rule allows for the re-contribution of retirement plan
withdrawals for home purchases canceled due to eligible disasters and
provides flexibility for loans from retirement plans for qualified hurricane
relief.
• Employee retention credit for employers affected by qualified disasters of
40% of wages (up to $6,000 per employee) paid by affected employer to
employees from a core disaster area.
• Special rule for determining earned income that allows taxpayers in
designated disaster areas to refer to earned income from the immediately
preceding year for purposes of determining the Earned Income Tax Credit
(EITC) and Child Tax Credit (CTC) in tax year 2018.
• Elimination of the current law requirements that personal casualty losses
must exceed 10% of adjusted gross income to qualify for deduction. Also
eliminated is the current law requirement that taxpayers must itemize
deductions to access this tax relief.
• Temporarily suspension of the limitations on the deduction for charitable
contributions associated with qualified disaster relief.
• Automatic extension of filing deadline. Any individual with a principal place
of abode or any taxpayer with a principal place of business in a disaster area
is granted an automatic 60-day extension with regard to any tax filing. This
applies to federally declared disasters declared after Dec. 20, 2019
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