Tax Extenders Set to Expire
It’s the time of year to again start thinking about expiring tax provisions. Usually the first thing that comes to mind is the alternative minimum tax, but this particular issue was “fixed” in January of this year by the fiscal cliff bill. That still leaves a number of expiring provisions, according to Robert Kerr, senior director of government relations at the National Association of Enrolled Agents.
Among them, Kerr noted, are the deduction for state and local sales taxes; the deduction for mortgage insurance as qualified interest; the above-the-line deduction for qualified tuition and related expenses; the above-the-line deduction for certain expenses of elementary and secondary school teachers; the Work Opportunity Tax Credit; the increase in expensing and the expansion of the definition of Section 179 property; the Research and Experimentation Tax Credit; and the 15-year straight line cost recovery for qualified leasehold, restaurant and retail improvements.
Every year the alternative minimum tax was at the head of the list of things that needed fixing, observed Kerr. “Each year that we didn’t have a fix, we had a growing number of people on the AMT bubble. It created a whale tail’ when you paid for the patch. Since the increase in cost to pay for the patch wasn’t linear, it was exponential. It didn’t grow gently. Probably the piece that got our attention was there were some 20 million potentially affected out of the total population of taxpayers.”
There are a number of reasons that less attention is being paid this year to the extenders, Kerr indicated. “One reason is that AMT is no longer the engine that drives the extender train,” he said. The other is the overall legislative environment this year—the budget, the sequester, the shutdown, and talk of tax reform. At least the Ways and Means Committee had visions of managing the extenders within the context of tax reform.”
“The net is that we’re sitting here with 10 legislative days left in the year, and we don’t have any word on the extenders except for the notion that they will be included in the El Dorado of tax reform,” he said. “My take on that is tax professionals desire stability and predictability above all else, and the current state of affairs on extenders provides us with neither.”
Will Congress act before the end of the year to extend some or most of these? Will they all expire, only to be resurrected retroactively during the filing season—or in 2015? Or will they just expire, period?
“None of us should be surprised if we find ourselves in precisely the same situation as at the beginning of 2013, and proceed all the way through 2014 without knowing which ones will be retroactively extended,” said Kerr.