Congress Agrees on Debt Limit, Budget Legislation; Tax Extenders and Corrections Not Addressed

September 2019 | Article

Congress has passed legislation suspending the debt limit until July 31, 2021, and preventing the automatic spending cuts under the Budget Control Act of 2011. The president is expected to sign.

The legislation does NOT extend any of the expired or expiring tax provisions or make corrections to any inadvertent errors in prior legislation. This is important to understand as several of these provisions, if not extended, could have a significant impact on your business.

Why are tax extenders important to understand?
At this time, it appears that extenders and correction legislation is unlikely to be addressed until closer to the end of the year, and the legislation is not expected to be enacted prior to the extended due dates for filing calendar year 2018 tax returns.

As a reminder, tax extenders are items that have not achieved permanency in tax law. In order to continue use, they are often extended or terminated.

It is generally agreed that enactment of extender and corrections legislation will require compromise.

There is some hope that pension legislation will be enacted in the fall and could serve as a vehicle for these provisions. However, interest in the extender and corrections provisions has generally been limited to the tax writing committees, while the rest of Congress has focused on other issues.

The House Ways and Means Committee has advanced for consideration by the full House legislation extending through 2020 almost all provisions that would expire before then.

The Senate Finance Committee has established working groups to take comments and study whether individual provisions should be extended but has not yet taken up legislation.

What tax extenders are currently affected?
There are over 25 provisions that expired at the end of 2017, including:

  • Alternative and renewable fuel credits (including biodiesel)
  • §45G railroad maintenance credit
  • §179D deduction for energy efficient commercial property
  • §25C nonbusiness energy property

There are also several provisions expiring at the end of 2019, including:

  • New markets credit
  • Work opportunity tax credit
  • CFC look-through rule to the PFIC rules
  • Suspension of Medical Device Excise tax

Without an extension, there is a great deal of uncertainty surrounding these important pieces of legislation. If the provisions are not extended, businesses will be forced to move forward without these key tax opportunities.

What else is at stake in relation to the tax extenders?
It’s reported that the full technical corrections bill could exceed several hundred pages. But, if fixing these drafting missteps is going to happen this year, it will take congressional cooperation. Then, even if something moves forward in this area, this year’s legislation could be limited to certain key provisions, including correction of the inadvertent exclusion of qualified improvement property from bonus depreciation, the availability of the passthrough deduction to REMICs, several international tax provisions, and giving tax exempt organizations a break from including the value of employee benefits in unrelated business taxable income.

What should you do in relation to the delay of tax extenders?
It is important to stay in the know when it comes to tax reform. Several of these pieces can impact various areas of your business.

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