Congress will have just over three weeks to negotiate a government spending package when it returns from its summer recess after Labor Day, the outcome of which is likely to chart the course for tax issues still outstanding this year.
Members of the two appropriations committees and Congressional leadership have indicated skepticism that all 12 appropriations bills or an omnibus spending bill will be done in time to avert a government shutdown when government funding expires on Oct. 1. Instead, Congress may be forced to take a piecemeal approach to appropriations or pass a temporary continuing resolution to fund some or all of the government at existing levels until they can reach a long term deal.
A spending package or omnibus bill ultimately presents the most viable path forward for tax extenders, technical corrections or retirement incentives. However, if Congress is unable to include them, there are likely just two potential vehicles left to carry the pending legislation.
The first is a bill (H.R. 748
) passed by the House in July and would repeal the Affordable Care Act’s “Cadillac” tax. An identical bill in the Senate (S. 684
) has 61 sponsors, split almost evenly between Republicans and Democrats. While it has enough support to pass, it is uncertain whether Senate leadership will allow consideration on the floor. One complicating factor is the bill’s cost. It is expected to reduce revenue by nearly $200 billion over 10 years and contains no offsets.
The second option would be to combine all pending tax legislation into one large year-end bill. The viability of this option largely depends on what other issues Congress will have to contend with at the end of the year. The recent deal to suspend the debt ceiling and raise the sequestration caps, coupled with a forthcoming spending agreement, should clear the decks significantly. However, a Congressional response to the digital tax schemes being imposed by France and the United Kingdom as well as other, unforeseen issues could creep up and take precedence.
Washington National Tax Office
+1 202 861 4144
Washington National Tax Office
+1 202 861 4143
Tax professional standards statement
This content 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 topics presented herein, we encourage you to contact us or an independent tax professional to discuss their 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 content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content 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.