Tax writers look to add extenders to year-end agenda as international reform flounders

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Tax writers look to add extendersThe focus of the tax-writing committees is expected to shift to the 50-plus provisions that expired at the end of 2014 after negotiations over highway funding and international reform all but collapsed.

House Ways and Means Committee Chair Paul Ryan, R-Wis., has been negotiating with Sen. Chuck Schumer, D-N.Y., on an international reform package to pay for highway spending. Ryan hoped to pair a transition to a territorial system with an “innovation box,” and use a onetime tax on repatriated earnings to raise revenue (See our discussion of the innovation box proposal for more information). Ryan and Schumer have not been able to reach agreement on the details of international reform or how much revenue from reform should be used to fund highway spending.

The current authorization of highway funding is scheduled to expire on Oct. 29, and Ryan instructed appropriators to start working on a bill without him. He said he has not fully abandoned efforts to attach international reform, but prospects are grim. Schumer expressed little hope for a compromise, and pairing international reform with highway spending has always been unpopular with Senate Majority Leader Mitch McConnell, R-Ky., and Finance Committee chair Orrin Hatch, R-Utah.

Tax writers are now expected to shift their focus to renewing the expired tax extender provisions. Ryan had discussed adding permanent extensions of some expired provisions to the highway bill as a way to sweeten his international reform package, but it looks likely now that extenders will have to move separately or with other year-end legislation.

Lawmakers have a slew of high priority issues to work through before the end of the year. The debt limit will need to be raised by early November to avoid default, and government funding will expire on Dec. 11. On top of that, House Republicans are in the midst of a contentious debate over who the next Speaker of the House will be. Speaker John Boehner, R-Ohio, is expected to exit Congress at the end of October, and his successor has not yet been picked. House Majority Leader Kevin McCarthy of California was the presumptive favorite, but he abruptly quit the Speaker race on Oct. 8. McCarthy’s withdrawal from the Speaker race makes enactment any legislation, including extenders, more difficult. Given those factors, there will be little time for the extender provisions.

There was some hope that lawmakers would try and resurrect a proposed deal from late last year that would have made a handful of provisions permanent and extended the rest for two years. But with the compressed legislative calendar, it now looks increasingly likely that lawmakers will enact only a one- or two-year extension very late in the year, perhaps as part of a spending bill by Dec. 11 or even after. Tax Legislative Update 2015-04 has a full discussion of the outlook for the extenders and a table describing how House and Senate legislation would treat each provision.

Dustin Stamper
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