Congress is expected agree on a short-term spending deal this month, a move that could bolster the odds of pending tax legislation being passed by year’s end.
Lawmakers approved a bill in July that set new spending caps and raised the debt ceiling for the next two years, but stopped short of actually extending government funding before it expires on Oct. 1. With a possible government shutdown now looming and Republicans and Democrats still far apart on appropriations, Congressional leaders have indicated they will likely pass a continuing resolution to keep the government open at existing funding levels until a long-term agreement can be reached.
The delay would buy time for the top tax writers in the House and Senate to find consensus on tax priorities to potentially add to an omnibus spending deal. The tax priorities with the most likely chance of enactment include the tax extenders, a very limited set of technical corrections to the Tax Cuts and Jobs Act, and retirement incentives.
The House Ways and Means Committee approved a bill along party lines in June that would renew all of the extenders that expired in 2017 and those set to expire at the end of this year. The bill proposed paying for it by accelerating the expiration of the increased estate and gift tax exclusion by three years. This was dismissed as a non-starter by Senate Finance Committee Chair Chuck Grassley (R-Iowa), although he has hinted that the lines of communication are still open. Ways and Means Chair Richie Neal (D-Mass.) has indicated he is not wedded to revenue offset.
Technical corrections will be more difficult, as Democrats continue to resist efforts to help fix a bill they had no say in writing and which they are campaigning to repeal or adjust. However, a handful of changes agreeable to Democrats, like a fix granting bonus depreciation for qualified improvement property, remain very possible.
The SECURE Act (H.R. 1994
), a package of retirement incentives, is another possibility. Efforts to fast-track it by unanimous consent have been stymied by a handful of holdouts, but it remains popular and could be attached to other tax legislation. The Middle Class Health Benefits Tax Repeal Act (H.R 748
), which repeals the Affordable Care Act’s “Cadillac” tax, has 62 Senate co-sponsors, but it is uncertain whether Senate Majority Leader Mitch McConnell will bring it to the floor.
A spending package presents the last must-pass legislation for Congress this year and is perhaps the most viable vehicle for extenders, technical corrections and other outstanding tax items. Without it, Congress would likely have to bundle all pending tax legislation into a separate stand-alone package. The House has sent the Senate two tax bills they can work from, both of which passed with overwhelming majorities and enjoy strong bipartisan support in the Senate.
Congressional leaders have indicated that a stand-alone tax package could make it onto Congress’s year-end agenda. However, the lack of urgency around tax issues would make the bill more susceptible to falling by the wayside, particularly if other unforeseen issues emerge.
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.