Hearing leaves tax extenders still in limbo

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The House Ways and Means Committee in Congress held a hearing on Tuesday to discuss temporary tax provisions and the urgency of both currently expired provisions and those set to expire. According to the Joint Committee, there are 80 provisions set to expire between now and 2027, and around 29 provisions which have expired in 2017 or 2018.

Many of these provisions have been routinely extended and are often expected to be extended, including clean energy and energy efficiency incentives that have left taxpayers in limbo.

Although the hearing was set to discuss these temporary policies in the Internal Revenue Code, the discussion quickly turned political, with arguments from both sides about the value and impact of the Tax Cuts and Jobs Act and how it was enacted. The limited discussion about actual tax extenders led to a suggested outside third-party review to determine which provisions should be extended and which should end. However, it is unclear where this will go.

Provisions under consideration

The committee issued document JCX-8-19 outlining the provisions that have expired in 2017 and 2018, and those expiring in 2019. A brief list of these provisions include:

  • 45L (a $2,000 credit for the construction of new energy efficient homes);
  • 179D ($1.80 per square foot for energy-efficient commercial buildings);
  • 6426/6427 (incentives for alternative fuels);
  • Cost recovery provisions for horses, motorsports, Indian reservations property, and film production;
  • Excise taxes on beer, wine and distilled spirits;
  • Credit for health insurance costs;
  • New Market tax credit;
  • Work opportunity tax credit; and,
  • Qualified tuition deduction.

Witness statements

There was agreement from both Republicans and Democrats that the temporary and often retroactive nature of extenders is unhealthy and stunts the effectiveness of the provisions due to unpredictability.

Congressional members also agreed that tax extenders are positive when they promote good behavior in energy conservation, efficiency and investment in new technologies and job creation.

Witness testimonies included opinions from Chye-Ching Huang, director of federal fiscal policy at the Center on Budget and Policy Priorities, who believes the focus should be on restructuring the TCJA to prioritize low-income families, including a heightened focus on the Earned Income Tax Credit and the Child Tax Credit.

Kyle Pomerleau, chief economist and vice president of economic analysis at the Tax Foundation, highlighted the importance of stability, meaning temporary and retroactive tax laws should be avoided. And he pointed out the opportunity to evaluate different aspects of the law to make those that are worthy permanent.

Pam Olsen, U.S. deputy tax leader at Big Four firm PricewaterhouseCoopers, encouraged the committee to end the uncertainty that temporary tax provisions breed: Temporary tax provisions are supposed to be an effective tool to test the efficacy of a provision before making it permanent or to encourage or change a behavior, and should remain in effect for a sufficient period to demonstrate their effectiveness.”

The takeaway

With the 2018 tax filing season underway, many taxpayers and tax preparers are searching for updates on the status of these expired provisions, which have offered tax relief over the past decade to hundreds of thousands of individuals and businesses — many of whom are waiting for these extensions.

The Energy Policy Act of 2005 enacted provisions such as the 45L credit and 179D deduction, which have been extended five to seven times in the past 10 years. Unfortunately, the enactment of another extender bill in the new future is unclear, and the status of these expired provisions will keep taxpayers in limbo for the unforeseen future.

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Tax extenders Tax credits Tax deductions Ways and Means Committee