This post was written by Rebecca Smith, CLA's Director of Cooperative Tax.
On December 20th the President signed into law The Further Consolidated Appropriations Act which funded the government through September 30, 2020 and also contained tax provisions which addressed expiring tax credits which are of particular interests to cooperatives. Here is a summary of those provisions.
Biodiesel and renewable diesel - The Code provides a $1.00-per-gallon tax credit for biodiesel and biodiesel mixtures, and the small agri-biodiesel producer credit of 10 cents per gallon. These credits were extended from 01/01/18 – 12/31/22. For the period beginning on Jan. 1, 2018, and ending on September 30, 2019 the credit will be allowed, and any refund or payment attributable to the credit will be made as prescribed by the IRS. The IRS will be issuing guidance no later than January 19th providing for one-time submission of claims covering these periods. The guidance will provide for a 180-day period for the submission of the claims to begin no later than 30 days after the guidance is issued. The claims will be paid within 60 days (if not, interest will be provided). Additionally, the Disaster Act amends the Code to treat renewable diesel the same as biodiesel, except there is no small producer credit.
Alternative fuel refueling property credit – A taxpayer can claim a 30% credit for the cost of installing non-hydrogen alternative vehicle refueling property for use in the taxpayer's trade or business (up to $30,000 maximum per year per location).These credits were extended from 01/01/18 to 12/31/20.
Alternative Fuels excise tax credits - A 50¢-per-gallon (or gasoline gallon equivalent for non-liquid fuel) excise tax credit was allowed against the retail fuel excise tax liability for alternative fuel sold for use or used by a taxpayer. A credit was also allowed against the removal at terminal excise tax liability for alternative fuel used to produce an alternative fuel mixture for sale or use in the taxpayer's trade or business. A taxpayer could claim an excise tax refund (or, in some cases, a credit against income tax) to the extent the taxpayer's alternative fuel or mixture excise tax credit exceeded the taxpayer's liability. These credits were extended from 01/01/18 – 12/31/20. Additionally, the Act modifies the mixture component of the credit by specifying that liquefied petroleum gas, compressed or liquefied natural gas, and compressed or liquefied gas derived from biomass, are not eligible to be included in an alternative fuel mixture. For the period beginning on Jan. 1, 2018, and ending on September 30, 2019 the credit will be allowed, and any refund or payment attributable to the credit will be made as prescribed by the IRS. The IRS will be issuing guidance no later than January 19th providing for one-time submission of claims covering these periods. The guidance will provide for a 180-day period for the submission of the claims to begin no later than 30 days after the guidance is issued. The claims will be paid within 60 days (if not, interest will be provided).
Work Opportunity Tax credit - The Code provides an elective general business credit to employers hiring individuals who are members of one or more of ten targeted groups under the Work Opportunity Tax Credit program. The credit is extended from 01/01/20 - 12/31/20.
New markets tax credit - The Code provides a New Markets Tax Credit which is available to both individual and corporate taxpayers and is equal to 39% of the capital invested in a qualified community development entity, a for profit or nonprofit entity that commits to the rules of the program, which in turn must loan to or invest substantially all of such capital in qualified businesses operating in low-income communities. The Act provides a $5 billion New Markets Tax Credit allocation for 2020. In addition the Act also extends for one year, through 2025, the carryover period for unused New Markets Tax Credits.
Empowerment zone tax incentive - The designation of an economically depressed census tract as an “Empowerment Zone” renders businesses and individual residents within such a Zone eligible for special empowerment zone tax incentives, including: a 20% wage credit; liberalized code section 179 expensing rules; tax-exempt bond financing; and deferral of capital gains tax on sale of qualified assets sold and replaced. These incentives were extended from 01/01/18 to 12/31/20.
In addition to the extenders, the Appropriations Act includes the Setting Every Community Up for Retirement Enhancement Act (SECURE Act). This Act addresses the overcharging of premiums by the Pension Benefit Guaranty Corporation (PBGC) for rural cooperative “multiple-employer” pension plans. The Act adjusts PBGC premiums to better reflect the low risk of Cooperative and Small Employer Charity (CSEC) pension plans. This provision applies to all plan years beginning after December 31, 2018. Specifically the Act establishes individualized rules for calculating PBGC premiums. For CSEC plans, flat-rate premiums are $19 per participant, and variable rate premiums are $9 for each $1,000 of unfunded vested benefits. For purposes of determining a CSEC plan's variable rate premiums, unfunded vested benefits for a plan year is the excess (if any) of (1) the plan's funding liability (CSEC plans may use the third segment rate as the interest rate), determined by taking into account only vested benefits, over (2) the fair market value of plan assets. Any payments already made to the Pension Benefit Guaranty Corporation (PBGC) for plan years beginning after December 31, 2018 will be eligible for a significant refund from the PBGC.