Tax Analysts®Tax Analysts®

My Subscriptions:

Featured News

April 7, 2014
Camp Draft's Choices on Extenders Could Shape Ways and Means Discussions
by Lindsey McPherson

Full Text Published by Tax Analysts®

House Ways and Means Committee Chair Dave Camp, R-Mich., didn't need to repeal any of the tax provisions that expired at the end of 2013 in his comprehensive tax reform draft because their removal doesn't raise any revenue for him to use elsewhere in the plan.

But that didn't stop him from repealing -- or proposing changes that effectively repeal -- 37 so-called tax extenders in his draft released February 26.

Camp has announced that in April, Ways and Means will begin reviewing the extenders to decide which should be made permanent and thus a part of the revenue baseline against which a larger tax reform plan would be scored.

The committee's review of extenders will be separate from its review of the draft, Camp told Tax Analysts March 26. However, Camp's views on extenders, as reflected in his draft, will undoubtedly carry some weight in the committee's discussions.

Camp's draft would permanently extend only eight of the expired extenders. He also proposes temporarily extending the exceptions under subpart F for active financing income through the end of 2018.

But what about the remaining 11 provisions that expired at the end of 2013? The draft is silent on those provisions, which include the new markets tax credit, the employer wage credit for activated military reservists, and the allowance for tax-free distributions from individual retirement plans for charitable purposes.

"We paid for everything that we did in the draft, so that was one of the limitations we had there," Camp said, explaining that there were provisions he might have decided to renew if he didn't have to offset the cost of extending them.

Those provisions, as well as the ones he proposes repealing, are on the table as the committee begins its extenders review, Camp said. "If we have the ability to assume the extenders are permanent, that gives us some more flexibility," Camp said.

Here's a full look at how Camp's draft treats the 57 expired tax extenders, which include two disaster relief provisions left out of most extenders lists:

Repealed:
Deduction for certain expenses of elementary and secondary school teachers (sec. 62(a)(2)(D));
Deduction for state and local general sales taxes (sec. 164(b)(5)), except for state and local taxes individuals paid or accrued in carrying on a business or producing an income;
Deduction for qualified tuition and related expenses (sec. 222(e));
Premiums for mortgage insurance deductible as interest that is qualified residence interest (sec. 163(h)(3));
Credit for health insurance costs of eligible individuals (sec. 35(a));
Work opportunity tax credit (sec. 51(c)(4));
Indian employment tax credit (sec. 45A(f));
Accelerated depreciation for business property on an Indian reservation (sec. 168(j)(8));
Credit for certain expenditures for maintaining railroad tracks (sec. 45G(f));
15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements (secs. 168(e)(3)(E)(iv),(v)(ix)168(e)(7)(A)(i) and (e)(8));
Seven-year recovery period for motor sports entertainment complexes (secs. 168(i)(15) and 168(e)(3)(C)(ii));
Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico (sec. 199(d)(8));
Special expensing rules for certain film and television productions (sec. 181(f));
Special rules for qualified small business stock (sec. 1202(a)(4));
Additional first-year depreciation for 50 percent of basis of qualified property (secs. 168(k)(1) and (2) and 460(c)(6)(B));
Election to accelerate alternative minimum tax credits in lieu of additional first-year depreciation (sec. 168(k)(4));
Determination of low-income housing tax credit (LIHTC) rate for credit allocations with respect to nonfederally subsidized buildings (sec. 42(b)(2)) effectively repealed by the draft's modifications of the LIHTC under a revised section 42(b);
Enhanced charitable deduction for contributions of food inventory (sec. 170(e)(3)(C));
Beginning-of-construction date for renewable power facilities eligible to claim the electricity production credit or investment credit in lieu of the production credit (secs. 45(d) and 48(a)(5));
Special rule for sales or dispositions to implement Federal Energy Regulatory Commission or state electric restructuring policy (sec. 451(i));
Credit for construction of new energy-efficient homes (sec. 45L(g));
Energy-efficient commercial buildings deduction (sec. 179D(h));
Mine rescue team training credit (sec. 45N);
Election to expense advanced mine safety equipment (sec. 179E(a));
Credit for energy-efficient appliances (sec. 45M(b));
Credit for certain nonbusiness energy property (sec. 25C(g));
Alternative fuel vehicle refueling property (non-hydrogen refueling property) (sec. 30C(g)(2));
Incentives for alternative fuel and alternative fuel mixtures (other than liquefied hydrogen): excise tax credits and outlay payments for alternative fuel (secs. 6426(d)(5) and 6427(e)(6)(C)); excise tax credits for alternative fuel mixtures (sec. 6426(e)(3));
Incentives for biodiesel and renewable diesel: income tax credits for biodiesel fuel, biodiesel used to produce a qualified mixture, and small agri-biodiesel producers (sec. 40A); income tax credits for renewable diesel fuel and renewable diesel used to produce a qualified mixture (sec. 40A); excise tax credits and outlay payments for biodiesel fuel mixtures (secs. 6426(c)(6) and 6427(e)(6)(B)); excise tax credits and outlay payments for renewable diesel fuel mixtures (secs. 6426(c)(6) and 6427(e)(6)(B));
Placed-in-service date for partial expensing of certain refinery property (sec. 179C(c)(1));
Credit for two- or three-wheeled plug-in electric vehicles (sec. 30D(g));
Credit for production of Indian coal (sec. 45(e)(10)(A)(i));
Second-generation biofuel producer credit (formerly cellulosic biofuel producer credit) (sec. 40(b)(6)(H));
Special depreciation allowance for second-generation biofuel plant property (sec. 168(l));
Qualified zone academy bonds: allocation of bond limitation (sec. 54E(c)(1));
Empowerment zone tax incentives: designation of an empowerment zone and of additional empowerment zones (secs. 1391(d)(1)(A)(i) and 1391(h)(2)); increased exclusion of gain (attributable to periods through 12/31/18) on the sale of qualified business stock of an empowerment zone business (secs. 1202(a)(2) and 1391(d)(1)(A)(i)); empowerment zone tax-exempt bonds (secs. 1394 and 1391(d)(1)(A)(i)); empowerment zone employment credit (secs. 1396 and 1391(d)(1)(A)(i)); increased expensing under sec. 179 (secs. 1397A and 1391(d)(1)(A)(i)); nonrecognition of gain on rollover of empowerment zone investments (secs. 1397B and 1391(d)(1)(A)(i)); and
New York Liberty Zone: Tax-exempt bond financing (sec. 1400L(d)(2)(D)).

Renewed

Parity for exclusion from income for employer-provided mass transit and parking benefits (sec. 132(f)) permanently renewed with $130 exclusion for transit and $250 exclusion for parking;
Tax credit for research and experimentation expenses (sec. 41(h)(1)(B)) modified and made permanent;
Exceptions under subpart F for active financing income (secs. 953(e)(10) and 954(h)(9)) extended through the end of 2018;
Look-through treatment of payments between related controlled foreign corporations under the foreign personal holding company rules (sec. 954(c)(6)) made permanent;
Increase in expensing to $500,000/$2,000,000 and expansion of definition of section 179 property (secs. 179(b)(1)and (2) and 179(f)) reduced back down to the 2008-2009 levels of $250,000/$800,000 and made permanent;
Reduction in S corporation recognition period for built-in gains tax (sec. 1374(d)(7)) made permanent;
Three-year depreciation for racehorses two years old or younger (sec. 168(e)(3)(A)) replaced under the draft's proposed section 168(c)(2)(B), which would define the life of all racehorses as three years for depreciation purposes;
Basis adjustment to stock of S corporations making charitable contributions of property (sec. 1367(a)(2)) made permanent; and
Special rules for contributions of capital gain real property made for conservation purposes (secs. 170(b)(1)(E)and 170(b)(2)(B)) made permanent but modified to repeal the exception from special limitations regarding contributions of capital gain property and to repeal the carryover provision for corporate farmers and ranchers.

Not Addressed

Discharge of indebtedness on principal residence excluded from gross income of individuals (sec. 108(a)(1)(E));
Temporary increase in limit on cover-over of rum excise tax revenues (from $10.50 to $13.25 per proof gallon) to Puerto Rico and the Virgin Islands (sec. 7652(f));
Modification of tax treatment of certain payments to controlling exempt organizations (sec. 512(b)(13)(E));
Treatment of certain dividends of regulated investment companies ("RICs") (secs. 871(k)(1)(C) and section 871(k)(2)(c) , and 881(e)(1)(A) and (2));
Employer wage credit for activated military reservists (sec. 45P);
RIC qualified investment entity treatment under the Foreign Investment in Real Property Tax Act (sec. 897(h)(4));
Treatment of military basic housing allowances under low-income housing credit (sec. 142(d));
Tax-free distributions from individual retirement plans for charitable purposes (sec. 408(d)(8));
New markets tax credit (sec. 45D(f)(1));
American Samoa economic development credit (sec. 119 of Pub. L. No. 109-432 as amended by sec. 756 of Pub. L. No. 111-312); and
Extension of replacement period for nonrecognition of gain for areas damaged by 2008 Midwestern severe storms, tornadoes, and flooding (sec. 702 of Division C of Pub. L. No. 110-343).

Follow Lindsey McPherson (@lindsemcpherson) on Twitter for real-time updates.

About Tax Analysts

Tax Analysts is an influential provider of tax news and analysis for the global community. Over 150,000 tax professionals in law and accounting firms, corporations, and government agencies rely on Tax Analysts' federal, state, and international content daily. Key products include Tax Notes, Tax Notes Today, State Tax Notes, State Tax Today, Tax Notes International, and Worldwide Tax Daily. Founded in 1970 as a nonprofit organization, Tax Analysts has the industry's largest tax-dedicated correspondent staff, with more than 250 domestic and international correspondents. For more information, visit our home page.

For reprint permission or other information, contact communications@tax.org