RIP tax extenders? 

Source: By BRIAN FALER, Politico • Posted: Monday, January 4, 2016

Rob Portman is pictured. | AP Photo

‘The extenders has been a huge political and policy issue, with a whole army of lobbyists. Most of that is now resolved,’ said Sen. Rob Portman, who sits on the tax-writing Finance Committee. | AP Photo

Goodbye tax extenders?

Some lawmakers are hoping that a massive tax package signed into law last week will mean the end of the recurring need to extend dozens of tax breaks with expiration dates.

Lawmakers peeled off the biggest and most popular of the breaks, such as one for corporate research and development programs, and made them permanent.

That will give Congress less reason to bother continuing to renew the rest — given shorter extensions under last week’s accord — which is fanning hopes among some lawmakers that they’ve finally put the days of the tax extenders behind them.

“It changes the whole dynamic,” said Sen. Rob Portman (R-Ohio), who sits on the tax-writing Finance Committee. “The extenders has been a huge political and policy issue, with a whole army of lobbyists. Most of that is now resolved.”

Ending the ritual would amount to a sea change in how Congress writes tax policy, not to mention bad news for everyone from racehorse owners to NASCAR, whose favorite provisions were not awarded permanent status in last week’s agreement.

For decades, lawmakers have been rolling over the hodgepodge of breaks, usually at the last minute and with little scrutiny, as lawmakers prepared to leave for Christmas recess.

It’s become one of Congress’ routines, with the number of extender provisions steadily growing. The very first extenders bill, the Technical and Miscellaneous Revenue Act of 1988, had eight provisions. This year, there were more than 50.

It’s been a triumph of both budget gamesmanship — lawmakers made the breaks temporary to make the cost appear cheaper — and lobbying, with a cottage industry growing up on K Street around the provisions.

Tax writers said what they did this year will allow them to focus on better things. The $680 billion tax-cut package will give “breathing room to the cause of bipartisan tax reform,” said Sen. Ron Wyden, the ranking Democrat on the Finance panel.

The legislation takes aim at the fact that some extenders are more popular than others.

Lawmakers may not like the idea of handing out special tax breaks to NASCAR or Puerto Rican rum companies. But, typically, they hitched a ride on other, more pressing extenders provisions.

For many years, that was the alternative minimum tax. It hadn’t been indexed for inflation, so Congress repeatedly intervened to prevent it from hitting more Americans, and that legislation ended up moving all sorts of other, unrelated extenders.

After Congress permanently fixed the AMT as part of the 2013 fiscal-cliff agreement, the R&D credit, which has long enjoyed broad bipartisan support, became the next must-pass extender.

But last week’s agreement not only made the credit permanent, it also made more than a dozen other popular provisions permanent. Among them: special breaks for small businesses, schoolteachers and people who make charitable contributions.

That raises the question of which of the remaining provisions could be considered must-pass legislation by lawmakers.

“What’s going to drive the effort to get them extended now that the research credit has been made permanent?” said John Gimigliano, a former Ways and Means aide who now heads the tax legislative group at KPMG. “It’s less clear which of these remaining extenders is going to emerge as the one that people are going to say, ‘This is the one that we must do.’”

It will be especially tricky because the remaining extenders have different expiration dates, so they won’t come up for renewal at the same time.

Lawmakers agreed to extend about a half-dozen provisions for five years. They were the ones that were strongly supported by one party, but not the other, said a senior tax aide. They include so-called bonus depreciation, which provides more generous investment write-offs for equipment purchases; the New Markets tax credit, which subsidizes investment in low-income areas; and a credit for the wind-power industry.

The remaining 30 extenders, which lawmakers agreed to extend through next year, are most in danger of eventually dying off. They tend to be more parochial, with a relatively small number of supporters. Among them: special incentives for film and television productions; a credit for electric motorcycles; a break for those hiring people working on Indian reservations; and generous write-offs for mine safety equipment.

But some lawmakers say Congress will at least consider continuing to renew the remaining provisions.

“I don’t think this alone kills it entirely because we have a number of provisions that are simply being extended another two years, so there’s still that list to deal with,” said Sen. Pat Toomey (R-Pa.).

Sen. Ben Cardin (D-Md.), another Finance Committee member, said “you’ll still have need for extenders,” noting “some are pretty important that are in the two-year package.”

He predicted lawmakers will become “much more selective” about which will be renewed, predicting “some will expire” and “some will be modified.”

Sen. John Thune (R-S.D.) agreed it was too early to declare the extenders process dead, “but I don’t think it will have the same drama associated with it that it’s had.”

Some lobbyists say lawmakers may have inadvertently created a new vehicle for the remaining extenders when they decided to delay the Affordable Care Act’s Cadillac tax on pricey health care benefits. Some doubt lawmakers will ever allow the tax to take effect, saying it, or two other Obamacare taxes that were suspended in the legislation, could end up carrying the leftover extenders.

Others hope a new president will tackle tax reform in 2017, so the question of the fate of the remaining provisions will become moot.

“It’s not as clear how this is going to play out as it has been in past years,” said Gimigliano. “It’s a new world.”