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Private Equity Strategies

Regs Note: The Tax Man Cometh

Monday, December 02, 2013

By: Bailey McCann, Private Equity Strategies

57 US tax provisions will expire on December 31. Not many of them have been renegotiated in congress, which seemed to be more focused on pointless fights and taking days off. Expiring provisions could have a significant impact on portfolio companies, which will see expense limits drop from $500,000 to $25,000 under section 179. The work opportunity tax credit and research and development credits are also expiring.

Some of these provisions are likely to come up during forthcoming budget negotiations slated for the beginning of this year when the US runs up against its debt ceiling yet again. Carried interest is also projected to be part of that debate.

The on-again, off-again nature of the expiring provisions creates a lot of uncertainty, and that uncertainty then creates more complexity in the tax code,” says Jeffrey A. Porter, CPA. Porter also chairs the American Institute of CPAs (AICPA) Tax Executive Committee.

“It’s not unusual for the expiring provisions to be reinstated retroactively, also adding to the uncertainty and the complexity for long-term planning. Many taxpayers have come to anticipate that these expiring provisions are going to be retroactively reinstated. If they’re incorrect, that can prove to be a very costly decision for a small or medium-sized business. And the impact is not just limited to businesses. There are a number of individual provisions that are expiring, such as the deduction for state and local sales tax, the above the line deduction for tuition and tax-free distributions from individual retirement plans for charitable purposes.”

The full list of expiring provisions is available here.

This article was published in Opalesque's Private Equity Strategies our monthly research update on the global private equity landscape including all sectors and market caps.
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