Calendar Year

Yes, Congress finally passed the tax extender provisions, although only at the very end of 2014 and only for a year. (See my Year-End Tax Planning blog on this site athttp://sagecity.na.sage.com/support_communities/sage_fixed_assets/b/sage_fixed_assets_blog/default.aspx) While the provisions that were extended are important, there are additional tax changes taking effect in 2015. Some of the new rules are contained in the Tax Increase Prevention Act of 2014 (TIPA) and the Affordable Care Act (ACA), while others are due to several final regulations with 2015 effective dates.

Tax Rules

It is no surprise that health insurance plans and their administration is at the forefront of any discussion of what’s new in 2015. Businesses with at least 100 full-time employees* must offer affordable health care starting January 1, 2015. If a minimum level of health care coverage is not offered, the employer may be subject to an “employer shared responsibility payment.” (Note this provision is delayed until 2016 for smaller employers, that is, those with at least 50 but less than 100 full-time employees). As one of the conditions for avoiding this additional tax assessment, businesses currently must offer coverage to at least 70% of its full-time employees (increasing to 95% in 2016).

*Note: In one of the first bills passed by the new Republican-controlled Congress (H.R.30), the House redefines the threshold for full-time employment for purposes of ACA from 30 to 40 hours a week. Should the bill get through the Senate, the President has promised a veto, calling it an attack on the ACA. One might easily see both sides of this issue: On the one hand, some businesses are currently reducing their employees’ hours to avoid the employer mandate and its associated penalty, but on the other hand, such a change would result in many workers losing their employer-based health insurance. And, finally, it could cost the government a substantial amount of money in fees as fewer employers would be paying for their noncompliance.

In another ACA provision, employer health plans, starting in 2015, cannot have a waiting period of more than 90 days once an employee is otherwise eligible for insurance. Although final regulations specified that a reasonable period may be imposed before an employee is considered eligible, it soon became clear further clarification was needed. Now, new proposed regulations limit the maximum length of any orientation period to one month.

Dividend

Aside from the extender provisions contained in TIPA, there are several new offsets included in the Act. One such offset excludes dividends received from a foreign subsidiary from being included in personal holding company income, starting in 2015. Such dividends will still be subject to corporate income tax, however.

And lastly, effective in 2015, there is a final regulation on computing the value of ending inventory when using the retail inventory method of accounting. The retail inventory method is used by large retailers to value their ending inventory, often using each item’s retail price less the markup amount to approximate the item’s actual cost. The final regulation contains a special rule for taxpayers who receive margin protection payments or certain vendor allowances. A “margin protection payment” (sometimes called a markdown allowance) is a price rebate or discounted amount intended by the vendor to compensate for a permanent reduction in the taxpayer’s retail price. (See Reg. 1.471-8 for further info on this issue.)

Happy New Year

So be ready in 2015 with knowledge of the latest tax laws. Wishing you all a Happy New Year!