WorldWide Drilling Resource

Drilling Into Money Not Boring by Mark E. Battersby Tax Savings from Another Late Law The new “Protecting Americans from Tax Hikes (PATH) Act of 2015″ retroactively extends over 50 temporary provisions. Although many of those extenders are merely extensions expiring provisions, more than a few contain modifications. In most cases, these key extenders are retroactive to January 1, 2015: FIRST-YEAR WRITE-OFFS: The so-called “Section 179” deduction allows a drilling business an up-front expense deduction for the entire cost of equipment ranging from computers to furniture to vehicles and machin- ery. The amount allowed as a write-off in the first year (instead of slowly deducting or depreciating over several years), is now permanently fixed at $500,000 per year (phased out dollar-for-dollar as expenditures begin to exceed $2 million in a year). A BONUS WRITE-OFF: Bonus depreciation, which permits the immediate deduction of any business equipment expenses rather than a depreciated tax benefit over time, has been extended at the former 50% rate for the 2015-2017 tax years, phased down to 40% in 2018 and 30% in 2019. ENERGY-EFFICIENT COMMERCIAL BUILDINGS: The new law extends through 2016 the above-the-line deduction for energy efficiency improvements to lighting, heating, cooling, ventilation, and hot water systems of commercial buildings. THE WORK OPPORTUNITY TAX CREDIT: PATH retroactively extended and greatly expanded the Work Opportunity Tax Credit (WOTC) through the 2019 tax year. The WOTC allows employers who hire members of certain targeted groups to get a credit against income tax of a percentage of first-year wages up to $6000 per employee ($3000 for qualified summer youth employees). In situations where the employee is a long-term family assistance (lTFA) recipient, the WOTC is a percentage of first and second year wages, up to $10,000 per employee. CADILLAC TAX: The so-called “Cadillac” tax on the high-cost health insurance plans so many drilling business owners provide themselves and key employees will be delayed from 2018 to 2020. This means businesses offering employees ex- pensive health insurance will not have to pay the 40% Cadillac tax for those plans until 2020. Whether maximizing write-offs for 2015 or planning to reap all the benefits your business is entitled to in the years ahead, thanks to the complexity of the new law, professional assistance may be required. Which of the provisions of the PATH Act of 2015 will best help your drilling operation or business reap its share of the $622 billion in tax savings? Mark Mark E. Battersby may be contacted via e-mail to michele@worldwidedrillingresource.com 50 MARCH 2016 WorldWide Drilling Resource ®