Congress Prepares Tax Legislation

• Published date: 01 November 2015
• Date: 01 November 2015
• DOI: http://doi.org/10.1002/jcaf.22108
• Author: Caroline D. Strobel

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© 2015 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22108

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Congress Prepares Tax Legislation

Caroline D. Strobel

Congress has started working

on a number of different tax

legislative initiatives. While

many believe that it will not

be possible to pass legislation

prior to next year’s presiden-

tial election, these proposals

are receiving bipartisan sup-

port as well as support from

the White House. This column

will examine these legisla-

tive proposals as well as some

initiatives put forward by

President Obama.

TAX EXTENDERS

The Senate Finance Com-

mittee passed by a vote of 23 to

3 a bill that would extend over

50 tax breaks over the next two

years. Over half of the tax dol-

lars involved can be attributed

to the research and develop-

ment tax credit, small business

expensing, the state and local

sales tax deduction, bonus

depreciation, and active financ-

ing income. Among the other

provisions are the $250 above‐

the‐line tax deduction for

teachers for costs incurred for

books and supplies, mortgage

debt relief, parity for employer-

provided mass transit and

parking benefits, the deduc-

tion for mortgage insurance

premiums, special rules for con-

tributions of capital gain real

property made for conservation

purposes, the above‐the‐line

deduction for higher educa-

tion expenses, and tax‐free

distributions from individual

retirement plans for charitable

purposes. Also included in the

legislation are various energy

tax breaks, including those for

wind energy, biodiesel, and

cellulose ethanol.

Many of these proposals

were enacted to provide incen-

tives for individuals to invest

in activities that are deemed

important for the continued

growth of our economy. In

order to maximize the benefit

of these provisions it is impor-

tant for Congress to pass them

prospectively so taxpayers can

rely on them. Hopefully, the

Senate and the House will be

able to quickly pass this legis-

lation when they return from

their summer recess.

HIGHWAY FUNDING BILLS

The Democrats have intro-

duced a bill in the House that

would fund the Highway Trust

Fund for the next six years,

costing $478 billion. It is not

clear where this will go, as the

House leadership has proposed

an extension of the funding

only through December 18 of

this year. The Democratic plan

is contained in two separate

pieces of legislation. The first

legislation tightens the rules on

corporate inversions and would

pay for the first two years of

the highway program. The

tightened restrictions would

limit the ability of U.S. compa-

nies from avoiding U.S. taxes by

moving their domicile abroad.

A second Democratic bill

would create an 18‐month

deadline for international tax

reform. If reform has not been

enacted in that time, a fallback

international tax package to

make U.S. business more com-

petitive by decreasing taxes for

U.S. businesses paying relatively

high taxes abroad, but increas-

ing taxes for companies doing

business in tax havens where

tax rates are much less. Under

this plan, for active‐market for-

eign income, a company would

pay a 12.25% tax to the United

States on overseas profits if

they are currently paying no

tax, and a 2 percent tax to the

U.S. on overseas profits if they

are paying an average of 25%

abroad. There is a sliding scale

between these two extremes.