Elections Will Decide Direction of Year-End Tax Package

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By Kaustuv Basu and Aaron E. Lorenzo

Sept. 28 — A clearer picture of legislation that will make up a year-end tax package will emerge only after the elections, even as interested lawmakers try to set the table for possibilities in a lame-duck session.

If Republicans control both chambers and Donald Trump wins the presidency, a tax bill could slip into 2017, lawmakers, lobbyists and congressional tax aides told Bloomberg BNA.

An election night ending with a Hillary Clinton win or Democrats taking back the Senate could set the stage for a year-end deal including measures giving tax breaks to employees at startups and renewable energy companies.

“It all depends on what happens Nov. 8 and we should probably finish this conversation on Nov. 9,” said Sen. Dean Heller (R-Nev.), who, along with Senate Finance Committee ranking member Ron Wyden (D-Ore.), has been pushing renewable energy tax credits to spur investment in wind, geothermal and fuel cells that weren't included in the Protecting Americans from Tax Hikes (PATH) Act of 2015.

But the prospect of renewing other temporary tax provisions expiring at the end of the year remains up in the air. This includes the empowerment zone tax incentive, which gives tax benefits such as tax-exempt bonds to employers operating in economically distressed areas, and the railroad track maintenance credit, which provides a credit on expenditures incurred for maintaining railroads.

Temporary Provisions

House Majority Leader Kevin McCarthy (R-Calif.) and Minority Leader Nancy Pelosi (D-Calif.) raised the possibility in recent days that the temporary tax provisions, known as extenders, could be renewed during a lame-duck session (187 DTR G-5, 9/27/16).

It remains to be seen whether House Ways and Means Committee Chairman Kevin Brady (R-Texas) will come around to the idea.

Brady has said repeatedly that he is against extending the nearly two dozen tax provisions this year. Recent history is in Brady’s favor.

Congress has typically extended the temporary tax provisions retroactively, and this means they would have another year to renew the two-year provisions.

If Brady has his way, they would be considered within the context of a broader tax overhaul.

“No extenders,” Brady told Bloomberg BNA when asked about the possibility of extenders action at the end of the year.

But he remains open to acting on other tax measures. “We are hopeful that we can move permanent stand-alone tax provisions in November. It all depends on the schedule,” Brady said.

Mike Greenwald, a partner at Friedman LLP, said that if Brady sees an opportunity in the near future to work on any significant tax overhaul package, he might be more willing to dig in his heels. “If he looks around and sees division between the White House, the House and the Senate, he might let a few things go now where progress needs to be made,” Greenwald said.

All Eyes on Brady

There is a clamor among lawmakers, including Ways and Means members, to advance smaller tax measures. Brady attempted to appease some members with a markup of smaller tax bills this month.

But they want more.

Rep. James B. Renacci (R-Ohio), a Ways and Means member, said several stand-alone tax bills that don't fit in the extender category deserve attention. “While we are here, we might as well consider some of them,” he said.

Legislation that could get passed late in the year includes a bill to defer taxes on stock options paid to start-up employees (H.R. 5719) and another to limit Internal Revenue Service asset seizure authority (H.R. 5523). The bills, sponsored by two Ways and Means members, Reps. Erik Paulsen (R-Minn.) and Peter Roskam (R-Ill.), respectively, both have Senate companions and momentum.

“Those are good policies. They’re permanent. We wouldn’t have moved them out, and certainly not off the House floor, if we didn’t think they have merit,” Brady said.

There is also bipartisan support for the clean energy tax credits that seek to increase investment in geothermal, fiber-optic solar energy, fuel cell and small wind energy machinery. Those credits expire at the end of the year, and Wyden has repeatedly said that he will use “every opportunity” to extend them.

In addition, Rep. Charles Boustany (R-La.) of Ways and Means plans to push a bill during the lame-duck session that would authorize tax credits related to flood damage in his state.

The Ways and Means Committee this month marked up measures extending tax credits for new nuclear reactors (H.R. 5879) and a bill (H.R. 5406) authorizing a tax break to recruit doctors and other medical staff to Indian reservations by making an existing student loan repayment program tax free (184 DTR G-8, 9/22/16).

Another bill (H.R. 5204) advanced by the committee would eliminate taxes on students loans that have been forgiven because of death and disability.

With assistance from Laura Davison in Washington.

To contact the reporters on this story: Kaustuv Basu in Washington at kbasu@bna.com and Aaron E. Lorenzo in Washington at aaron@bna.com

To contact the editor responsible for this story: Meg Shreve at mshreve@bna.com

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