The top Republican and Democratic Senate tax writers joined together last week to push for retroactively extending a series of popular tax provisions that expired at the end of 2017. The bipartisan move should breathe some new life into the provisions, but the House is continuing to slow walk action on them and other tax priorities.
Senate Finance Committee Chair Chuck Grassley (R-Iowa) and ranking minority member Ron Wyden (D-Ore.) introduced the Tax Extender and Disaster Relief Act of 2019 (S. 617). It includes disaster relief and would extend more than 30 provisions for 2018 and 2019, including:
- Alternative fuel and biofuel credits
- Energy-efficient new home credit
- Energy-efficient commercial building property credit
- Special expensing for film and television products
- Three-year depreciation for racehorses
- Seven-year cost recovery for motor sports entertainment complexes
- Expensing for advanced mine safety equipment
The extenders represent one of only a few tax priorities that could gain bipartisan traction with a divided government this year. Legislation on retirement incentives, IRS administration, and tax reform fixes is also possible.
The extenders remain the top tax priority for Grassley, who is hoping to enact them before the April tax filing deadline. But the effort must overcome several hurdles. The legislation has been cleared by Senate leadership to go straight to the floor, but the Senate needs the House to send it a revenue bill first because tax legislation must generally originate in the House.
The House appears in no hurry to act. Ways and Means Committee Chair Richard Neal (D-Mass.), said he wants to move all tax legislation through regular order, which would mean a full mark-up. The House Ways and Means Subcommittee on Select Revenue Measures will hold a hearing on the provisions on March 12.
The extenders are also estimated to cost around $30 billion, which would run afoul of House pay-as-you-go budget rules. Democrats could agree to waive the rules for the extenders, but finding a revenue offsets would make the effort more difficult. In addition, it may be difficult to pass any stand-alone tax bill, and lawmakers are looking for must-pass legislative vehicles to carry tax provisions. The most likely candidates appear to be legislation to raise the debt limit, lift the sequester caps, or extend government funding. However, Congress is not expected to face a hard deadline on any of these issues until September or October.
If a tax title does move, it could carry other tax priorities besides the extenders. Lawmakers were very close to a unanimous consent agreement on IRS administration legislation last year. It could be resurrected this year, but Grassley would need to resolve difference over the private debt collection program with Democrats. There is also significant common ground between the Retirement Enhancement and Savings Act of 2018 (RESA) legislation Wyden introduced last year and the retirement tax package proposed by House Republicans in 2018. Neal also considers retirement incentives a top priority and has already held a hearing on them.
Fixes to the Tax Cuts and Jobs Act face the most resistance. Democrats have made clear they are not interested in helping Republicans pass a full package of technical corrections for a bill they oppose and would like to amend significantly. However, there does appear to be room for negotiating a handful fixes for provisions if Republicans can offer Democrats something significant in exchange. Making qualified improvement property eligible for bonus depreciation is the most likely candidate, but other provisions could also be considered. Negotiations have not yet begun in earnest, and a resolution could still be months away, if it comes at all. Neal is unlikely to agree to fixes before holding more tax reform hearings.
Washington National Tax Office
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