United States: Expiring Federal Tax Provisions And Recent State Tax Changes

Last Updated: September 29 2016
Article by Kelly Morris

At the end of nearly every recent year, Congress has been forced to address numerous tax "extenders" in its budget negotiations. Extenders describes a variety of temporary tax breaks which are set to expire at the end of a particular year unless Congress extends them or makes them permanent. Usually there are several dozen of these extenders set to expire, but the Protecting Americans from Tax Hikes Act of 2015 ("Path" Act), enacted late in 2015, pared the list significantly by making many extenders permanent. These permanent provisions included tax incentives such as the Research and Development Tax Credit and an increased Section 179 Expensing Election. Numerous other provisions were again extended, some for multiple years and some for just 12 months. Several of the more popular ones set to expire at the end of this year are described below, and some may require action quickly to avoid missing out on their benefits.

Several of the provisions expiring this year relate to renewable energy. Most of these incentives are credits for biofuels, energy efficient homes and buildings, and renewable power facilities and equipment. A number of these credits pertain to fuel and energy efficient vehicles, construction of energy efficient homes, and upgrades to existing residential fuel systems. Included in this list is a popular 30% credit for homeowners applied to costs of installing geothermal heat pumps or small wind turbines. Solar energy equipment also qualifies for the credit, but represents one of the few types of energy investments for which the credit does not expire this year, instead expiring five years from now.

Two of the biggest expiring provisions pertain to homeowners. The first extender exempts some homeowners from any tax on mortgage loan forgiveness. Typically, any loan forgiveness ("discharge of indebtedness") must be included as income by the person who receives the forgiveness. However, this provision allows some homeowners to exclude that mortgage loan forgiveness from income. The second extender allows homeowners to deduct mortgage insurance premiums with their mortgage interest deductions. Mortgage insurance is typically required whenever a home is purchased with less than a 20 percent down payment. Most of the existing federal and state programs for first time homebuyers and low income buyers only require down payments of 5 percent or less, and therefore this second provision would affect many homeowners.

The remaining provisions are mostly a mixed bag of incentives for a variety of economic interests, ranging from a credit for railroad track maintenance to changes in the limits for rum excise tax revenue from Puerto Rico and the Virgin Islands. Of note are the deductions for medical expenses and qualified tuition and related expenses. Through the end of 2016, individuals aged 65 and older are allowed to deduct their qualified medical expenses above 7.5 percent of adjusted gross income ("AGI"), while all other individuals are subject to a 10 percent limit. If this provision is not extended, all taxpayers, regardless of age, will be subject to the 10 percent limit. Additionally, there is currently an above-the-line deduction (deducted while computing AGI) for qualified tuition fees and related expenses. This deduction will disappear at the end of 2016 unless extended.

What Congress chooses to do with these extenders remains to be seen. No doubt some will be extended again, while others will be allowed to expire. Congress seemingly will be under less pressure to extend these than in prior years, because some of the overwhelmingly popular extenders were made permanent a year ago.


Individual states do not endure the same chaotic year end push to extend expiring tax provisions the way Congress does. However, the states do make changes during the year of which taxpayers should be aware. Here are a few highlights of state tax law changes in northern New England.


Maine made a few changes in 2016 to conform its corporate and personal income tax laws to the Internal Revenue Code, which included passing extensions for bonus depreciation and the Capital Investment Credit. More significant, however, is the expansion of Maine's Educational Opportunity Credit ("EOC"). The EOC provides a tax credit to taxpayers who:

  1. graduated from an accredited Maine community college, college, or university;
  2. live and work in Maine; and
  3. pay student loans for that degree.

Previously, students who earned more than 30 credit hours out of state and transferred to a Maine school before December 31, 2012, were disqualified from utilizing the credit. Under the new expanded law (for tax years beginning January 1, 2017), any student who received an associate or bachelor's degree from an accredited Maine school who lives and works in Maine is eligible for the credit. The EOC is expanding for both the 2016 and 2017 tax years.


Massachusetts made numerous changes to its corporate excise and personal tax credits, as well as its personal income tax deductions. Notably, Massachusetts added a personal income tax deduction for taxpayers who purchase an interest in, or contribute to, a Massachusetts prepaid tuition or college savings program. Previously one of just nine states that did not offer a state deduction for these contributions (there is no deduction at the federal level), Massachusetts now offers a $1,000 deduction for a taxpayer filing as single, married filing separately, or head of household, and a $2,000 deduction for married taxpayers filing jointly. This is a five year provision, applying to contributions made between January 1, 2017 and December 31, 2021.

New Hampshire

In 2016, New Hampshire made three big legislative changes that make the state more business friendly. First, New Hampshire increased its Section 179 depreciation deduction from $25,000 to $100,000 for property placed in service on or after January 1, 2017. If your business is considering making a large equipment purchase before the end of the year, it may be worth considering a delay in that purchase until the new year, when this change takes effect. Second, New Hampshire made its "basis step-up tax" optional for businesses. Previously, when an interest in a business was sold or exchanged, businesses were required to recognize and pay tax on the increased basis in the acquired interest's underlying assets if the entity elected for federal income tax purposes to "step-up" the basis in the assets. Beginning in 2017, businesses are no longer required to pay the "phantom tax" if they do not elect the step-up in basis. Finally, New Hampshire created an exemption from its real estate transfer tax for certain transfers involving only a change in the form of ownership. For more detailed information on these changes, see this article from a previous BNN newsletter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.