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September may be pivotal for pending tax bills

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Tax Hot Topics newsletter 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.

Contacts:
Dustin Stamper
Managing Director
Washington National Tax Office
T +1 202 861 4144

Omair Taher
Senior Associate
Washington National Tax Office
T +1 202 861 4143

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