Close
Close

Congress poised to act on expired provisions in lame duck session

RFP
Congress is scheduled to return on Nov. 12 for a lame duck session to begin negotiating the extension of the 50-plus tax provisions that expired at the end of 2013. Lawmakers have indicated discussions will start with the Senate Democratic proposal to extend nearly all of the provisions for two years, and negotiations will center largely on Republicans’ push to make as many provisions permanent as possible.

The Senate Finance Committee approved the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act earlier in the year. It would extend 51 of the expired provisions for two years, retroactively for 2014 and prospectively for 2015. The full Senate has not voted on the legislation because Senate Majority Leader Harry Reid, D-Nev., pulled the bill from the floor after Republicans insisted on voting on an amendment to repeal the medical device excise tax.
The House has taken a different approach with the expired provisions. The House Ways and Means Committee didn’t act on all the provisions, and instead advanced a series of bills to make just 10 of the provisions permanent:

  • Alternative simplified research credit
  • Increased Section 179 expensing limits
  • Bonus depreciation and the election to accelerate alternative minimum tax (AMT) credits in lieu of bonus
  • Subpart F exception for active financing
  • Subpart F look-through rule for controlled foreign corporation income
  • The reduced five-year holding period for built-in-gains tax after an S corporation conversion
  • The S corporation basis reduction limit for charitable gifts
  • Increased percentage limits and extended carryforward periods for charitable contributions of conservation easements and capital gain property
  • Tax-free individual retirement account distributions for taxpayers age 70½
  • Enhanced charitable deduction for contributions of food inventory
The full House has also voted favorably on all the provisions except for the Subpart F exception for active financing and the Subpart F look-through rule for controlled foreign corporation income.

Democrats are not pushing for any revenue offsets on their package, but have complained that making provisions permanent is too costly. Republicans aren’t currently pushing to remove any provisions from the Senate package and are instead focusing on including as many permanent extensions as possible. Republicans hope that permanent extensions will give them a better revenue baseline and make tax reform efforts easier in 2015 or 2016.

The most likely resolution to the negotiations for now appears to be a lame duck agreement on two-year extensions of nearly all the expired provisions, with perhaps a very limited number of provisions made permanent. Republicans have downplayed rumors that they will seek to postpone action until 2015 , when they control the Senate, and said it is an option only if Democrats refuse to budge. Both sides have shot down rumors of only a one-year extension, but negotiations will be fluid, and there are no guaranties

It looks unlikely at this point that Congress will include any legislation aimed at inversions. Treasury recently released guidance aimed to curb some of the financial benefits of the transactions, and Congress has been under pressure to act as well. But Senate Finance Committee Chair Ron Wyden, D-Ore., and ranking minority member Orrin Hatch, R-Utah, do not appear to be making much progress on a compromise. In addition, Sen. Reid is not pushing hard for a Senate vote, and House Republicans have largely said inversions should be dealt with only as part of tax reform.

The following table describes how the expired tax provisions would be treated by the EXPIRE Act and how they have been addressed in the Ways and Means Committee and on the House floor. The EXPIRE Act column notes when a provision was modified by an amendment during the markup.

Provision

EXPIRE Act (Senate Finance Committee)

House action

Individual tax provisions

Itemized deduction for state and local sales taxes

  • Extends through 2015
  • No action yet
  • Above-the-line deduction for qualified tuition

    • Extends through 2015
  • No action yet
  • Above-the-line deduction of $250 for teacher classroom expenses

    • Extends through 2015
  • No action yet
  • Tax-free IRA contributions to charity after age 70½

    • Extends through 2015
  • H.R. 4719 would make permanent and was passed by the House on July 17
  • Deduction for mortgage insurance premiums

    • Extends through 2015
  • No action yet
  • Transit and parking fringe benefit equalization

    • Extends through 2015, and an amendment was approved that adds cost of bike share to definition of qualified transit benefit
  • No action yet
  • Exclusion for principal residence debt forgiveness income

    • Extends through 2015
  • No action yet
  • Health care tax credit for displaced workers

    • Extends through 2015
  • No action yet
  • General business tax provisions

    Research credit

    • Extends through 2015. For businesses less than five years old with less than $5 million in annual gross receipts, an amendment was approved that would allow individual research credits to offset alternative minimum tax and make up to $250,000 of credit refundable against payroll taxes.
  • H.R. 4438 would allow the traditional credit to expire but make the alternative simplified credit permanent with a 20% rate, and was passed by the House on May 9.
  • Qualified small business stock

    • Extends to apply to stock acquired before Jan. 1, 2016
  • No action yet
  • New markets tax credit

    • Extends through 2015
  • No action yet
  • Reduced five-year holding period for S corporation built-in gains for dispositions

    • Extends through 2015
  • H.R. 4453 would make permanent and was passed by the House on June 12
  • Work opportunity tax credit

    • Extends through 2015 and adds a new category of eligible workers for those who have exhausted unemployment benefits
  • No action yet
  • CFC-related payment look-through rule

    • Extends through 2015
  • H.R. 4464 would make permanent and was passed by the Ways and Means Committee
  • Subpart F exemption for active-financing income

    • Extends through 2015
  • H.R. 4429 would make permanent and was passed by the Ways and Means Committee
  • Additional properties eligible for low-income housing credit

    • Extends and modifies credit rate for unsubsidized new buildings through 2015  
  • No action yet, but Camp’s tax reform discussion draft would retain and modify provision
  • Exclusion of military housing allowance for income test for low-income housing credit

    • Extends through 2015
  • No action yet
  • Indian employment tax credit

    • Extends through 2015
  • No action yet
  • Employer wage credit for active-duty employees

    • Extends through 2015, expands credit to all employers and increases rate to 100%
  • No action yet
  • RIC-qualified investment entity treatment under FIRPTA

    • Extends through 2015
  • No action yet
  • Interest and short-term capital gains–related RIC dividends

    • Extends through 2015
  • No action yet
  • Conservation contributions of capital gain real estate

    • Extends through 2015
  • H.R. 4719 would make permanent and enhance the deduction for Alaska Native Corporations. It was passed by the House on July 17.
  • Enhanced charitable deduction for gifts of food inventory

    • Extends through 2015
  • H.R. 4719 would make permanent and enhance the provision, and was passed by the House on July 17
  • Treatment of payments to controlling exempt organizations

    • Extends through 2015
  • No action yet
  • Basis adjustment to S corporation stock for charitable contributions of property

    • Extends through 2015
  • H.R. 4453 would make permanent and was passed by the House on June 12
  • Railroad track maintenance tax credit

    • Extends through 2015
  • No action yet
  • Mine rescue team training credit

    • Extends through 2015
  • No action yet
  • Depreciation provisions

    Bonus depreciation

    • Extends 50% bonus depreciation for property placed in service in 2014 and 2015 (2016 for certain long-lived and transportation property) and extends ability to claim unused alternative minimum tax credits in lieu of bonus depreciation
  • H.R. 4718 passed the House on July 7 and would make bonus depreciation and the election to accelerate alternative minimum tax credits permanent, and would expand eligibility to include retail improvements by property owners. It would make several other minor modifications.
  • Section 179 expensing

    • Extends the $500,000 expensing allowance and $2 million phaseout threshold to property placed in service before Jan. 1, 2016, and indexes these figures to inflation
  • H.R. 4457 would make $500,000 expensing allowance and $2 million phaseout threshold permanent, but would not index these figures for inflation. It passed the House on June 12.
  • 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements

    • Extends through 2015
  • No action yet
  • Three-year depreciation for racehorses

    • Extends through 2015
  • No action yet, but Camp’s tax reform discussion draft would retain and modify this provision
  • Seven-year cost recovery for motor-sports entertainment complexes

    • Extends through 2015
  • No action yet
  • Expensing for advanced mine safety equipment

    • Extends through 2015
  • No action yet
  • Special expensing for film and television productions

    • Extends through 2015
  • No action yet
  • Energy tax provisions

    Section 30D plug-in electrical vehicle credit

    • General credit, which will begin to phase out once 200,000 vehicles are sold, is not extended
    • Credit for three-wheeled vehicles allowed to expire, but the credit for motorcycles is extended through 2015
  • No action yet
  • Credit for production of Indian coal

    • Extends through 2015
  • No action yet
  • Cellulosic (second-generation) biofuel credit

    • Extends through 2015
  • No action yet
  • Special depreciation for cellulosic biofuel plant property

    • Extends through 2015
  • No action yet
  • Incentives for biodiesel and renewable diesel

    • Extends through 2015
  • No action yet
  • Alternative fuel and alternative fuel mixture credit

     

    • Extends through 2015 for all fuels, including propane used in forklifts
  • No action yet
  • Alternative fuel vehicle refueling property credit

    • Extends through 2015
  • No action yet
  • Special rule for qualified electric utility dispositions to implement FERC or state restructuring policy

    • Extends through 2015
  • No action yet
  • Partial expensing of refinery equipment

    • Not extended
  • No action yet
  • Section 45 renewable electricity production credit

    • Extends credit to property with construction beginning before Jan. 1, 2016, and extends ability to claim 30% Section 48 credit in lieu of Section 45. Grant in lieu of credit not extended.
  • No action yet
  • Section 45M energy-efficient appliance credit

    • Not extended
  • No action yet
  • Section 45L energy-efficient new home credit

    • Extends through 2015
  • No action yet
  • Section 25C energy-efficient home improvement tax credit

    • Extends through 2015 and expands the credit to include energy star roofing
  • No action yet
  • Section 179D deduction for energy-efficient commercial building property

    • Extends through 2015 and updates the energy efficiency standards
  • No action yet
  • Incentives for specific locations

    Accelerated depreciation for Indian reservation business property

    • Extends through 2015
  • No action yet
  • Empowerment zone tax incentives

    • Extends through 2015
  • No action yet
  • Section 199 deduction for Puerto Rican production activities

    • Extends through 2015
  • No action yet
  • Increased limit on rum excise tax cover for Puerto Rico and the Virgin Islands

    • Extends through 2015
  • No action yet
  • American Samoa economic development credit

    • Extends through 2015
  • No action yet
  • New York Liberty Zone tax-exempt bond financing

    • Not extended
  • No action yet
  • Qualified Zone Academy Bonds

    • Extends through 2015 and reduces the private contribution requirement to 5%
  • No action yet


  • Contact
    Mel Schwarz
    +1 202 521 1564
    mel.schwarz@us.gt.com

    Tax professional standards statement
    This document supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the subject of this document, we encourage you to contact us or an independent tax adviser to discuss the potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this document may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this document is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

    The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.