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.