Skip to Local Navigation
Skip to Content
California State University, Long Beach
Print this pageAdd this page to your favoritesSelect a font sizeSelect a small fontSelect a medium fontSelect a large font
 
Text Resize
Sunday October 26, 2014

Washington News

Washington Hotline

Highway Bill Still in Park

The Senate Finance Committee scheduled a hearing on June 26 to mark up the Preserving America’s Transit and Highways Act of 2014. However, Senate Finance Committee Chairman Ron Wyden (D-OR) postponed the hearing to permit taxwriters from the House and Senate to work on a bipartisan agreement. The highway bill must be passed by August to continue federally-funded transportation projects.

Senator Wyden noted that the bill should include new compliance provisions that will raise revenue. He stated, “Rather than raising taxes the legislation includes measures designed to boost tax compliance – to make sure that those who owe taxes pay them. And it also includes measures that the committee has passed in previous years on bipartisan votes.”

There are multiple provisions in the bill designed to raise revenue. First, there is an added tax on heavy vehicles weighing more than 97,000 lbs. Second, the bill adopts a proposal that has been previously made to require IRA distributions to children within a term of five years.

Under current law, most children who are designated beneficiaries of an IRA are permitted to take a “stretch” distribution over their life expectancy. For example, a daughter age 59 who is the designated beneficiary on her mother’s IRA may take distributions from age 60 through age 87. The distributions start at approximately 4% and increase over her lifetime until the IRA is fully distributed. While the daughter may take more rapid distributions, many children wisely will use the stretch provisions to benefit from tax-free growth inside the traditional IRA during their life expectancy.

Under the five year distribution provision (also previously proposed in other bills), the daughter would take distributions from age 60 to age 64. These larger distributions from a traditional IRA would result in higher income taxes. Some annuity contracts that have commenced payments prior to the demise of the owner would be grandfathered under the bill.

Ranking Member Orrin Hatch (R-UT) was pleased that Chairman Wyden chose to pursue a bipartisan bill. He stated, “We have to get it right when it comes to funding the highway trust fund, and that means working in a bipartisan and bicameral manner to create a bill that is acceptable to both sides and both chambers. This means real cuts to wasteful and low-priority spending must be included.”

Chairman Wyden and Senator Hatch plan to work with House Ways and Means Committee Chairman Dave Camp (R-MI) during the Fourth of July holiday to develop a compromise bill. Hatch has suggested that revenue from reduced electric vehicle credits and expanded oil and gas production could provide sufficient funding.

The House Democratic revenue preference is substantially different. House Budget Committee Ranking Minority Member Chris Van Hollen (D-MD) stated, “The Highway Trust Fund will start running dry in August if we fail to act, threatening hundreds of thousands of jobs. By curbing corporate expatriations, we can put people to work and boost our economy at a critical moment in our recovery.” Van Hollen referred to proposed bills by House Democrats that would penalize major public corporations who move their headquarters overseas to reduce their U.S. taxes.

Editor’s Note: The construction industry very much hopes that House and Senate negotiators will come to an agreement over the July 4th holiday. The final bill must be passed by August to avoid loss of thousands of construction jobs. While the five year IRA distribution plan may not be in the final bill, it now is likely to be presented as a tax offset in future legislation and may be passed at some point.

Published June 27, 2014


Previous Articles

Gas Tax for Highway Trust Fund?

New Taxpayer Bill of Rights

IRS Tips for Disaster Response

IRA Rollover and Tax Extenders

Permanent Charitable Tax Extenders Markup

scriptsknown
If you have trouble accessing this website please call 562-985-5489.
eNewsletter Sign-Up
Workshop and Events
Learn different ways to make a gift
Find out different types of assets to give