United States

Talk within Congress about revisiting expired tax extenders promising

Tax extenders may come in July–or not

TAX ALERT  | 

One of the most common questions currently circulating in the tax community is, "When will we see movement on tax extenders?" It appears there is a chance that these may be taken up as soon as July.

The term "tax extenders" refers to the tax provisions that sunset periodically and require congressional action to extend their expiration dates. They include things such as bonus depreciation, the research and development credit, the increased section 179 expensing allowance, the abbreviated five-year built-in gains recognition period for S corporations, etc. Absent congressional action that retroactively extends these provisions, each of these provisions (and many others) expired earlier this year.

Retroactively extending these provisions has become common practice for Congress, but it places taxpayers in a difficult position, oftentimes making it difficult to plan and understand what the tax implications will ultimately be with respect to transactions they have already conducted. Despite this, in each of the past two years Congress has extended the provisions either very late in the year or after the year had already ended. As a consequence, there has been growing interest in whether 2015 will be a repeat of recent history, or if perhaps Congress will act earlier to reduce some of this uncertainty.

It would appear, based on comments from several congressional officials and their staff within the past month, that there is a chance that Congress could take up the extenders as early as July in conjunction with ongoing discussion regarding funding for the federal highway trust fund. The fund, which is projected to run out of money by the end of July, will require congressional action before that time. Several congressional leaders have suggested that to the extent that Congress takes up this issue in a substantive way, the extenders would likely be taken up at the same time. If, however, Congress opts for a short-term solution to the trust fund shortfall — for example by simply transferring money from the general fund to avoid a shortfall — it could very well be that the extenders will not be taken up this summer.

Although it is difficult to know what the ultimate resolution will be, it appears there is a chance we will see action on the extenders in July. If that does not happen, we may see a repeat of 2013 and 2014 where no action is taken until late in the calendar year.

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