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TAX EXTENDERS UPDATE


Lee B

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Copied from Tax Pro Today:

 

Expired tax breaks

 
Approximately 30 tax breaks that had been given short-term extensions over a number of years expired at the end of 2017. There had been some debate as to whether those tax breaks would continue after the Tax Cuts and Jobs Act, but Congress extended them through 2017 in early 2018, resulting in some need to revise software systems and tax forms for the 2017 tax return filing season. Congress is again considering what to do with those expired provisions well after their expiration. The initial proposal had been to extend them retroactively for 2018 and preserve them for 2019. As time passes without enactment, however, the chances increase that many of those expired provisions will not be extended. Another issue that may push some of the tax breaks to the sidelines is that Democrats would prefer that any extension be paid for, but offsetting revenue-raisers appear to be in short supply. Besides a few individual tax breaks, most of the expired provisions relate to energy or to specific industries. Democrats have been working on a more simplified structure for energy tax breaks, focused on renewable energy, and that initiative might replace many of the energy-related expired tax breaks.

Lobbying activity continues in an effort to restore a number of these tax breaks, including credits for biodiesel and railroad track maintenance, but, as time passes without action, the number of expired provisions likely to receive retroactive extension, or any extension at all, continues to diminish.
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32 minutes ago, JimTaxes said:

I have a list of clients to amend for energy credits, etc.. at this point I hope they extend them but not retroactively as now sure how billing for the amendments sounds 

Why wouldn't you charge for amendments, unless the amendment is your fault ?

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10 hours ago, cbslee said:

Why wouldn't you charge for amendments, unless the amendment is your fault ?

Because many of these effects are so minimal they wouldn't even pay the cost of preparation.  Residential energy credits, excluding exotic things like geothermal, are limited to $500, but the preparer has to examine all previous credits dating back to 2007.  Speaking only for myself, most of my long-time customers who would upgrade for energy have used up their credits long ago.

Reviving some of these credits would help a small percentage of energy-conscious taxpayers because of prior usage.

Being conservative, I do worry about the huge deficit.  I wish some of these lobbyists fighting for these goodies would figure out a way to pay for them.  Not partisan political here, each party is as bad as the other re: spending.

 

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11 hours ago, Edsel said:

... many of these effects are so minimal they wouldn't even pay the cost of preparation.  Residential energy credits...are limited to $500, but the preparer has to examine all previous credits dating back to 2007...most of my long-time customers...have used up their credits long ago.

Exactly right.  The original credit (long ago) was pretty good, but over the years they've cut it down so much and the cumulative ceiling has limited tax savings so much that it just isn't worth the trouble and we can't charge enough to justify the research involved.   

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Copied from Tax Pro Today:

In the first step of what could be a lengthy process, the House Ways and Means Committee voted 25-17 on June 20, 2019, to advance the tax extenders bill, which would temporarily extend a number of tax breaks that expired at the end of 2017 and 2018, or that will expire at the end of 2019.

“These extender provisions have been in the Tax Code for many years, and Congress has continued to extend them,” said Jorge Castro, former senior advisor to the IRS commissioner and currently a member of the tax practice at law firm Miller & Chevalier. “They haven’t been made permanent, but they are a group of different provisions that have diverse constituencies that care about them,” he said. “For example, it includes tax benefits for tuition expenses, and a mine rescue team training credit. This was in response to a coal mining tragedy in West Virginia in 2006, and covers training program costs for mine rescue team employees.”

“Other incentives in the extenders include provisions for the renewable energy sector, the New Markets Tax Credit for economic development, and the Work Opportunity Tax Credit,” he said. “The point it that it’s a large package that has a lot of constituencies that care about these tax provisions. Most of these provisions have been expired for a year and a half, so they will be retroactively extended back to Jan. 1, 2018. This package will not be made permanent, but the hope is that Congress at some point in the future will try to address them permanently.”

“Different provisions are important to different sectors, which is why the package currently has momentum,” he said. “It is generally bipartisan and bicameral, but the different chambers will disagree on how to enact it. Senate Finance Committee Chairman [Charles] Grassley and ranking member [Ron] Wyden have a clean extension -- just the extenders with nothing added. However, the bill that the House Ways and Means Committee marked up makes some changes, with which Republicans generally are not in favor.”

Specifically, the Ways and Means bill contains an offset to the extenders. It would “pay for” the extenders by accelerating the expiration of the higher estate tax exemption levels from 2025 to 2022. (Under the Tax Cuts and Jobs Act, the exemption increased from $5.5 million to $11 million for individuals, and from $11 million to $22 million for couples.

“This is obviously just a first step in many important steps,” said Castro. “Senate Republicans have raised objections to the changes the House bill would make to the estate tax -- that’s just part of the negotiations,’ he said. “And [Ways & Means Chair Richard] Neal, on the House side, is under pressure to make this package fully paid for with revenue offsets so it will be a point of contention between the House and the Senate. Neal made the comment that they would look for more offsets by the time the bill hits the floor of the House.””

Although the markup is complete, the timeline is fluid, according to Castro. “The provisions have already expired, so there’s an urgency on that end to pass the legislation,”he said. “I can see this play out over the next several months, and possibly into the fall.”

And the possibility that the package may pass in late fall is one more complicating factor facing practitioners as they prepare for the filing season

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Mr. Lee's  message tells the story of why we can't get rid of complications and cryptic deductions/credits in the tax code.  There are too many vested interests competing with each other to accomplish true tax simplification.  To amplify their case, some of them attach to the heart strings of people who follow the six o' clock news (like the coal mine disaster mentioned), when much of the tax benefit has already been used up.

It matters not to congress that we as practitioners are in the cross-hairs of the complications.  Perhaps we need to become yet another "vested interest."

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