Hope still lives for lobbyists and lawmakers seeking to help industry-specific tax breaks and technical corrections catch a ride into law, but proponents of those perks know their window is rapidly closing.
The spending and debt deal (H.R. 3877) that the House is set to vote on July 25 doesn’t revive expired tax breaks, such as tax credits for electric vehicle purchases and biodiesel, as proponents for those benefits had hoped. But a funding companion to the deal, needed to continue government operations beyond the end of the fiscal year on Sept. 30, may be the last chance for those breaks to continue or risk fading away.
Sen. Rob Portman (R-Ohio) said he hopes the Senate Finance Committee, of which he is a member, would mark up a bill for the extenders when Congress returns from its August break.
“Obviously we want to get it done as soon as possible,” he said. “But it’s got to be done, in my view, before Sept. 30. So that’s kind of our next chance.”
Several of the tax benefits expired almost two years ago, and any more delays to renewing them would make it increasingly difficult for companies or individuals to claim them retroactively. Renewable Energy Group Inc. announced July 24 that it plans to close its New Boston, Texas, biorefinery partly because the biodiesel tax credit hasn’t been renewed.
The 2017 tax law also ended other popular breaks that were in the same perpetual cycle of renewal, making consensus on the extensions harder to achieve without attaching them to a larger, likely unrelated package.
Not all lawmakers support extenders, and a bipartisan group of nonprofit policy organizations, including the liberal Progressive Policy Institute and the conservative Heritage Foundation, have partnered to urge Congress to resist efforts to pass a new round of tax extenders. Opponents argue that extenders are poor economic policy because of their temporary nature and retroactive effect.
Technical corrections to the tax law, including a revision to allow properties improved by restaurants and retailers to qualify for full expensing, and a bipartisan retirement reform package already passed by the House this year (H.R. 1994), could also factor into extender talks.
Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said on the Senate floor July 24 that a task force examining the long-term viability of extenders will report back to him later this week, according to prepared remarks. He said he was disappointed that the debt limit deal didn’t address extenders, “a subject that has been causing heart-ache for millions of taxpayers for at least the past six months.”
George Callas, a former senior Republican tax policy aide who now works on public policy for the law firm Steptoe & Johnson LLP, said he isn’t sure if enough urgency exists within congressional leadership to get this current crop of extenders done.
“It’s hard to get a deal on a tax package if the four corners want a deal but none of them need a deal,” Callas said.
Ways and Means Committee Chairman Richard Neal (D-Mass.) introduced his own extenders package (H.R. 3301), which excluded two benefits—for depreciation of racehorses and to expedite expensing deductions of mine safety equipment—that benefit businesses in Senate Majority Leader Mitch McConnell’s home state of Kentucky.
Neal also wants to substantially expand the earned income and child tax credits, a potential nonstarter in the Republican-controlled Senate, barring major trade-offs.
Because support for the expired benefits doesn’t fall along partisan lines, those trade-offs could include more pressing technical corrections that have bipartisan support, such as the fix for restaurants and retailers.
“Chairman Neal’s statement so far is that he wants to address the extenders package, but I think all of us know that the bill passed out of committee is fantasy,” Ways and Means ranking member Kevin Brady (R-Texas) said in reference to H.R. 3301.
Brady also said there haven’t yet been bipartisan conversations on a technical corrections package. Democrats so far have largely been hesitant to help on those fixes, because the tax law was a Republican-only product.
“We’ve got to be able to get to the table. So far we are not having those discussions in a bipartisan way,” Brady said.
‘Pretty Good Bargain’
Rohit Kumar, a former senior McConnell aide who is now U.S. tax policy services leader for PwC, said he thinks congressional leaders could tie together technical corrections, extenders, and the retirement reform package into one deal.
“I wouldn’t call it a grand bargain,” Kumar said. “I’d call it a great bargain or a pretty good bargain.”
As the government’s Sept. 30 fiscal year deadline fast approaches, Kumar said he thinks that tax riders could continue beyond that date due to a common congressional practice: lawmakers extending their own deadlines.
“There’s no chance in the world that all of the government funding bills will be done by Sept. 30,” Kumar said. “There will be some continuing resolution that will be passed sometime before Sept. 30,” to prevent another government shutdown while funding negotiations continue, he said, adding that the final funding deal “becomes the last train leaving the station.”
Still, tax professionals tracking the process acknowledge that extenders can only be kept on life support for so long without congressional renewal.
“If it doesn’t happen in September you’re suddenly approaching a two-year lapse,” said Liam Donovan, a principal at the law firm Bracewell LLP. “And staff has indicated that there’s a point of no return for the 2018 tax year.”
—With assistance from Kelly Zegers.
To read more from Daily Tax Report ® pleaseOR Request Trial
(Updates with additional comment from Senate Finance Committee Chairman Chuck Grassley (R-Iowa) in the ninth paragraph. )