Budget deal revives dozens of expired tax breaks for 2017

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The bipartisan budget deal signed into law Friday by President Trump contains 36 tax extenders that had expired at the end of 2016 and makes them retroactive to 2017.

The deal includes many tax breaks for industries such as motorsports, horse racing, renewable energy, rum, and movie, TV and theater production (see Tax extenders added to bipartisan budget deal). The tax breaks are traditionally extended every year for only a year or two by Congress so as not to add more to the ballooning budget deficit, although that seemed to change in 2015. Many were made permanent such as the research and development tax credit in the appropriations legislation that Congress passed at the end of 2015, and then again last December in the Tax Cuts and Jobs Act of 2017. Dozens of tax extenders were left out of last December’s tax overhaul. However, Washington insiders had anticipated the remaining tax extenders could eventually be revived as part of the continuing resolution that has been used to fund the government in order to draw more support from lawmakers on both sides of the aisle (see Congress isn’t quite done with taxes yet). The cost is estimated to be $15 billion.

A list of the 36 is available on the Tax Foundation’s website. Most can only be claimed for 2017, although some are set to phase out in 2022. On the energy side, they include tax credits for qualified fuel cell motor vehicles and alternative fuel vehicle refueling property, for two-wheeled plug-in electric vehicles, for biodiesel and renewable diesel incentives, and for energy-efficient homes. The deal also extends energy efficient commercial buildings deduction and excise tax credits relating to alternative fuels, along with other energy-related tax breaks.

On the individual side, the deal also extends for 2017 the above-the-line deduction for qualified tuition and related expenses, as well as the treatment of mortgage insurance premiums as qualified residence interest, and the extension of the exclusion from gross income of discharge of qualified principal residence interest.

Miscellaneous provisions for 2017 include an extension of the Indian employment credit, the railroad track maintenance credit, the classification of certain race horses as three-year property, the seven-year recovery period for motorsports entertainment complexes, the deduction for income attributable domestic production activities in Puerto Rico (such as Puerto Rican rum), empowerment zone tax incentives, the American Samoa economic development credit, accelerated depreciation for business property on an Indian reservation, special expensing rules for certain productions, the election to expense mine safety equipment, along with other tax breaks.

The budget deal doesn’t directly provide additional funding for the Internal Revenue Service, according to the National Treasury Employees Union, which represents IRS employees, although Congress is likely to appropriate extra funds for implementing the new tax law in the near future. The statement of principles accompanying the budget agreement includes support for additional IRS funding in the fiscal year 2018, but the NTEU pointed out that the agency needs supplemental funding now in order to handle the expanded workload and pay for technology upgrades. The administration has requested $90 million of the IRS’s $397 million cost estimate for implementation of the new tax law.

“However, we are disappointed that the agreement does not include an immediate funding increase for the Internal Revenue Service, which is currently in the middle of the filing season and implementation of the most sweeping tax reforms in 30 years,” said NTEU national president Tony Reardon in a statement.

The IRS said Friday in an email to tax professionals it is reviewing the retroactive extender provisions and plans to provide additional information for taxpayers and the tax community: “The IRS is reviewing the legislation signed Feb. 9 that retroactively extended and modified numerous tax provisions covering 2017. We are assessing these significant changes in the tax law and beginning to determine next steps. The IRS will provide additional information as quickly as possible for affected taxpayers and the tax community.”

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Tax extenders Tax breaks Bipartisan Budget Act of 2015 Trump tax plan Finance, investment and tax-related legislation Tax credits