I haven’t sent an update on Congress and taxes in a while because . . . well, there hasn’t been that much going on in Washington in the world of taxes. However, with filing season upon us and the beginning of the end of this congressional session, I thought it might be useful to give you and your clients a view of the road ahead.
Tax extenders are the closest to a sure thing that is going to happen in taxes right now. I don’t expect Congress to take extenders up in the few weeks they will be in session in September (and then breaking early to go back for the elections) but the smart money is strongly expecting tax extenders to be addressed in the lame duck session (regardless of the election results).
While there is still a fair amount of uncertainty, the general talk on Capitol Hill is that the deal on tax extenders will be to take the Senate Finance Committee bill on extenders for two years (going back to January 1, 2014) with possibly an agreement to take a few of the House proposals to make some extenders permanent (R&D probably being one of them). As a reminder, the Senate proposal includes an expansion of eligibility/utilization of R&D (with the AMT turnoff that alliantgroup has been championing), the creation of a refundable R&D Tax Credit for start-ups and an expansion of 179D (energy efficient commercial buildings) to allow charities and Indian tribes to allocate the tax benefits to the designer. Hopefully these changes (good starting January 1, 2014) will make it through the agreement on extenders.
One of the best pieces of news on taxes came not from Congress but from Treasury – with Treasury changing its regulations this summer (after a lot of drum beating by alliantgroup and friends of small businesses on the Hill) to allow the Alternative Simplified R&D Tax Credit (ASC) to be taken on amended returns. It’s nice to see this commonsense rule put in place that will benefit many small and medium businesses.
Inversions – expect a steady drumbeat on the Hill about inversions before the elections and there seems to be a growing view that the administration will seek a partial fix for inversions through regulation. A statutory fix – if any – is a next year activity.
Tax Reform – nothing this year but there is a growing view that there might be some type of tax reform in the next year. Tax reform (or at least parts of it) is one of the few things that the administration may be able to find some agreement with Congress (especially if the Republicans control both the House and the Senate). The thinking is that rather than seeing sweeping tax reform (ala the proposal of Chairman Camp) that any tax reform may be more small ball – for example, on international tax (and deal with inversions), education or limited corporate tax reform. I’ve found that being pessimistic about tax reform happening has been a winning bet for several years running – but I do think that rather than a 0-5% chance of reform happening (especially with the inversion issue) – perhaps more like a 15% chance of some kind of tax reform in the next session.
I wish you a joyous filing season and please feel free to contact me by phone at 713.877.9600 or email at [email protected].