Tax Extenders: Been There, Done That
It seems like writing about expiring provisions is a regular rite of passage and frankly, it doesn't feel like the religious experience alluded to in Ecclesiastes. The last time I spoke with you about tax extenders (Nov. 28, 2014), I asked: What’s the million dollar topic on members’ minds these days? The choices were the following:
- The IRS
- The congressional lame duck session
- Starting busy season
- Government appropriations
- The Keystone Pipeline
- Immigration reform
- Bipartisan cooperation in Washington
- All of the above
Look familiar? The IRS, Congress, extenders, busy season, appropriations and cooperation haven't left many people's consciousness. Even the Keystone Pipeline and immigration have been in the news. I’d add a few other familiar priorities: the Highway Trust Fund and the debt ceiling.
By the way, several members have asked me if I ever get tired of blogging about tax extenders; how long will this continue? Good question. Well, as of today, the answer is 2023. At least that’s what the Joint Committee on Taxation indicates in its List of Expiring Federal Tax Provisions 2013 – 2023. Yes, that’s correct, 2023. And that’s before the extensions of the extensions of the extenders! Practice makes perfect.
So where are we and what’s going to happen? The divide in Washington is over the permanency of some of the extenders. S. 1946, the Tax Relief Extension Act of 2015, introduced this summer by Senate Finance Committee Chair Orrin Hatch (R-UT), would extend the expired provisions for two years and modify how some of them would work. The House, on the other hand, considered a series of bills that would have made some extenders permanent (H.R. 637; H.R. 640; H.R. 641; and H.R. 644). Earlier, tax reform was part of the extenders vernacular (i.e., let’s address extenders as part of a reform bill) but reform will not happen before 2017, after the presidential election cycle.
Permanency does make sense. The AICPA pushed for extenders to be resolved timely as we know that resolution is critical to leveraging a timely start to filing season. Also, from a tax policy perspective, transparency, certainty and simplification are critically important. The lack of certainty gives way to other consequences, such as the impact on companies’ financial accounting and reporting; the increase in complexity and administrative burden for taxpayers and the IRS; the possible adverse impact on small businesses; and the effect on economic decisions and tax payments. Absent other explicit goals for enacting temporary provisions, such as adding an economic stimulus, there is really no reason to put taxpayers and their advisers through this agony.
I’ve “gone out on a limb” regarding predictions for tax extenders before, so let’s do it again. First, the facts:
- The congressional calendar is very compressed with only a few “must-pass” bills including highway funding that expires Dec. 4.
- Congress recesses Dec. 18 and reconvenes in early January.
- Congress set the overall spending limits for FY ’16 and FY ’17 in a budget deal on November 2. That deal sets Dec. 11 as the deadline to decide on the exact appropriated amounts that will be allocated to the federal agencies – in an omnibus spending bill. That’s the next important date.
Here’s what I think will happen – Congress will pass a two-year (2015 and 2016) extension of all the expired provisions on Dec. 11 as part of a government funding bill. One wild card is the Syrian refugee situation – a very emotional issue that could derail the appropriations process. Stay tuned.
“A time to weep and a time to laugh, a time to mourn and a time to dance.” Ecclesiastes wasn’t referring to Washington politics but, then again . . .
Edward Karl, Vice President-Taxation, American Institute of CPAs.