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June 21, 2019
2019-1140

Ways & Means approves tax extenders bill

The House Ways and Means Committee June 20 approved by a 25-17 vote the Taxpayer Certainty and Disaster Tax Relief Act of 2019 (H.R. 3301), to extend through 2020 tax provisions that expired at the end of 2017 and 2018, and that will expire at the end of 2019, plus disaster relief tax provisions. The Committee also approved separate bills to: Expand the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), and repeal the expansion of UBIT to the transportation fringe benefits of non-profits; to increase entitlement funding for child care; and to clarify that all tax provisions apply to legally married same-sex couples the same as other married couples.

In an opening statement, Chairman Richard Neal (D-MA) said the fiscally responsible approach to the extenders bill is a sharp contrast to the Tax Cuts and Jobs Act (TCJA). In a colloquy with Chairman Neal, Rep. Brad Schneider (D-IL) said he was glad the cost of the extenders is offset. However, because the EITC and CTC expansions are not offset and the cost is in upwards of $100 billion, he asked for a commitment to pay for the provisions when considered on the floor, which Neal was amenable to.

Ranking Member Kevin Brady's (R-TX) statement reflected his desire to trim the extenders package, saying when Republicans were in control they "set in motion a method for finding a permanent path forward on these temporary tax policies. We asked stakeholders to come to the table and advocate why a certain provision needed to be made permanent, or how we could work to phase it out."

The revenue offset to fully cover the $33.19 billion 10-year cost of the extenders provisions would accelerate the sunset of the TCJA estate tax regime — the TCJA roughly doubled the estate tax exemption, which is an inflation-adjusted $11.4 million per-person for 2019 — to the end of 2022 instead of the end of 2025. The issue of revenue offsets was an undercurrent throughout the markup, as some Democratic members expressed opposition to bills and amendments that are not paid for.

The extenders bill would extend the tax provisions that expired at the end of 2017, with the exception of the classification of certain race horses as three-year property and the election to expense advanced mine safety equipment. The three provisions that expired at the end of 2018 that would be extended under the bill are the reduction in the deduction floor for medical expenses, the oil spill liability trust fund rate, and the black lung liability trust fund excise tax.

Provisions expiring at the end of 2019 that would be extended, through 2020, under the House bill are:

  • the controlled foreign corporation (CFC) look-through rule
  • the Work Opportunity Tax Credit
  • the New Markets Tax Credit
  • the beginning of construction deadline for wind facilities for the renewable electricity production credit and the election to claim the energy credit in lieu of the electricity production credit (for wind facilities the construction of which begins in calendar year 2020, the credit is reduced by 60%)
  • the employer tax credit for paid family and medical leave
  • certain provisions related to beer, wine and distilled spirits excise taxes and record-keeping requirements
  • the credit for health insurance costs of eligible individuals, a refundable credit (the health coverage tax credit or "HCTC")

The bill would also provide tax relief for individuals and businesses in Presidentially-declared disaster areas occurring between January 1, 2018, and 30 days following date of enactment of the legislation. It would also change the private foundation excise tax from a two-tiered tax of 1% and 2% to a simplified tax of 1.39%.

Amendments

Republican amendments to the extenders bill were defeated. Votes included:

  • Rep. Dave Schweikert's (R-AZ) amendment to make permanent the TCJA tax cuts failed on a 16-24 vote
  • Rep. Jason Smith's (R-MO) amendment to make permanent the TCJA's increased CTC failed on a 16-24 vote
  • Rep. Kenny Marchant's (R-TX) amendment to make permanent the 7.5% deduction floor for medical expenses, which he said would cost about $2 billion, failed on a 16-25 vote
  • Rep. Tom Reed's (R-NY) amendment to make permanent the family and medical leave tax credit failed on a 17-23 vote
  • Rep. Tom Rice's (R-SC) amendment to make permanent the increased standard deduction failed on a 16-24 vote
  • Rep. Ron Estes' (R-KS) amendment to make permanent the CFC look-through rule failed 16-22
  • Rep. Jackie Walorski's (R-IN) amendment to repeal the medical device excise tax failed 16-22
  • Rep. Mike Kelly's (R-PA) amendment to repeal the Cadillac tax failed on a 16-23 vote
  • Rep. George Holding's (R-NC) amendment to permanently repeal the health care insurance tax fell to a point of order, which was upheld 16-23
  • Rep. Devin Nunes' (R-CA) amendment to make permanent 100% expensing failed on a 17-23 vote
  • Rep. Drew Ferguson's (R-GA) amendment to extend Section 529 plans to homeschooling fell to a point of order, which was upheld 24-16
  • Rep. Jason Smith's amendment to strip the estate tax revenue offset failed on a 16-24 vote
  • Ranking Member Brady's amendment to replace the retroactive alternative fuel mixture credit clarification that includes "no inference" language with a clarification that applies only on a prospective basis was defeated by voice vote
  • Ranking Member Brady's amendment to lower, regarding the discharge of indebtedness on principal residence excluded from gross income of individuals provision, the maximum exclusion from $2 million to $350,000 failed on a 17-25 vote

Rep. Schweikert offered an amendment to include in the bill TCJA technical corrections addressing qualified improvement property (QIP) treatment as 15-year property under the modified accelerated cost recovery system and 20-year property under the alternative depreciation system, and eligible for 100% bonus depreciation, Section 965 overpayments, downward attribution and attorney's fees for harassment cases deductible by victims. Chairman Neal asked whether Schweikert's amendment would be better handled in a technical corrections bill that he plans to move this year. The amendment failed on a 17-24 vote.

Rep. Lloyd Doggett's (D-TX) amendment to strike the Indian coal provision was adopted by voice vote.

The following amendments were offered and withdrawn:

  • Rep. Estes' amendment to make the short-line railroad credit permanent
  • Rep. Adrian Smith's (R-NE) biodiesel phasedown amendment
  • Rep. Brad Wenstrup's (R-OH) amendment to make permanent the TCJA excise tax reductions on beer, wine and distilled spirits
  • Rep. Adrian Smith's amendment to facilitate additional long-term certainty regarding the wind production tax credit

The Senate version of the tax extenders bill, the "Tax Extender and Disaster Relief Act Of 2019" (S. 617) introduced in February by Finance Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR), would retroactively extend, through 2019, 26 tax provisions that have been expired since the end of 2017 and the three that expired at the end of 2018. Chairman Neal has described the Ways and Means bill as a negotiating position for the tax extenders.

Other bills

The Economic Mobility Act of 2019 (H.R. 3300), approved 22-19, would, for two years, make the CTC and child and dependent care tax credit (CDCTC) fully refundable, expand the Earned Income Tax Credit (EITC) for workers without children, and increase the amount of the exclusion for employer-provided dependent care assistance from $5,000 to $10,500. The bill would also repeal the requirement that the unrelated business income tax (UBIT) of tax-exempt organizations be increased by expenses related to qualified transportation fringe benefits (the so-called "church parking tax"). The bill does not include revenue offsets.

Rep. Stephanie Murphy (D-FL) said she supported provisions in the bill but wants it to be offset and therefore could not vote in favor. The bill was amended to increase the amount of the CTC to $3,000 for young children.

Republican amendments failed, including:

  • Ranking Member Brady's amendment that included just the church parking tax provision, on a 16-23 vote
  • Rep. Rice's amendment to deny eligibility for the refundable CTC for certain taxpayers for whom the credit was previously denied, on a 16-24 vote
  • Rep. Jodey Arrington's (R-TX) amendment to deny the CDCTC to those in the country illegally, on a 16-25 vote

The Child Care Quality and Access Act of 2019 (H.R. 3298), approved 22-18, would increase federal entitlement funding to match state investments in child care. Some Republicans opposed the bill over its temporary nature and lack of a link to employment, with Rep. Walorski advocating the Jobs for Success Act (H.R. 1753).

The Promoting Respect for Individuals' Dignity and Equality (PRIDE) Act of 2019 (H.R. 3299), approved by voice vote, would allow lawfully married same-sex couples to file claims for credits and refunds related to a change in marital status back to their year of marriage, and amend the tax code so that provisions that apply to married couples use gender-neutral language.

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