Lawmakers negotiating potential permanent extenders package

Congressional leaders and the administration are deep in negotiations over a potential compromise that could make permanent several of the tax provisions that expired at the end of 2014 and extend the rest for two years.

A similar deal was brokered by Senate Minority Leader Harry Reid, D-Nev., and Republicans last year, but fell apart when the president threatened a veto because the package didn’t include permanent enhancements to the child tax credit and earned income tax credit (EITC). That agreement would have made the research credit and several other provisions permanent. This year, Republicans are pushing to make the research credit and bonus depreciation permanent, and a successful compromise could also include some of the other provisions the House has voted to make permanent, including the following:

  • Increased Section 179 expensing limits
  • Reduced five-year holding period for S corporation built-in-gains tax
  • Election to deduct state and local sales tax
  • Tax-free charitable distributions from individual retirement accounts (IRAs) for taxpayers 70½ years and older
  • Increased percentage limits and extended carryforward periods for charitable contributions of conservation easements and capital gain property (with enhancements for Alaska native corporations)
  • Enhanced charitable deduction for contributions of food inventory  
  • S corporation basis reduction limit for charitable gifts

The administration is open to a deal that includes a permanent research credit and other permanent business and individual incentives, but strongly opposes making bonus depreciation permanent. However, the biggest sticking point in negotiations is again the White House’s push to make permanent the enhancements to the child credit and EITC, which are scheduled to expire at the end of 2016. Many Republicans don’t want to make these provisions permanent unless there are “program integrity” changes that would seek to curb what Republicans believe is abuse of the credits.

If they ultimately can’t reach a deal, the mostly likely fallback plan is a two-year extension of all or nearly all of the expired provisions, or potentially a one-year extension. With so little time left in the legislative session for the rest of the year, the extenders may have to be paired with other legislation. The most likely legislative vehicles are highway bill with a Dec. 4 deadline or spending bills, which are due by Dec. 11.

Please contact Mel Schwarz or Dustin Stamper for more information.

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