by Dean Zerbe, National Managing Director at alliantgroup and Former Senior Counsel to the U.S. Senate Finance Committee
Apr 3, 2014
Today the Senate Finance Committee (where I was Senior Counsel and Tax Counsel for over 7 years) took the first key step on tax extenders – including the R&D Tax Credit and the Energy Efficient Commercial Building Deduction (Section 179D) – by passing out a tax extenders bill with good bipartisan support.
R&D Tax Credit – In!
alliantgroup has been predicting for a long time that we expected the Congress to extend R&D and do it without a break (seamless) – and that is exactly what has happened. The extension is retroactive to when it expired and runs until December 31, 2015.
Expansions of R&D Tax Credit!!
Holy smokes. The Finance Committee agreed to an amendment by Senators Schumer (D-NY) and Roberts (R-KS) (who spoke at an alliantgroup thinktank), as well as a number of other Senators that, in effect, makes the R&D tax credit refundable (although capped). It allows a company to take a credit of up to $250,000 against the payroll taxes the company pays on its employee wages. The benefit is available for companies that have existed for less than five years (targeting this benefit for startups) and that have less than $5 million dollars in annual gross receipts.
If that wasn’t enough -The Finance Committee also agreed to an amendment championed by Senators Grassley (R-IA) and Roberts (included in the Schumer-Roberts amendment) that allows companies to take the R&D credit against their AMT. This is basically what the Senate passed in 2010 and has now brought back a tremendous benefit to a large number of alliantgroup’s partner companies.
We also anticipate that the Senate report language will include a strong signal to the Treasury to change the regulations to allow companies to take the Alternative Simplified Credit (ASC) on amended returns – something of key importance to many alliantgroup clients.
It’s a hat trick
Section 179D – In!!!
Section 179D was also included – thanks in large part to a number of Senators, and especially Senator Cardin’s (D-MD) efforts and the efforts of our partner, the American Institute of Architects (AIA), as well as alliantgroup itself helping pull the oars. Section 179D was extended to December 31, 2015, and is also retroactive to the date it expired.
Expansion of Section 179D!!!!
Section 179D was not only extended, but starting in 2013 Section 179D is expanded so that buildings owned by charities (IRC 501(c)(3)) and tribal governments can also allocate the 179D benefits to the building designers (just like government entities can currently). The Committee also updated the standards for 179D – starting in 2015 the base is the 2007 ASHRAE standards.
What is next?
The Senate Finance Committee is the vital starting point for extenders. The extenders bill will now to go to the Senate floor for consideration. It is strongly anticipated that the Senate will give a heavy vote in favor of the extenders bill – signaled by the good bipartisan vote of final passage in the Finance Committee. At the moment, it’s uncertain when the Senate will take up the extenders bill (this has to do with bigger issues of managing the Senate floor) – but it will be considered – Leaders Reid (D-NV) and McConnell (R-KY) have both indicated solid support for an extenders bill. My early sense is that extenders will be taken up by the Senate no later than this Summer – and more likely sooner.
The House Ways and Means Committee is now talking about extenders –switching from tax reform. At this time, it’s hard to see a path where the House Ways and Means Committee will actually markup a bill on extenders(they haven’t in the recent past either). A more likely scenario is that the Senate will pass the tax extenders bill and the Senate version serves as the starting point (or the final point) for an extenders bill that will be passed into law in the lame duck session, that is, post elections (there is still a fair chance it could happen before the elections). This scenario, whether before or after the election, is exactly what happened the last time Congress passed extenders (Senate Finance Committee marks up, approved by Senate and House accepts). Regardless of when the extenders passage is signed into law, it will still be seamless – applying retroactively to December 31, 2013.
Why all this good news? In no small part this has occurred due to the scores of alliantgroup partner CPA firms and businesses reaching out and contacting their elected officials on the importance of these provisions. It matters. The Senate Finance Committee listened – but it’s important that we continue to make our voices heard on these important provisions during the rest of the legislative journey.
Make sure you thank your Senators for supporting these changes – especially Senators Schumer, Roberts, Cardin, Grassley, Enzi (R-WY), Cantwell (D-WA), Warner(D-VA), Stabenow (D-MI)– and of course Chairman Wyden(D-OR). It is key to let your Members of Congress to also know that you support these tax extenders AND these critical new improvements and expansions to R&D and 179D that will help so many small and medium businesses create jobs across this country.
About the Author
Dean Zerbe is alliantgroup’s National Managing Director based in the firm’s Washington, D.C. office. Prior to joining alliantgroup, Zerbe was Senior Counsel and Tax Counsel to the U.S. Senate Committee on Finance. He worked closely with then-Chairman of the Finance Committee, Senator Charles Grassley, on tax legislation. During his tenure on the Finance Committee, Zerbe was intimately involved with nearly every major piece of tax legislation that was signed into law, including the 2001 and 2003 tax reconciliation bills, the JOBS bill in 2004 (corporate tax reform) and the Pension Protection Act.