Don't Mess With Taxes

Ready to take a break from your 2021 taxes? I have just the diversion.

You can read all about the tax legislation that was enacted during the 116th Congress. Wait! Come back. It's a good timeline look at recent tax breaks and changes, some of which still affect our 2021 tax returns.

During that session of Congress, which began on Jan. 3, 2019, and ended on Jan. 3, 2021, the House and Senate sent 344 bills to the White House that were signed into law. 

Since this is a tax blog, our attention is on those bills/laws that had an impact on the Internal Revenue Code. There were eight of them during that Congressional session.

Details are in the Joint Committee on Taxation (JCT) Blue Book, the moniker for JCT's general explanation of those law's tax provisions. That effort, released by JCT staff on March 8 as downloadable PDF JCS-1-22, also earns this weekend's Saturday Shout Out.

You can peruse the document's 596 pages at your leisure. But to whet your tax reading appetite, here's a preview.

Part One: The Taxpayer First Act (Public Law 116–25). This measure is more popularly known as the most recent Internal Revenue Service reform bill. The JCT looks at its provisions on IRS customer service, the taxpayer appeals process, and tax compliance enforcement issues, such as seizure requirements related to structuring transactions.

The Act also covers the always interesting 21st Century IRS. Topics here range from cybersecurity and identity protection, development of information technology, and expanded use of electronic systems

Part Two: Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE) Act (Public Law 116–91). Taxes involved in the FUTURE Act are part of the provision about secure disclosure of tax-return information to carry out the Higher Education Act of 1965.

Part Three: Further Consolidated Appropriations Act, 2020 (Public Law 116–94). This omnibus appropriations package for fiscal year 2020 included the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, or SECURE Act, which, among other things, modified the Tax Cuts and Jobs Act of 2017 changes to the kiddie tax treatment of minors' unearned income.

It also made some disaster tax relief changes, and repealed several health-related taxes, such as the medical device excise tax; the annual fee on health insurance providers; and excise tax on high-cost employer-sponsored health coverage.

In addition, some extenders — remember these so-called temporary tax provisions that typically are periodically renewed? — were, well, extended as part of PL 116-94. They included

• Excluding from gross income of discharge of qualified principal residence indebtedness,
• Treating mortgage insurance premiums as qualified residence interest,
• Axing the 10 percent of adjusted gross income (AGI) Schedule A threshold of the Affordable Care Act (aka Obamacare) and moved it back to 7.5 percent of AGI,
• Continuing the deduction of qualified tuition and related expenses,
• Renewing the work opportunity credit, and
• Keeping in effect certain provisions related to beer, wine, and distilled spirits.

Part Four: Virginia Beach Strong Act (Public Law 116–98). This law signed on Dec. 20, 2019, created special rules for contributions for relief of the families of the mass shooting at the municipal center in Virginia Beach, Virginia, on May 31, 2019. Specifically, it accelerated the income tax benefits for charitable cash contributions to the family relief efforts.

Then 2020 and the COVID-19 pandemic arrived in the United States.

Part Five: Families First Coronavirus Response Act (Public Law 116–127). This first of many coronavirus tax measures became law on March 18, 2020, just five days after the White House declared a national coronavirus emergency. This bill focused on businesses facing COVID's adverse economic impact. Among its key provisions were various corporate tax credits for companies that provided pandemic-related paid sick and family and medical leave.

Part Six: Coronavirus Aid, Relief, and Economic Security (CARES) Act (Public Law 116–136). The House and Senate then turned in the CARES Act to COVID-prompted tax measures for individuals. This law, enacted on March 27, 2020, included the first of the pandemic rebates, or economic impact payments (EIPs), which officially were advance payments of the Recovery Rebate Credit. There also were special rules for use of retirement funds, and the one-year suspension of required minimum distributions (RMDs).

Since by this time, lots of people were depending on outside help, charities also got attention in this bill. It created the temporary above-the-line deduction for charitable contributions, as well as expanded limits on itemized charitable contributions.

Part Seven: Continuing Appropriations Act, 2021 and Other Extensions Act (Public Law 116–159). This law slipped into the U.S. Code at the end of 2020, with some tax provisions aimed at transportation taxes.

It was quickly followed by one more COVID relief/tax bill as the 116th Congress scrambled to wrap up its session and the 2020 tax year.

Part Eight: Consolidated Appropriations Act, 2021 (Public Law 116–260). This bill, with the lovely CAA acronym, was signed into law on Dec. 27, 2020. It was another massive measure that combined federal funding with, in part, a lot of COVID-related relief provisions. Most notable were additional, and increased, 2020 recovery rebates for individuals, along with amendments to CARES Act recovery rebates.

CAA also included the No Surprises Act, which provides relief to those who get unexpectedly large medical bills after receiving what they believed were insurance covered treatments.

And, as tends to happen on Capitol Hill at the end of tax years, some extenders were given longer lives, including  

• Work opportunity credit (again),
• Exclusion from gross income of discharge of qualified principal residence indebtedness (again),
• Seven-year recovery period for motorsports entertainment complexes,
• Empowerment zone tax incentives,
• Employer credit for paid family and medical leave
• Exclusion for certain employer payments of student loans, and
• A variety of energy related tax breaks (electric vehicles, alternative fuels, energy efficient homes)

The first footnote in each part gives the legislative history of the law that's explained in that section. And for dedicated numbers crunchers, the appendix provides the estimated budget effects of the tax legislation described in the document.

Happy tax reading!

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