Congress is set to return from the August recess on Sept. 8 to a full agenda that includes big tax priorities such as extending expired tax provisions and attempting international tax reform.
More than 50 popular tax provisions, including the R&D tax credit, expired at the end of 2014. Tax writers have largely finished their committee work on the provisions. The Senate Finance Committee approved a package that would extend all the provisions for two years retroactively from the start of 2015. The House voted to make permanent just eight expired provisions, including the R&D credit. All that's left is to negotiate a compromise.
Republican leaders hope to resurrect a proposed agreement from late last year that would have made a handful of provisions permanent and extend the rest for two years. House Ways and Means Chair Paul Ryan, R-Wis., has pledged to push for a resolution quickly in September but likely faces an uphill battle. With all the competing legislative priorities, an agreement may have to wait until at least November or December. If a big compromise eludes lawmakers, Congress will likely settle for a one- or two-year extension of most of the provisions. ( Tax Legislative Update 2015-04 discusses the outlook for the extenders and includes a table describing how House and Senate legislation would treat each provision.)
Lawmakers also need to extend highway funding by the end of October. The short-term extension passed at the end of July included several revenue-raising provisions. (For a full discussion of the revenue raisers, see Tax Legislative Update 2015-05.) Ryan still hopes to pair highway funding with international reform. He has yet to release a full proposal but has endorsed a reduced rate on certain intellectual property income that was proposed by Reps. Charles Boustany, R-La., and Richard Neal, D-Mass. ( See our summary of the proposal for more information.) Ryan aims to combine this "IP box" with a transition to a territorial system and a one-time tax on all unrepatriated earnings. Ryan proposes dedicating some of the revenue from the one-time tax to highway spending and using the highway bill as a vehicle for the bill.
Assembling a viable international reform package by October will be difficult, especially with so many nontax items taking up limited space on the congressional calendar. Pope Francis' visit to the United States, which will include an address to a joint meeting of Congress, will likely slow congressional action in late September. In addition, Congress will probably need to agree on a new spending deal to avoid a government shutdown at the end of October and will also have to contend with the debt limit around that time. Finally, the Senate will likely spend time considering the nuclear deal with Iran.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.