You thought we basically were done with taxes with the passage of the GOP's massive tax bill this week, right? Wrong. A variety of old extenders will get another look in the New Year.
Senate Republicans decided to deal with the recently-passed tax code changes by working within the budgetary parameters of reconciliation and the Byrd rule so they could pass any bill by a simple majority.
However, that made the individual tax changes temporary, setting the expiration date for most at the end of the 2025 tax year.
The move to make these tax breaks temporary, as I noted in an earlier post, essentially makes them the new extenders, a collection of impermanent tax laws that must be renewed or they will end by their legislative due date.
Now, with pseudo tax reform just a day old, we're also getting word that the chair of the Senate Finance Committee wants to revisit some of the old extenders we thought had simply died in 2015 when they weren't included in the Protecting Americans from Tax Hikes, or PATH, Act.
Guess what? Some of those now-dead tax breaks may be about to get a new lease on life.
Tax extenders live: Today (Thursday, Dec. 21, 2017) Senate Finance Committee Chairman Orrin Hatch (R-Utah) introduced S. 2256, a new extenders bill.
Its official title is "A bill to amend the Internal Revenue Code of 1986 to extend expiring provisions, and for other purposes." One of the bill's cosponsors, Sen. John Thune (R-South Dakota) told Tax Analysts that the bill is designed to "address member concerns for temporary tax policy separately from the permanent relief in the Tax Cut and Jobs Act."
In addition to not cluttering up the already massive tax bill (whose official name, by the way, was changed when it went back to the Senate for a final vote to a bill "To provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018"), there's a monetary reason for this separate consideration of other tax measures.
Any tax provisions added to TPfRPtTIIaVotCRotBfFY2018 (if you want to call it by its initials) would mess up the delicate math to keep the bill's costs under $1.5 trillion.
Extenders, on the other hand, historically have been considered — and renewed — without worrying about budget concerns because they are temporary. Yeah, right.
Potentially resurrected tax breaks: Anyway, Hatch has packed his bill with many provisions that were popular, both the general tax-paying public, and many of his Capitol Hill colleagues.
They include the:
- above-the-line deduction of up to $4,000 for tuition and fees for some college expenses,
- tax-free designation of home loan debt that is forgiven as a result of mortgage modification or foreclosure,
- ability to claim private mortgage insurance, or PMI, as tax deductible mortgage loan interest on Schedule A,
- favorable depreciation schedules for owners of racehorses and motorsports facilities (yep the so-called NASCAR tax break),
- special expensing rules for creators of films, TV shows and theatrical productions (thanks, Hamilton!),
- tax credit for certain energy efficient home improvements,
- tax credits for several motor vehicle alternative fuel/electric operating systems, and
- excise tax break for rum producers in Puerto Rico and the U.S. Virgin Islands.
The meeting of old and new taxes: This means that in addition to trying to smooth out the bumps created by the speed with which TPfRPtTIIaVotCRotBfFY2018 (OK, let's stick with the unofficial Tax Cuts and Jobs Act moniker) was created, revised and passed, Congress will be spending at least part of next year dealing with old tax laws.
Despite a history of eventually approving most extenders, that might not be so easy this time.
Many tax policy experts and members of Congress think tax extenders are, in general, bad ideas. The constant need to renew them doesn't really allow for affected individuals and business to properly plan. It is much better, they say, to make them permanent or let them die and let folks deal with that certainty.
Also, Congressional deficit hawks — yes, they still exist, although their wings have been clipped by the cost of the just-passed tax bill — might decide to re-emerge during the extenders debate. And most of these lawmakers are Republicans, meaning House and Senate leaders will have to deal with intra-party fighting here.
And, of course, there are the Democrats. Capitol Hill's hyperpolarized political climate doesn't lend itself to what in the past has been slightly more bipartisan consideration of extenders. To get the extenders through, Dems are likely to demand some concessions that the GOP isn't willing to accept.
So take a break from taxes this holiday season while you can. More tax battles are waiting shortly after we enter the New Year.
You also might find these other tax reform posts of interest:
- Highlights of the GOP tax bill that's about to become law
- More (oh joy!) GOP tax bill proposed changes
- You may, or may not, see the new tax law's changes in your February paycheck