Extenders Clear the Senate

Although it’s not ideal and expires in just two weeks, we are glad to report that the tax extenders bill finally passed in the Senate last night by a 76-16 vote and is on its way to the President’s desk.

Among the 55 provisions included in the bill are the reduced five-year built-in gains holding period and the basis adjustment fix for charitable contributions. The package, however, is a one year retroactive extension of the expired provisions through 2014, and will therefore expire at year’s end.

Interestingly, Senate Finance Chairman Ron Wyden (D-OR) voted against the bill, as did Sen. Rob Portman (R-OH), highlighting the ridiculous nature of a one-year retroactive extension for tax policy. (The 16 “no” votes were a bipartisan affair: 8 members of each party opposed the bill.) Speaking last night, Chairman Wyden said:

“This tax bill doesn’t have the shelf life of a carton of eggs…the only new effects of this legislation apply to the next two weeks.”

Sen. Portman also took to the floor to vent his frustration:

“This is ridiculous because we’re not extending it beyond the tax year and by the time we get back here, it will already be expired for a week or two…it is a failure of Washington again to get its act together and do what should be done.”

That said, we are pleased our S-CORP provisions were included in the package and expect to pick up again next year, as the tax policy conversation will have an early start. Congress is now adjourned for the holidays and will start up again January 6th.

Our thanks go out to all our S-CORP champions, both on and off the Hill, for your continued commitment to the Main Street business cause. We hope that you have very happy holidays and we look forward to our work together in 2015!

 

Extenders in Play

Tax extenders have gone from the back bench to a starring role in recent weeks. The latest news is that the Ways and Means Committee will hold a markup next Tuesday where they will consider seven separate bills to make permanent certain extender items – including the built in gains tax relief provision and the basis adjustment for S corporation donations that were originally included in Chairman Camp’s tax reform discussion draft. According to our friends at Politico:

EXTENDERS BUZZ. Congress is back next week and the House Ways and Means Committee is kicking up its review of the only tax legislation with a prayer’s chance this year: tax extenders. A mark-up is expected on a batch of corporate breaks on Tuesday, according to lobbyists and others in-the-know. Potential first ups include those debated at the hearing earlier this month, such as the beloved R&D tax credit and the one for active financing income. 

The plan is for the Committee to pass these provisions out next Tuesday and then for the House to take them up later in May.

Meanwhile, on the Senate side the extenders picture is a little less clear. The Finance Committee reported out a much broader list of extenders prior to the Easter recess, and Majority Leader Reid has the legislation on a longer list of items he would like the Senate to take up in May, but exactly how that all happens is still a bit of a mystery.

The House strategy of moving permanent extensions of just six provisions (rather than the full extender package of 50-plus) accomplishes two goals important to them. First, by focusing on just those provisions in the discussion draft, it keeps the focus on their tax reform efforts, which is obviously a priority for the Chairman. Second, it gives them a “House Position” if and when they get into negotiations on extenders later this year. Last go around, there was no House bill, and they were forced to just accept the Finance-approved product. As you can imagine, they would like to avoid that outcome this time.

So there’s lots of work to be done and differences to close, but the headline here is progress is being made and the table appears to be set for more meaningful action, either sometime this summer or post-election. That’s good news indeed.

S-CORP Testifies on Built In Gains

Long-time S Corporation Association advisor Jim Redpath testified Tuesday before the Ways and Means Committee in support, among other items, of making permanent the 5-year recognition period for built in gains.

The hearing focused on making permanent a handful of so-called “extenders” that were part of Chairman Camp’s Discussion Draft released earlier this year, including the shorter built-in gains recognition period plus increased deductions for S corporations making charitable contributions.

Jim’s testimony, along with that of the four other witnesses, is available here.  You can watch Jim’s testimony by clicking below:

 

 

The hearing adds to the building momentum in Congress to act on extenders this year.  Just last week, the Senate Finance Committee reported out legislation that would extend nearly all the 50-plus tax provisions that expired at the end of 2013.  As with the Camp Draft, this package includes our BIG tax fix and the basis adjustment for charitable giving by S corporations.

S corporation provisions aside, however, the two packages are significantly different.  The Finance Committee package includes nearly all the expired provisions and extends them through the end of 2015.  The Camp package includes only seven provisions and makes them all permanent.

Their respective plans for moving forward are different as well.  Majority Leader Harry Reid (D-NV) has indicated he would like to consider extenders first thing when the Senate returns after Easter.  Meanwhile, Camp has made clear he intends to move individual provisions through his Committee and to the House floor, starting with legislation to make the higher limits on Section 179 expensing permanent, then the R&E tax credit, and then others.  His goal is to have a package of permanent House-passed provisions to compete with the broader, but temporary, Wyden package.

Given our druthers, we’d take permanent over temporary.  As Mr. Redpath testified Tuesday:

Although much better than the 10 year recognition period, the temporary extension results in tax motivated transactions as the expiration date approaches that may not be in the best interest of the company or its stakeholders.  Making the 5-year recognition period permanent would preserve the original intent of the 1986 Tax Act and provide S corporations stability and certainty, so they can make business decisions that are best for the company, its owners and stakeholders.

Either way, just having Congress take action on these expired provisions is a positive sign.  We’re hoping to see further progress soon.

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