Congress Prepares Tax Legislation

Published date01 November 2015
Date01 November 2015
© 2015 Wiley Periodicals, Inc.
Published online in Wiley Online Library (
DOI 10.1002/jcaf.22108
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.
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.
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.

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