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Permanent Tax Extenders Pass US House Markup

by Mike Godfrey, Tax-News.com, Washington

21 September 2015


Following the approval of ten provisions earlier this year, the US House of Representatives Ways and Means Committee, on September 17, marked up the permanent extension of a further five "tax extenders."

The 50-plus tax provisions for individuals and businesses in the tax extender package last expired at the end of 2014. They have previously been rolled forward annually, but this has caused problems for taxpayers relying on the credits and deductions, as Congress has extended them very late each year.

The five measures passed by the Committee included a permanent extension to bonus depreciation that would allow businesses to immediately deduct 50 percent of their investment in equipment and software, with the remainder depreciated over time. The provision was enacted in 2008 as a temporary stimulus measure and, since then, has been repeatedly extended.

The cost of a permanent bonus depreciation extension was put at USD281bn over the 2015-2025 period. However, the Tax Foundation has pointed out that its expansionary effect on economic growth, and therefore also on individual and corporate incomes, would mean that the actual tax revenue cost over ten years would be "less than a quarter of the revenue impact without growth."

The other permanent tax extenders marked up by the Committee, at a further cost of USD130bn (without their effect on growth), included two to allow American corporations to defer paying taxes on their overseas profits – extending the rules allowing financial companies to defer tax on their overseas income (subpart F) – and allowing corporations to transfer funds between international subsidiaries without paying tax.

The Committee's Chairman Paul Ryan (R– Wisconsin) said that "making these provisions permanent will give people the certainty they need to create more opportunity in our economy," but its Ranking Member Sander Levin (R – Michigan) pointed out that "this is being proposed at a time when we are reaching the debt ceiling and the Republicans are now proposing that we push the deficit through the roof."

The Committee's ten measures passed in February this year, at a total cost of USD319bn, had included a permanent extension to the research and development tax credit, small business Section 179 expensing, and the deduction for state and local sales tax. However, so far, the Committee has not extended the production tax credit for wind energy that is also within the tax extenders.

The House markup comes after the Senate Finance Committee voted in July this year to advance a bipartisan bill that would renew all of the tax extenders for a further two years to end-December 2016, but the legislation has yet to be scheduled for consideration by the Senate as a whole.

TAGS: individuals | Finance | tax | investment | small business | business | sales tax | energy | legislation | United States | research and development | Tax

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