Tax extenders outlook cloudy in the 2014 lame duck session
Wednesday, November 12, 2014
Representatives and Senators clocked in today, meeting as lame ducks for the 20th time since 1940.
Not exactly lame, but some say these pool toys are just as effective as some lame-duck lawmakers. "Rubber Ducks" photo by artur84 via FreeDigitalPhotos.net.
It's the first time lawmakers have seen each other since the GOP cleaned the Dems clocks in the midterm elections. But beyond that electoral awkwardness, lame duck sessions always are weird.
It's the last time, at least for a while, that some members of Congress will be on Capitol Hill as lawmakers. Some are gracious in their defeats. Others are ... well, let's say grumpy to keep the alliteration going, as well as remain a family friendly blog.
Meanwhile, the newly elected members are in town for orientation.
They won't take office until January 2015, but they are getting Federal Lawmaking 101 lessons and, more importantly, triumphantly scoping out their new digs. It's sort of like seeing your boy- or girlfriend's beaming new squeeze on campus while you're still trying to figure out why you got dumped.
Amid all these conflicting emotions, the current Congress still has some important tasks to complete.
The fiscal measures facing lawmakers include agreeing to a continuing resolution so the government can keep running, as well as bills dealing with nationwide collection of state sales taxes and whether Internet access should be taxed.
Extenders approval could get messy: And, of course, there are the tax extenders. These 55 or so tax provisions, affecting both businesses and individual taxpayers, expired at the end of 2013. These tax breaks that are dead until Congress revives them is the topic of the latest Weekly Tax Tip.
Consensus is that most of the expired tax laws will be, as the name indicates, extended.
For the 2014 tax year, if Congress follows the bad habit set in previous years, the tax laws will be made retroactive to Jan. 1, 2014. In practical tax practice, however, that gives us just a few weeks, depending on when final action is taken, to make tax moves for this year.
At least, again if the lawmakers follow prior procrastination patterns, the measures will be made the law of the land through 2015. But just how and when that will happen in these final few weeks of the 113th Congress remains to be seen.
When a group of key Congressional tax committee staff members gathered two days after the midterms for a post-election look at tax legislation, hopes were high that extenders would be taken care of quickly.
After all, the Senate Finance Committee has approved a bulk package -- the EXPIRE Act -- of now-dead laws and the House has OKed several of the provisions as separate legislation.
But as anyone who's paid any attention at all as to how Congress does or, too often, doesn't work, you know it's a good idea to never ever take any action for granted.
Temporary vs. permanent tax laws: The biggest hurdle, at least before the election, was how long the laws would be in the Internal Revenue Code.
The Democratic tax-writing panel in the Senate wanted to extend the laws only through 2015. Meanwhile, the GOP-controlled House Ways and Means Committee (especially its departing chairman Rep. Dave Camp of Michigan, who also championed major tax reform) sought to make many of the expired provisions permanent.
"We're the only major industrialized company that has major components of our tax code operating temporarily," George Callas, majority staff director of the W&M Subcommittee on Select Revenue Measures told attendees at the KPMG Tax Institutes/Bloomberg BNA half-day conference on Nov. 6. "We wanted to reduce that because it wreaks havoc on business and families trying to plan, to make financial decisions."
It also wreaks havoc on Congress. When lawmakers have to constantly deal with the same tax laws over and over, added Callas, that limits the legislative time spent on "forward thinking, good tax policy to move the country forward."
Will there still be some insistence by the GOP on longer-term approaches to expired tax laws in this Congressional session's waning hours?
Just what is the level of Democratic support of permanence vs. temporary laws?
And just how much pressure will lobbyists be able to exert to gain support of their favorite provisions, especially since some of the members making decisions now will not be around next year?
We simply don't know yet.
Timing critical, practically and politically: Then there's the possibility that some could push for putting off the decision until the 114th Congress convenes.
Some Republicans, emboldened by midterm elections that gave them a new Senate majority and a larger House majority, reportedly are suggesting that consideration of the extenders (and other major laws) wait until January. The party then would be in a stronger position to get what it wants.
So a lot of things in addition to the laws themselves are in play.
It's possible a compromise of temporary, say three- to five-year extensions, and permanent provisions could pass. But that mix will take some time to work out.
And time is one thing that the lame duck lawmakers, the Internal Revenue Service and taxpayers have very little of right now. Every day that the extenders aren't dealt with one way or the other means a greater likelihood of a delayed 2015 tax filing season.
As Bette Davis' wonderful character in All About Eve might have advised if she'd been on Capitol Hill instead of Broadway, the best we can do right now is fasten our seat belts. The final few weeks of 2014 are going to be bumpy.
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