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Grassley Releases First Tranche of Reports Examining Tax Extenders (1)

Aug. 13, 2019, 6:34 PMUpdated: Aug. 13, 2019, 7:49 PM

Tax breaks for short-line railroads and energy-efficient commercial buildings should be among the provisions made permanent, a bipartisan group of Senate Finance Committee lawmakers said in a report released Aug. 13.

Committee Chairman Chuck Grassley (R-Iowa), who in May tasked his panel members with examining tax extenders, released reports from three of six task forces on Aug. 13. Two of the reports released, on energy and individual tax provisions, didn’t reach definitive conclusions, indicating either weak support or divided opinion for some of those provisions. Reports from committee task forces that studied employment and development, health, and disaster relief tax breaks have yet to be published.

A slew of the perks expired at the end of 2017 and 2018. Lawmakers failed to address the issue through legislation before August recess, but the Senate Finance Committee may hold a hearing or markup on extenders in September, to enable the potential inclusion of extender riders in upcoming government funding legislation.

The railroad track maintenance credit, under tax code Section 45G, is among the most popular of the expired provisions. Making permanent the Section 179D deduction for energy-efficient commercial buildings would benefit a broad group of industries and help the climate, the cost-recovery task force found.

That task force advised the committee to temporarily extend other items it examined, like shorter expense recovery periods for racehorses and motor sport complexes, and even potentially expand the latter to include racehorse tracks. After the committee extends those tax breaks, it can discuss whether they continue to be necessary, the group said.

The energy task force, led by Sens. John Thune (R-S.D.) and Debbie Stabenow (D-Mich.), found that stakeholders wanted certainty and predictability.

“Moreover, tax credits were acknowledged to be an effective incentive for bringing nascent technologies to a point of competitive maturity and deployment,” the report said.

A task force looking at tax breaks for individuals, led by Sens. Pat Roberts (R-Kan.) and Robert Menendez (D-N.J.), summarized input on provisions ranging from a mortgage insurance-related deductible to beer, wine, and spirit excise tax benefits.

The task forces also focused on areas like employment and community development and disaster relief.

‘Get Rid of Them’

Sen. Ben Cardin (D-Md.), who served on two task forces, said that the bottom line was that extenders aren’t good because they are temporary.

“Either make them permanent long-term, modify them if they need to be modified, or get rid of them,” Cardin said earlier this month.

The group focused on employment and community development reached consensus on the new markets tax credit and work opportunity tax credit, said Sen. Rob Portman (R-Ohio), the Republican lead of that task force. Both credits expire at the end of the year.

Portman demurred on giving further details so as not to get out ahead of the committee’s publication of the report. That report remains one of the three still outstanding.

Cardin said he wanted a committee hearing and a markup to discuss the issues, and that he believed that much of the debate over an extension package would revolve around the biodiesel and electric vehicle tax credits, two of the largest breaks under consideration for extension.

September Plans

Both Portman and Cardin said they would push for the Finance Committee to debate its own version of tax extensions in September, an indication that the chamber won’t take up an extensions package (H.R. 3301) supported by House Democrats and pushed by House Ways and Means Committee Chairman Richard Neal (D-Mass.).

The House version includes large, but temporary, expansions of tax credits aimed at low-income households.

The Ways and Means Committee’s extenders bill includes a budget offset that tweaks the estate tax threshold, a change seen as widely unacceptable to Senate Republicans.

It remains to be seen what effect the Finance Committee reports might have on an extenders package that the Senate takes up later this year. Some Democrats in the House, like Rep. Lloyd Doggett (D-Texas), wanted tax extenders to be offset.

To contact the reporters on this story: Kaustuv Basu in Washington at kbasu@bloombergtax.com; Colin Wilhelm in Washington at cwilhelm@bloomberglaw.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com