Included among the list of expiring tax provisions are some widely used incentives, such as the research and experimentation tax credit and 50 percent "bonus" depreciation. The list of expiring tax provisions also contains a raft of energy incentives, including the production tax credit for wind energy, incentives for alternative and renewable fuels and credits for energy-efficient appliances and houses. Provisions important to individuals—such as the deduction for out-of-pocket expenses for teachers, higher exclusions for mass-transit benefits and the deduction for state and local sales taxes—will sunset at the end of this year. The same is true for provisions important to US companies with cross-border activities (for example, the "active financing exception" and the subpart F exception for dividends, interest, rents and royalties paid between related controlled foreign corporations) and businesses operating in certain designated or distressed areas. Despite their diversity, these expiring tax provisions have one thing in common: Taxpayers who use them are about to enter months of uncertainty as to their availability.
If the past is prologue, some—but not all—of these provisions will be extended, but we will not know until much later in 2014 which ones will be extended, whether they will be extended with modifications, how long they will be extended, whether the extension will be retroactive and who will be stuck "paying" for any such extension. Still, despite the history of on-again, off-again extensions, it is risky to assume that any particular provision will be extended simply because it has been extended in the past. Some in Congress have argued for postponing action on the expiring tax provisions, believing that Congress should resolve their fate as part of tax reform. For example, the staff discussion draft on "Energy Tax Reform" released on December 18, 2013, by Senate Finance Committee Chairman Baucus would replace many of the expiring energy tax provisions with a smaller set of energy tax incentives. While the wait-for-tax-reform approach is understandable, the fact remains that tax reform will be a contentious process, and even if tax reform starts to move through the House Ways and Means and Senate Finance committees in 2014, it is a long way from enactment. In addition, although there will be attempts by proponents of particular expiring tax provisions to have their expiring tax provisions considered separately, the expiring tax provisions have historically been addressed as a group. Accordingly, unless the expiring tax provisions are severed from tax reform or their historical treatment as a pack, affected taxpayers may be in for a reprise of 2010 and 2012, with a long period of uncertainty.
So, for planning purposes, let's hope that dealing with these expiring tax provisions early in 2014 makes it on Congress' list of new year resolutions.
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