Washington News

Congress is now in recess until after the November election. However, tax issues are still percolating in Washington.

The House Ways and Means Select Revenue Measures Subcommittee continues to work on a draft bill for tax extenders. Subcommittee Chair Patrick Tiberi (R-OH) has been polling all of the Republican members of the committee. He is attempting to determine the tax extenders that have the most "intensity of support" so that he can include them in the bill. Tiberi stated, "We have to start cutting the wheat from the chaff in the next month and a half."

Ways and Means Ranking Member Sander Levin (D-MI) is also discussing the tax extenders with the Democratic members of the committee. He is attempting to find out which tax extenders have the highest level of support.

Other Members of Congress are also promoting tax extenders. A bipartisan group of lawmakers from Texas, Washington, Nevada, Florida, Tennessee, South Dakota, Wyoming and Alaska sent a letter to Chairman Camp and Rep. Levin supporting the sales tax deduction. Because those states do not have an income tax, they emphasized the importance of permitting taxpayers in their states to deduct their state and local sales taxes. This provision would need to be included in the extenders because it lapsed on January 1, 2012.

Another group lobbied in favor of the state and local bond interest exemption. The National Association of Bond Lawyers published a paper that emphasized the importance of permitting states to issue bonds that are not taxable for federal purposes. If these bonds are not issued, there would be a substantially reduced ability for states and communities to improve roads, bridges and other infrastructure.

Editor's Note: These tax discussions will have significant impact on the extender bill and on tax reform in 2013. Because there is minimal time for committee hearings and debate during a lame duck session, the November bills are typically written by the leaders and then passed by Congress. It now seems very likely that only a partial list of tax extenders will be passed. While there is significant support for the IRA charitable rollover, it is still uncertain whether it will be passed. If the IRA charitable rollover is passed, it will be retroactive to January 1, 2012. Some donors are currently directing their IRA custodians to make transfers to charitable organizations. If the bill passes and retroactively enacts the IRA charitable rollover, these transfers will be qualified charitable distributions (QCDs). If the IRA rollover is not extended, then these donors will report the IRA distribution as income, but will qualify for a charitable deduction for the gift to charity.