Don't Mess With Taxes

The House Ways and Means Committee plans to mark up seven bills this morning (Thursday, Sept. 17), most of which usually are considered as part of a comprehensive tax extenders package.

More than 50 temporary tax laws expired at the end of 2014. Congress is slowly working on getting them back in the tax code for at least a couple more years.

Passage of the extenders, so named because they are temporary tax laws that must be renewed (aka extended) periodically by Congress, have become an end-of-the-year pain in the a… a legislative ritual.

Such a delay, however, means that businesses and individual taxpayers cannot make firm tax plans until the laws are officially back on the books. This year, for example, the package of 50+ tax extenders expired at the end of the 2014 tax year, placing 2015 tax moves on hold until Congress acts.

Slow moving legislation: That tax law tardiness and planning predicament was noted by Ways and Means Chairman Rep. Paul Ryan (R-Wisc.) in his announcement of today's markup.

"Congress lurches from year to year by renewing so-called 'tax extenders,'" Ryan said "This annual practice creates uncertainty and confusion, which takes a toll on everyday Americans and costs jobs."

Towards that end, the Ways and Means members and then the full House have been considering the various extenders separately, rather than in bulk.

As part of Ryan's quest for more tax certainty and "no more year-end drama, no more writing tax law one year at a time," the laws that have been approved also have been made permanent parts of the Internal Revenue Code as.

That process continues today, with Ryan's committee taking up four business tax bills that in the past were part of a larger extenders package.

H.R. 765, the Restaurant and Retail Jobs and Growth Act, introduced by Rep. Mike Kelly (R-Pa.), would make permanent the 15-year depreciation schedule for leasehold improvements, restaurant improvements and new construction, and retail improvements. A 39-year depreciation period is already permanently in the tax code, but Kelly says the shorter time period would benefit small retail shops and restaurants that tend to rarely stay that long in one location.

H.R. 2510, to make permanent bonus depreciation, is sponsored by Rep. Pat Tiberi (R-Ohio). This bill would make 50-percent bonus depreciation permanent.

H.R. 961, to permanently extend the subpart F exemption for active financing income, also is a Tiberi-introduced bill. The Congressman says this measure would allow U.S. companies to more equitably compete against foreign competitors that are not subject to a worldwide tax system.

H.R. 1430, the Permanent Controlled Foreign Corporation (CFC) Look-Through Act of 2015, is sponsored by Rep. Charles Boustany (R-La.). Its supporters say the legislation would help U.S. companies operating internationally to function more efficiently without worrying about negative U.S. tax consequences. 

On the individual tax side, the Ways and Means members will look at the popular extenders write-off for teachers.

H.R. 2940, the Educator Tax Relief Act of 2015, sponsored by Rep. Dave Reichert (R-Wash.), would make permanent the $250 above-the-line deduction that schoolteachers and other educators can claim when they buy classroom supplies out of their own pockets.

Ways and Means members also plan to consider two measures connected to the Affordable Care Act, also known as Obamacare.

H.R. 1270, the Restoring Access to Medication Act of 2015, introduced by Rep. Lynn Jenkins (R-Kan.), would repeal the ACA provision that restricted use of tax-favored accounts to pay for over-the-counter meds. Jenkins bill would once again let participants in Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), Health Reimbursement Account (HRAs) or Archer Medical Savings Accounts (MSAs) use those fund to purchase medications from store shelves.

This measure has bipartisan support. Cosponsor Rep. Ron Kind (D-Wisc.) says the change is necessary as health care shifts towards higher deductibles and out of pocket expenses and more families rely on these various medical accounts help cover health care costs.

Finally, the tax-writing committee will take up a measure dealing with religious beliefs and the ACA.

H.R. 2061, the Equitable Access to Care and Health (EACH) Act, would provide a religious exemption from the health care law's coverage requirement for individuals whose beliefs preclude accepting medical health services. The bill is sponsored by Rep. Rodney Davis (R-Ill.).

Party, Senate differences: As with most pieces of legislation in the current Congress, the individual tax measures that have passed have done so along party lines, both at the Ways and Means committee level and in the full House.

Democrats have objected to the separate bills because they typically do not contain any way to pay for the tax breaks. Look for that pattern to continue today.

Meanwhile on the other side of Capitol Hill, the Senate Finance Committee on July 21 approved the its own collective extenders package, the Tax Relief Extension Act of 2015 (S. 1946). The 52 tax provisions for businesses and individuals in the Senate bill would be in effect retroactively for the 2015 tax year and through December 2016.

Will the two chambers eventually be able to reconcile their various expired tax laws?

Probably. We're heading into an election year and no member of Congress seeking to keep his or her seat wants to take away tax breaks from voters.

But don't expect the tax extenders to pass -- wait for it, literally -- until the end of this year.

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