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Nov. 27 — Despite promises from lawmakers this time would be different, businesses are faced with another year-end waiting game on renewing the dozens of expired tax breaks collectively known as extenders.
For contractors like the Columbus, Kansas-based Crossland Construction Company, Inc., that's adding up to another year where the company won't know what its ultimate tax bill will be until Congress ushers through another down-to-the-wire bill renewing the breaks, which expired at the beginning of the year.
“For us, these are proven and necessary deductions,” David Allison, chief administrative officer at Crossland, said. “It is a timing issue, and where the economy is still in the one percent to two percent range, it's not time to back off.”
Crossland is in the same position as thousands of other companies for whom the end-of-year fretting over extenders has become an annual ritual as familiar as mistletoe and mall Santas. And while Capitol Hill talks are continuing on a longer-term fix, no deal is close with three working weeks left in 2015 and a host of other legislative deadlines approaching.
Allison—whose company employs 1,100 people and brings in about $750 million in annual revenue—said that Crossland is waiting to hear the fate of Section 179 business expensing for the purchase of new equipment and the Section 179D deduction for building energy-efficient government buildings, among others.
It's not just Allison that's feeling the heat.
A group of 28 construction organizations sent a letter to House and Senate leadership Nov. 24 calling on them to reinstate the 50 percent bonus depreciation and create higher Section 179 expensing levels. At the beginning of the year, the extenders provisions maintaining a 50 percent depreciation bonus expired. Higher Section 179 expensing levels expired as well, causing a drop from $500,000 with a $2 million phase-out cap to $25,000 with a $200,000 limit.
The group urged Congress to pass an extenders bill quickly.
“Given that the end of 2015 is less than six weeks away and businesses are trying to make year-end financial plans, Congress must provide tax certainty,” the letter said.
Telecom company CenturyLink also penned a letter to leadership asking them to back an effort to make permanent the bonus depreciation provision.
“Failure to act will lead to a spike on our company's tax obligations, which will slow the pace of investment and draw resources away from jobs at a time when the economy is again facing challenges,” CenturyLink's Nov. 18 letter said.
Throughout 2015, top tax writers told businesses that Congress would finish an extenders renewal early in the year so businesses could plan accordingly (176 DTR G-4, 9/11/15).
“We want to do this early,” former House Ways and Mean Chairman Paul D. Ryan (R-Wis.) said July 9. “I would love nothing more than to come back from August recess with, basically, a plan in place to enact in September. In the House I feel like we could do that.”
And they tried. In July, the Senate Finance Committee approved a two-year renewal of most extenders. Throughout most of 2015, the House has passed a series of bills making permanent individual breaks, such as the research and development credit and Section 179 expensing ((138 DTR G-2, 7/20/15).
But so far, that is as far as the legislative process has advanced. When newly minted Ways and Mean Chairman Kevin Brady (R-Texas) took the gavel in early November, he followed he predecessor Ryan's tack, pushing to make a select few extenders permanent.
Brady and Senate Finance Committee Chairman Orrin G. Hatch's (R-Utah) staffers have been in talks on an outline making a few provisions permanent with a multi-year renewal for most. But there is nothing even tentative yet, a Senate Democrat aide said.
“I think it's difficult; there's a lot of desire to do more than just a simple extension,” Carolyn Lee, senior director of tax policy at the National Association of Manufacturers, said.
For much of the year, tax writers focused on code overhaul efforts such as the Senate working groups, which released their findings in July. That may have contributed to the late work on extenders, Lee said.
Still, Lee holds out hope that Congress can reach a substantial deal soon so lawmakers can move on the rest of the tax code.
“We need tax extenders as a bridge to tax reform,” Lee said. “Tax reform is where it's all heading to. We need the extenders taken care of so we can focus on the real goal here.”
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