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Congress Wants to Put An End to Tax Time Uncertainty

Tuesday, February 17, 2015  
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Policy Briefing - Week of February 17, 2015

 

Congress Wants to Put An End to Tax Time Uncertainty

In a last minute deal in December, the Congress extended a set of more than 50 tax provisions for the 2014 tax year, typically known as “extenders” in Washington, because they must be extended each year. Tax writers in Congress are determined to avoid the same situation this year by attempting to make many of the tax provisions permanent, but they can’t agree on what approach to take.

 

The House, under new Ways and Means Committee Chair Paul Ryan (R-WI), has decided to take up small groups of tax provisions, two to three at a time, making them permanent. So far, the House has voted on two bills, H.R. 644 to make permanent the charitable gift tax deduction, and H.R. 636, that would make the expanded small business expensing rules, known as “Sec. 179 expensing,” permanent as well as reduce the built-in gains recognition period for S corporations from ten years to five years. The bill would set Sec. 179 expensing deduction limit at $500,000 in property costs and would permanently increase the phase out threshold at $2 million. For comparison, the current levels are $25,000 and $200,000 respectively. The shortening of built-in gains would reduce the length of time C corporations that convert to S corporations must hold onto assets to avoid a tax on gains.

 

Senate leaders, meanwhile, have been working behind closed doors in an attempt to craft a comprehensive bill covering tax extenders. At issue is deciding which to keep and which to jettison. A path forward in Congress is unclear since President Obama has vowed to veto tax extender legislation that adds to the deficit because of the loss of revenue.  In order to avoid a Presidential veto, the loss of revenue collected must be offset by finding new revenue.  The President has already issued veto threats on both of the House-passed bills. 


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