Efforts to Extend Expired Tax Provisions Stalled—Future Uncertain

May 2019 | Article

Despite efforts by some members of Congress, legislative action on 29 tax extenders continues to be delayed. Tax extenders are items that are not permanent provisions in the tax law; they live in a continual state of life support. They are either kept alive through periodic extensions or terminated.

Historically, Congress has not often passed tax extenders as “stand-alone” legislation. More commonly, they have been attached to other, more urgent, bills that are considered “must pass” legislation (such as a government funding, infrastructure or debt limit bill) that may have broad support.

Uncertainty Reigns
Due to the uncertainty surrounding the tax extenders, some of our clients that benefit from the expired provisions have chosen to extend their 2018 income tax returns hoping Congress may act before their returns need to be filed. However, hearings in the House of Representatives intended to address tax extenders have turned political, with Democrats criticizing the Tax Cuts and Jobs Act and how it was passed and Republicans touting the Act’s benefits and, in some circles, suggesting extenders are no longer needed.

A further complication involves the House’s “pay as you go” rules that generally require reduced taxes and increased spending to be offset by revenue raisers (unless waived). Whether political differences can be put aside to pass tax extender legislation in the House remains an open question.

Bipartisan Consensus in the Senate?
At the end of February, Senate Finance Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) introduced legislation to retroactively extend the tax provisions that expired at the end of 2017 and 2018 through 2019 as part of their Tax Extender and Disaster Relief Act of 2019. Comments by other senators suggest there may be broad bipartisan support for the tax extenders in the Senate; however, Senate rules generally require 60 votes to avoid a filibuster of legislation. With the current Senate consisting of 53 Republicans and 47 Democrats, some Democratic votes would be required to move tax extender legislation through the Senate. As noted above, the provisions of the Grassley/Wyden proposal will likely need to be tucked into other legislation initiated and passed by the House. There may be opportunities for a little “horse trading” to include some or all the tax extender provisions in major pieces of legislation as they move through Congress later this year.

What is on the Extender List?
Here is a list of the 29 tax extenders included in the Grassley/Wyden proposal:

  • Nonbusiness energy property credit
  • Qualified fuel cell motor vehicles
  • Alternative fuel vehicle refueling property credit
  • Two-wheeled plug-in electric vehicle credit
  • Second generation biofuel producer credit
  • The $1 per gallon credit for biodiesel and renewable diesel
  • Credit for electricity produced from renewable sources
  • Production credit for Native American coal facilities
  • Railroad track maintenance credit
  • Energy-efficient homes credit
  • Classification of certain race horses as three-year property
  • Special allowance for second generation biofuel plant property
  • Energy-efficient commercial buildings deduction
  • Election to expense advanced mine safety equipment
  • Extension of special rule for sales to implement FERC or state electric restructuring policy for qualified electric utilities
  • Extension of excise tax credits relating to alternative fuels
  • Seven-year recovery period for motorsports entertainment complexes
  • Accelerated depreciation for business property on Native American reservations
  • Expensing rules for qualified film and television productions and live theatrical productions
  • Native American employment tax credit
  • Mine rescue team training credit
  • Exclusion from gross income of discharge of qualified principal residence indebtedness
  • Mortgage insurance premiums treated as qualified residence interest
  • Deduction of qualified tuition and related expenses
  • Extension of empowerment zones tax incentives
  • American Samoa economic development credit
  • Lower threshold of 7.5 percent or AGI for medical expenses
  • Oil spill liability trust fund financing rate
  • Black Lung Disability Trust Fund excise tax

Other tax provisions slated to expire at the end of 2019 may also be incorporated in an extender legislation deal. These include, for example, the suspension of the medical device excise tax and the “craft beverage” provisions.

We will continue to monitor activities in Congress and provide additional updates. If you have questions on any of the tax extenders or legislative prospects, please contact your Eide Bailly tax professional

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