Tax Update (November 25)
Democrats Green Extenders Package Takes Shape
On Tuesday (Nov. 19), House Ways and Means Democrats rolled out a plan to extend a variety of expired renewable energy tax breaks, create new ones, and expand others. House Ways and Means Chairman Richard Neal (D-MA) and Senate Finance Chairman Chuck Grassley (R-IA) met Wednesday (Nov. 20) and both emerged from the meeting feeling optimistic about reaching a year-end deal. House Ways and Means Ranking Member Kevin Brady (R-TX) also said that some of the provisions of the package could be included as part of a deal before the end of the year. A majority of the provisions in the draft have at least some degree of bipartisan support, but both parties are working to keep a year-end extenders deal focused so that it does not “collapse under its own weight.” The discussion draft includes extensions of the Production Tax Credit, the Income Tax Credit, and the Investment Tax Credit, all of which aim to incentivize the use of clean energy. To see a full section by section description of the draft, click here. To see the full discussion draft, click here.
Year-end Extenders Deal
Discussions among the “Big 4” – chairs and ranking members on House Ways & Means and Senate Finance – on a year-end extenders package are proceeding but not making great progress, according to staffers on both sides of the aisle and Hill. Democrats are dead-set against technicals corrections to the Tax Cuts and Jobs Act of 2017 (TCJA) unless Republicans agree to unspecified modifications to it. The House-passed tax extender package included $100B in refundable child tax credits, as well a revenue-raiser in the estate tax, which is a non-starter for Senate Republicans, but presumably Democrats want to exact a high price for technicals. Democrats are also wanting Republicans to add some of the new “green energy” package provisions and have noted that EV’s, off-shore wind and energy storage are key priorities. Other elements of a package could be:
- Health extenders. A repeal of the Cadillac Tax (a 40 percent tax on employer provided health insurance plans that cost more than $11,200 per year for an individual policy or $30,150 for family coverage), the medical device tax delay, and another Health Insurance Tax (HIT) delay will likely be included (although the HIT has already been built into health insurance rates for 2020, so they may simply go to 2021). Other non-tax health extenders dealing with Medicare were included in the just-passed continuing resolution (CR), but only for a month.
- Extenders set to expire in 2019. The Work Opportunity Tax Credit (WOTC), New Markets Tax Credit, and the Controlled Foreign Corporation (CFC) Look-Through Rule are under consideration.
- The “real estate glitch” that prevents investments in qualified improvement property (QIP) from qualifying for bonus depreciation will, is a high priority for retailers.
A vote on the state and local tax deduction cap is possible in the House before Christmas, but the outlines of the proposal are yet unspecified. However, reports are indicating that it will not be a repeal given the skewing of benefits to high-income taxpayers in coastal, high-tax states.
 Koss, Geof. “Green-tinged extenders package ‘not even in doubt.’” E&E Daily, 22 Nov. 2019. https://www.eenews.net/eedaily/2019/11/22/stories/1061611977