S20 - Internal Revenue Code Update/Motor Fuel Tax Changes (SL 2015-2)

Overview: S.L. 2015-2 consists of two Parts. The first Part, which was a recommendation of the Revenue Laws Study Committee, updates from December 31, 2013, to January 1, 2015, the reference to the Internal Revenue Code used in determining certain State tax provisions. The act decouples from the extensions listed below under the federal Tax Increase Prevention Act of 2014 for the 2014 tax year, but it conforms to the $250 teacher expense deduction. Enhanced Section 179 expensing

• Exclusion from income for forgiveness of debt on principal residence.
• Deduction for mortgage insurance premiums.
• Deduction for higher education tuition expenses.
• Tax-free distribution from IRAs to public charities.

This Part became effective March 31, 2015.

The second Part of the act makes the following changes to the motor fuels tax:

• Reduces the motor fuels tax rate from 37.5 cents to 36 cents beginning April 1, 2015, through December 31, 2015. It sets the rate at 35 cents per gallon (cpg) from January 1, 2016, through June 30, 2016, and at 34 cpg from July 1, 2016, through December 31, 2016.
• Changes the variable component of the formula for determining the rate. Beginning January 1, 2017, the rate will be 34 cpg multiplied by a percentage reflecting population change and the annual change in the Energy component of the Consumer Price Index for all Urban Consumers as produced by the U.S. Bureau of Labor Statistics.
• Replaces the two 6-month base periods used in determining the gas tax rate with a single 12-month base period.
• Makes $3.35 million and $10.1 million reductions in the Highway Trust Fund and Highway Fund budgets for the 2014-2015 fiscal year.

The motor fuels tax rate changes are effective as described above. The remainder of this Part became effective March 31, 2015.