Lawmakers Near Deal on Tax Extenders
After a nearly year-long process, on Wednesday, December 3, the House voted 378-46 to approve H.R. 5771, the Tax Increase Prevention Act of 2014 – a $41.6 billion tax extenders package. At the same time, the House also passed H.R. 647, the Achieving a Better Life Experience Act of 2014 (ABLE Act), which is a popular bill that would allow individuals with disabilities to use section 529 savings accounts for living expenses such as housing and education. The House combined its tax extenders package with the ABLE Act and sent the bills to the Senate in hopes of ensuring an expedient vote on the legislation with bipartisan support.
The House’s tax extenders bill would provide a one-year retroactive extension of approximately 50 tax extenders, meaning the tax extenders would expire after December 31, 2014.Prior to passing H.R. 5771, lawmakers in both the House and Senate had been working together on a broader bipartisan tax extenders deal that would have provided more certainty to taxpayers by extending most provisions for two-years and making certain provisions – like the Research and Development (R&D) Tax Credit – permanent. However, following a veto threat from President Obama, lawmakers abandoned this approach in favor of the current proposal for a one-year retroactive extension, which even Ways and Means Committee Chairman Dave Camp (R-MI) has called “less effective.”
Initially, following the release of the House’s bill, Finance Committee Chairman Ron Wyden (D-OR) and other Senate Democrats suggested they would still seek to pass an across-the-board two-year extension for expired tax extenders. Such an approach would have applied retroactively for one year and prospectively for one year, thus effectively extending the expired tax provisions through December 31, 2015. However, given the short amount of time available to negotiate a deal with House Republicans before Congress adjourns, along with the impending filing season, Chairman Wyden acknowledged that “there doesn’t appear to be a procedural path forward” for the Senate approach and suggested the Senate would ultimately support the House bill.
President Obama has also indicated that he is willing to support a temporary renewal of the expired tax provisions to ensure that U.S. businesses are able to engage in basic tax planning efforts. As such, despite complaints from various lawmakers that a one-year extension would be futile, we expect the Senate will take up and pass the House version of tax extenders legislation this week, which President Obama will likely sign into law shortly thereafter.
Notably, because these tax provisions will expire at the end of the year, lawmakers in the 114th Congress will again have to tackle the issue. According to incoming Finance Committee Chairman Orrin Hatch (R-UT), addressing tax extenders will be a priority early-on in 2015. Moreover, incoming Ways and Means Committee Chairman Paul Ryan (R-WI) has indicated that Republicans may revisit their effort to make certain tax extenders permanent when the House again takes up the issue under his Chairmanship.
Looking more broadly, House Speaker John Boehner (R-OH) has indicated that he hopes the House’s tax extenders bill “will lay the groundwork for the House and Senate to continue to work together to fix our broken tax code through tax reform.”
Ways & Means Committee Leadership Announced
This week, House Ways and Means Committee members selected the following Subcommittee chairs for the 114th Congress:
- David Reichert (R-WA): Select Revenue Measures Subcommittee (currently chairs Human Resources Subcommittee);
- Peter Roskam (R-IL): Oversight Subcommittee (replacing Representative Charles Boustany (R-LA));
- Charles Boustany (R-LA): Human Resources Subcommittee (currently chairs Oversight Subcommittee);
- Pat Tiberi (R-OH): Trade Subcommittee (currently chairs Select Revenue Measures Subcommittee);
- Kevin Brady (R-TX): Health Subcommittee (current chair); and
- Sam Johnson (R-TX): Social Security Subcommittee (current chair).
This Week’s Hearings:
- Tuesday, December 9: The Senate Finance Committee will hold a hearing titled “Social Security: Is a Key Foundation of Economic Security Working for Women?”
IRS May Provide Relief from Anti-Skinny-Down Rule
On Thursday, December 4, Internal Revenue Service (IRS) officials announced that the IRS is considering whether to adopt a de minimis exception to provide relief from the anti-skinny-down rule, which was included in its recent anti-inversion guidance. The IRS is examining the de minimis exception in Reg. section 1.7874-4T, which provides a five-percent de minimis exception for rollover equity, as perhaps necessary for certain relief.