President signs trade bills with new revenue raisers

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The president has signed into law two trade bills (H.R. 2146 and H.R. 1295) that include a handful of tax provisions affecting the child credit, tuition credits, information reporting penalties, and the retirement plans of federal law enforcement officers, firefighters and air traffic controllers.

Most of the tax provisions are designed to raise revenue, but the combined provisions raise less than $2 billion. The tax provisions in the two bills would do the following:

  • Extend the health coverage tax credit for workers affected by trade-related job losses
  • Increase the required corporate estimated tax payment in the third quarter of 2020 by 8% for corporations with at least $1 billion in assets, with a corresponding decrease for the following quarter
  • Require taxpayers to have a valid Form 1098-T for tuition payments to claim any deduction or credit for education
  • Extend customs user fees
  • Waive penalties for some educational institutions that are unable to collect tax identification numbers of individuals with respect to higher education tuition and related expenses
  • Allow federal law enforcement officers, firefighters and air traffic controllers to start withdrawing funds from governmental plans at age 50 without penalty
  • End the refundability of the child tax credit for taxpayers using the foreign income exclusion
  • Broadly increase the penalties for failing to file information returns

The House and Senate have convened a conference committee to resolve the differences between a third trade bill (H.R. 644). The Senate version would deny or revoke taxpayer passports for unpaid tax delinquencies. The House version would increase the minimum penalty for failure to file a tax return from $135 to $205. The $205 minimum penalty would continue to be indexed for inflation, a change recently enacted in the Achieving a Better Life Experience Act of 2014.

The use of so many noncontroversial revenue raisers on the trade bills could make it more difficult for tax writers to find more offsets to pay for an extension of highway spending. Highway funding is set to expire at the end of July. There is a funding shortfall of approximately $20 billion per year in the highway fund, and lawmakers are discussing extension options ranging from six months to six years.

Mel Schwarz
+1 202 521 1564

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