Tax extenders and health items included

On February 7, 2018, Senate leaders released the legislative text of the Bipartisan Budget Act of 2018 to increase both defense and non-defense spending caps for the remainder of FY 2018 and for FY 2019, suspend the federal debt limit until March 2019, extend certain tax extender provisions, fund $20 billion in infrastructure investment, provide disaster relief and address a number of health care items.

The agreement, announced earlier by Senate Majority Leader Mitch McConnell (R-KY) and Democratic Leader Chuck Schumer (D-NY), includes a continuing resolution that funds the government at current levels through March 23, 2018, allowing time for the Appropriations committees to negotiate detailed appropriations for the remainder of FY 2018. It is anticipated that by that date, Congress will process an omnibus appropriations bill that could also address other priorities.

The Senate is expected to amend the CR previously approved by the House — which would have provided funding for most of the government through March 23 and the Department of Defense through the end of FY 2018 — with language reflecting the Bipartisan Budget Act. Senate leaders plan to process the bill on February 8 and send it back to the House for a vote before government funding expires at midnight.

The Budget Control Act sequester had set 2018 discretionary spending limits at $549 billion for defense and $516 billion for non-defense. The bill would increase defense spending by $80 billion for FY 2018, to $629 billion; and by $85 billion for FY 2019, to $647 billion. Non-defense spending would be increased by $63 billion for FY 2018, to $579 billion; and by $68 billion for FY 2019, to $597 billion.

The bill lifts the debt limit through March 1, 2019. It also provides almost $90 billion in emergency supplemental appropriations for disaster relief efforts for communities crippled by hurricanes in Puerto Rico, the U.S. Virgin Islands, Florida, and Texas. Relief is also provided to those affected by California wildfires.

House Speaker Paul Ryan (R-WI) highlighted the agreement's establishment of a bipartisan, bicameral super committee on budget process reform, and Senator Schumer announced the creation of a Joint Select Committee to Solve the Multiemployer Pension Crisis to report a legislative fix for the issue by December 2018.

Tax provisions

Tax extender provisions that would be generally extended for one year, for 2017, under the bill include:

— Exclusion from gross income of discharge of qualified principal residence indebtedness
— Mortgage insurance premiums treated as qualified residence interest
— Above-the-line deduction for qualified tuition/related expenses
— Indian employment tax credit
— Railroad track maintenance credit
— Mine rescue team training credit
— Classification of certain race horses as 3-year property
— 7-year recovery period for motorsports entertainment complexes
— Accelerated depreciation for business property on an Indian Reservation
— Election to expense mine safety equipment
— Special expensing rules for certain productions
— Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico
— Special rule on qualified timber gain
— Empowerment Zone tax incentives
— American Samoa Economic Development Credit
— Credit for nonbusiness energy property
— Credit for new qualified fuel cell motor vehicles
— Credit for alternative fuel vehicle refueling property
— Credit for 2-wheeled plug-in electric vehicles
— Second generation biofuel producer credit
— Biodiesel and renewable diesel incentives
— Production credit for Indian coal facilities
— Credits with respect to facilities producing energy from certain renewable resources
— Credit for energy-efficient new homes
— Special allowance for second generation biofuel plant property
— Energy efficient commercial buildings deduction
— Special rule for sales or dispositions to implement FERC or state electric restructuring policy for qualified electric utilities
— Excise tax credits relating to alternative fuels

The bill also includes an extension of the Oil Spill Liability Trust Fund financing rate, an extension of the credit for residential energy property, extension and phase-out of the energy credit for certain sources, modifications of the advanced nuclear power production credit, modifications of the cover over of rum excise taxes, and enhancement of the carbon dioxide sequestration credit. A rule of construction for craft beverage modernization and tax reform is also included.

The bill also includes provisions addressing a clarification regarding the excise tax based on investment income of private colleges and universities and an exception from the private foundation excess business holding tax for independently-operated philanthropic business holdings.

Health care

In addition to providing $6 billion in long-awaited funding to address the opioid epidemic for the next two years, other top health care items include an additional four years of funding for the Children's Health Insurance Program (CHIP), bringing the previous six-year extension to a full decade, which the Congressional Budget Office (CBO) estimates would save the federal government $6 billion, as it provides coverage to children who would otherwise be subsidized on the health exchanges. There is also funding for many expired Medicare "extenders" and a funding boost for Community Health Centers (CHCs) — providing $3.8 billion for fiscal 2018 and $4 billion for 2019, as opposed to the House-passed package of $3.6 billion for both years. As in the House, the package incorporates the CHRONIC Care Act. The package would also repeal the universally disliked Independent Payment Advisory Board (IPAB), extend funding for the Maternal, Infant, and Early Childhood Home Visiting (MIECHV) Program, and close the coverage gap (known as the donut hole) that exposes some Medicare beneficiaries to high drug costs.

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ATTACHMENT

Bipartisan Budget Act of 2018