Slow Process on Moving Tax Extenders

June 4, 2014

pic-money-tax-budgetNegotiations behind the scenes continue as leaders in the Senate are trying to reach an agreement on how to advance legislation (S. 2260) that would renew for two years nearly all of the 55 tax extenders provisions that expired on Dec. 31, 2013—including several business tax extenders such as—Section 179 expensing and the research tax credit.

On May 13, the Senate attempted to consider the extenders package, however, the measure was stalled because Senate Majority Leader Harry Reid (D-Nev.) and Republicans were locked in a dispute over whether they would be able to offer amendments to the legislation. Since Reid invoked a procedural move restricting senators from offering amendments on the floor, the minority in turn blocked the procedural motion by a vote of 53-40 that would have allowed the bill to move forward—60 votes were required for passage.

More than 160 amendments had been filed by Democrats and Republicans alike; but the chief sticking point continues to be a Republican-sponsored provision that would repeal the medical device excise tax enacted in the Patient Protection and Affordable Care Act (PPACA). For his part, Reid has stated that he will not allow a vote on proposals to repeal the medical device excise tax or other provisions enacted in the PPACA.

Senate Finance Committee Chairman Ron Wyden (D-Ore.) and ranking member Orrin Hatch (R-Utah) had hoped to spend some time over the Memorial Day recess crafting a deal that would allow for a limited number of amendments, but upon return from recess on June 2, it did not appear that any progress had been made and no timeline has been set.

Meanwhile, on the House side, the Ways and Means Committee approved six additional bills to make several temporary tax credits permanent on May 29. The committee has now advanced 12 bills making tax extenders permanent, in contrast to the single package put forward by the Senate.

Most significant to small businesses is the committee approved (23-11) bill (H.R. 4718) that would make permanent a modified version of the now-expired 50 percent additional first-year depreciation deduction for qualified property placed in service after Dec. 31, 2013. As approved, the legislation would make the deduction more generous by:

•    Expanding the definition of qualified property to include qualified retail improvement property;
•    Making permanent the special rule for the allocation of bonus depreciation to a long-term contract;
•    Indexing the current-law $8,000 increase in the depreciation deduction limitation for certain passenger automobiles to automobile price inflation; and
•    Allowing taxpayers to claim bonus depreciation on trees and vines bearing fruits or nuts.

Rep. John Larson (D-Conn.) attempted to substitute language that would make the provision expire in two years, offset by tax increases for oil and gas companies, however, the committee rejected the amendment on a voice vote.

According to the Joint Committee on Taxation, these six bills would decrease federal revenues by a combined $303 billion over 10 years. Committee Democrats in a series of party-line votes opposed the measures, citing both their permanency and lack of offsets, and in three cases attempted to swap in temporary language mirroring the provisions of the Senate package.

Ways and Means Committee Chairman Dave Camp (R-Mich.) is expected to hold additional extenders mark-ups in the near term, but has not indicated when they would take place or what specific provisions would be considered. House Republican leaders have not yet laid out a detailed schedule for moving the extenders provisions that the Ways and Means Committee has approved so far—although section 179 expensing may be on the House floor the week of June 9.