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Monday December 22, 2014

Washington News

Washington Hotline

Bonus Depreciation Permanent Extender

On July 11, the House voted 258-160 to pass H.R. 4718. This bill will renew bonus depreciation and has permanent effect. This is now the fourth permanent extender bill that has been passed by the House. The Republican majority was joined by 34 Democratic representatives in a bipartisan vote.

House Ways and Means Committee Ranking Member Sander Levin (D-MI) continued to oppose passage of the permanent extenders. While Levin noted that he supports in concept many of the extenders, he observed that the cost of this extender was $287 billion over the next decade. Levin noted that this cost was not paid for through any tax increase. In addition, he observed that the intention of bonus depreciation was to be a temporary stimulus during a recession. If the temporary provision is made permanent, he believes that it will lose its effectiveness.

The House previously had passed extender bills to make permanent $500,000 in expensing of equipment for most companies, five-year built-in gains recognition for S corporations that previously were C corporations, the research credit and appreciated property charitable gifts from subchapter S corporations.

The House has pending seven other permanent extender bills that have passed the Ways and Means Committee.

Editor’s Note: The philanthropic sector hopes that the seven other potential tax extenders will pass the House during July. The charitable extenders that could be made permanent include the IRA charitable rollover, gifts up to April 15 of each year, enhanced deductions for gifts of apparently wholesome food, a simplified 1% excise tax on income of private foundations and enhanced charitable deductions for conservation easement gifts. House Republican leaders confirmed this week that they expect to schedule votes on these bills this summer. If the House does pass all 12 permanent extenders, then it will be in position in the November negotiations to seek either permanent passage or a longer duration (perhaps five years). The Senate is expected eventually to pass the EXPIRE Act of 2014 which extends 55 provisions for two years. The final tax extenders bill is expected by the end of November.

Keeping the Highway Bill on the Road


Both the House and Senate are facing an urgent deadline with respect to funding for infrastructure. Senate Finance Committee Chairman Ron Wyden (D-OR) stated this week, “With the Highway Trust Fund getting closer to running on fumes, Congress must get beyond the gridlock where each faction says, ‘It’s my way, or no highway.’”

Sen. Wyden and Ranking Member Senator Orrin Hatch (R-UT) announced a compromise on the Preserving America’s Transit and Highways (PATH) Act of 2014. The compromise plan will raise $10.8 billion over 10 years. The final funding date is not specified in the bill, but is anticipated to be through May of 2015.

The funding compromise received approval from Sen. Hatch. He stated, “Today’s proposal is a balanced and viable bill that addresses the immediate needs of the Highway Trust Fund. And while I had hoped our counterparts on the other side of the aisle would accept cuts to wasteful and low-priority spending as a way to pay for the bill, our proposal is nonetheless a bipartisan product forged by compromise. Moving forward, I am committed to addressing the chronic underfunding of the Highway Trust for the long term.”

The funding plan delays adjustments in pension funding interest rates, requires additional reporting on mortgage interest, allows withholding payments from Medicare providers with delinquent taxes and uses other technical changes to produce the $10.8 billion in revenue. Significantly, the Democratic plan to replace stretch IRA payments for children with a five year accelerated distribution was dropped from the final bill.

Editor’s Note: This bill shows how difficult it is for the House and Senate to pass legislation in the current political environment. The House bill will fund the highway program until May 31, 2015 and includes fairly similar revenue sources. However, it will be necessary for a conference committee to agree on the bill’s final language. The difficulty in passing this quite urgent legislation shows the challenges facing other provisions prior to the election. Given the current political situation, it is very likely that most major issues such as tax extenders will be deferred until after the November election.

Published July 11, 2014


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