Bipartisan Budget Act of 2018 Revives Many Expired Tax Breaks Retroactively

February 11, 2018
Kristine A. Tidgren

President Trump signed the Bipartisan Budget Act of 2018 into law on February 9. The Act, which was passed to fund the federal government and avoid another shutdown, includes a number of changes to the Internal Revenue Code. Many of these changes retroactively extend--generally for one year--tax provisions which had expired at the end of 2016. Because this Act significantly impacts many 2017 returns, IRS announced on Friday that it was reviewing the legislation and would provide additional information as quickly as possible. Not in the Act was any change to the qualified cooperative dividend deduction implemented by the new tax law. Although earlier reports had suggested that a "fix" would be inserted into the budget bill, it now appears that lawmakers continue to work toward crafting an appropriate solution to the controversial problem. We will continue to keep you posted on that issue.

Below is a summary of key revenue provisions included in the Act. We will continue to watch for IRS guidance on these provisions.

Tax Relief for Families and Individuals

Sec.  40201.  Extension  of  exclusion  from  gross  income  of  discharge  of  qualified  principal  residence  indebtedness. 

IRC § 108(a)(1)(E)(ii) provided that a discharge of qualified principal residence indebtedness was excluded from income if it was discharged subject to an arrangement that was entered into and evidenced in writing before January 1, 2017. The Act extends this provision to apply to arrangements entered into and evidenced in writing before January 1, 2018.

Sec.  40202.  Extension of mortgage insurance premiums treated as qualified residence interest. 

IRC § 163(h)(3)(E) generally provided that premiums paid or accrued (through December 31, 2016) for qualified mortgage insurance by a taxpayer in connection with acquisition indebtedness for a qualified residence shall be treated as qualified residence interest. The Act extends this provision to apply to premiums paid or accrued through December 31, 2017.

Sec.  40203.  Extension of above-the-line deduction for qualified tuition and related expenses.

IRC § 222 provided an above-the-line deduction for qualified tuition and related expenses incurred through December 31, 2016. The Act extends this provision to apply to expenses incurred through December 31, 2017.

Incentives for Energy Production and Conservation

Sec.  40401.  Extension of credit for nonbusiness energy property. 

The Act extends the IRC § 25C credit for nonbusiness energy property to apply to property placed in service by December 31, 2017.

Sec.  40402.  Extension and modification of credit for residential energy property. 

The Act extends the IRC § 25D credit for residential energy property for qualified fuel cell property, small wind energy property, and geothermal heat pump property placed in service through December 31, 2021. The law already provided that the credit for qualified solar electric property and solar water heating property applied to property placed in service through December 31, 2021. The Act does not change these dates.

Sec.  40403.  Extension  of  credit  for  new  qualified  fuel  cell  motor  vehicles. 

The Act extends the IRC § 30B credit for new qualified fuel cell motor vehicles to apply to those vehicles purchased through December 31, 2017.

Sec.  40404.  Extension of credit for alternative fuel vehicle refueling property. 

The Act extends the IRC § 30C credit for alternative fuel vehicle refueling property to apply to property placed into service through December 31, 2017.

Sec.  40405.  Extension of credit for 2-wheeled plug-in electric vehicles. 

The Act extends the IRC § 30D credit for 2-wheeled plug-in electric vehicles to apply to vehicles acquired before January 1, 2018.

Sec.  40406.  Extension of second generation biofuel producer credit. 

The Act extends the IRC §40 second generation biofuel producer credit to apply before January 1, 2018.

Sec.  40407.  Extension of biodiesel and renewable diesel incentives. 

The Act generally extends IRC § 40A biodiesel and renewable diesel incentives through the 2017 tax year. It also provides that a special rule will apply for 2017 with respect to the biodiesel mixture credit properly determined under IRC § 6426(c) for 2017. The Act states that IRS will issue guidance within 30 days providing for a one-time submission of claims. The guidance will provide for a 180-day period for the submission, beginning once the guidance is issued.

Sec.  40408.  Extension of production credit for Indian coal facilities. 

The Act extends the IRC § 45(e)(10)(A) credit for Indian coal facilities to apply for an additional year (through 2017).

Sec.  40409.  Extension of  credits  with  respect  to  facilities  producing  energy  from  certain  renewable  resources. 

The Act extends, through 2017, IRC § 45(d) credits with respect to the following:

  • Closed-loop biomass facility
  • Open-loop biomass facility
  • Geothermal energy facilities
  • Landfill gas facilities
  • Trash facilities
  • Marine and hydrokinetic renewable energy facilities

These facilities will be considered energy property under IRC § 48(a)(5)(C)(ii) through 2017.

Sec.  40410.  Extension of credit for energy-efficient new homes. 

The Act extends the IRC § 45L credit for energy-efficient new homes to apply to homes acquired through 2017.

Sec.  40411.  Extension and phase-out of energy credit. 

The Act extends the IRC § 48 energy credit for fiber-optic solar, qualified fuel cell, small wind energy property, qualified micro-turbine, and combined heat and power system property through 2021. This credit is subject to a phase-out.

Sec.  40412.  Extension  of  special  allowance  for  second  generation  biofuel  plant  property.

The Act extends the special depreciation allowance provided by IRC § 168(l) for qualified second generation biofuel plact property to include that property placed in service by December 31, 2017.

Sec.  40413.  Extension of energy efficient commercial buildings deduction. 

The Act extends the deduction provided by IRC § 179D for energy efficient commercial buildings to apply to property placed in service through December 31, 2017.

Sec.  40414.  Extension  of  special  rule  for  sales  or  dispositions  to  implement  Federal Energy Regulatory Commission  or  State  electric  restructuring  policy  for  qualified  electric  utilities.

The Act extends the IRC § 451(k)(3) special rule to apply through 2017.

Sec.  40415.  Extension of excise tax credits relating to alternative fuels. 

The Act extends alternative fuels excise tax credits available under IRC § 6426(d)(5) and IRC § 6426(e)(3) through 2017. The Act also extends the IRC § 6427(e) outlay payments for an additional year. The Act directs that IRS will issue guidance within 30 days providing for a one-time submission of claims. The guidance will provide for a 180-day period for the submission, beginning once the guidance is issued.

Sec.  40416.  Extension of Oil Spill Liability Trust Fund financing rate. 

The Act provides that the Oil Spill Liability Trust Fund financing rate shall not apply after December 31, 2018. Prior to this amendment, it was scheduled to end December 31, 2017.

Incentives for Growth, Jobs, Investment, and Innovation

  • Sec.  40301.  Extension of Indian employment  tax  credit. 
  • Sec.  40302.  Extension of railroad  track  maintenance  credit. 
  • Sec.  40303.  Extension of mine rescue  team  training  credit. 
  • Sec.  40304.  Extension of classification  of  certain  race  horses  as  3-year  property. 
  • Sec.  40305.  Extension of 7-year  recovery  period  for  motorsports  entertainment  complexes.
  • Sec.  40306.  Extension  of  accelerated  depreciation  for  business  property  on  an  Indian  reservation. 
  • Sec.  40307.  Extension of election  to  expense  mine  safety  equipment. 
  • Sec.  40308.  Extension of special  expensing  rules  for  certain  productions. 
  • Sec.  40309.  Extension  of  deduction  allowable  with  respect  to  income  attributable  to  domestic  production  activities  in  Puerto  Rico. 
  • Sec.  40310.  Extension of special  rule  relating  to  qualified  timber  gain. 
  • Sec.  40311.  Extension of empowerment  zone  tax  incentives. 
  • Sec.  40312.  Extension of  American  Samoa  economic  development  credit. 

Miscellaneous Internal Revenue Code Provisions

  • Sec.  41102.  Modifications  to  rum  cover  over. 
  • Sec.  41103.  Extension  of  waiver  of  limitations  with  respect  to  excluding  from  gross  income  amounts  received  by  wrongfully  incarcerated  individuals.
  • Sec.  41104.  Individuals held harmless on  improper  levy  on  retirement  plans. 
  • Sec.  41105.  Modification of user fee requirements  for  installment  agreements. 
  • Sec.  41106.  Form 1040SR  for  seniors. 
  • Sec.  41107.  Attorneys  fees  relating  to  awards  to  whistleblowers. 
  • Sec.  41108.  Clarification  of  whistleblower  awards. 
  • Sec.  41109.  Clarification  regarding  excise  tax  based  on  investment  income  of  private  colleges  and  universities. 
  • Sec.  41110.  Exception  from  private  foundation  excess  business  holding  tax  for  independently-operated  philanthropic  business  holdings. 
  • Sec.  41111.  Rule  of  construction  for  Craft  Beverage  Modernization  and  Tax  Reform.
  • Sec.  41112.  Simplification  of  rules  regarding  records,  statements,  and  returns. 
  • Sec.  41113.  Modification  of  rules  governing  hardship  distributions. 
  • Sec.  41114.  Modification  of  rules  relating  to  hardship  withdrawals  from  cash  or  deferred  arrangements. 
  • Sec.  41115.  Opportunity  Zones  rule  for  Puerto  Rico. 
  • Sec.  41116.  Tax  home  of  certain  citizens  or  residents  of  the  United  States  living  abroad.
  • Sec.  41117.  Treatment  of  foreign  persons  for  returns  relating  to  payments  made  in  settlement  of  payment  card  and  third  party  network  transactions.
  • Sec.  41118.  Repeal  of  shift  in  time  of  payment  of  corporate  estimated  taxes. 
  • Sec.  41119.  Enhancement  of  carbon  dioxide  sequestration  credit. 

CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.

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