Negotiations over the fate of more than 50 tax extenders have continued over the Thanksgiving recess. Leaders in both the House and Senate have been in discussions over whether to extend the popular but temporary tax breaks or to make permanent some of the incentives and eliminate others. At the same time, the White House expressed concerns about the balance between business and individual incentives in any final package.

Expired Incentives

The extenders, including the state and local sales tax deduction, higher education tuition deduction, teachers’ classroom expense deduction, research tax credit and special expensing rules for film and television productions, expired after December 31, 2013. In early 2014, the Senate Finance Committee approved the EXPIRE Bill (Sen 2260), which would extend the incentives for two years. The House has approved bills extending some but not all of the expired provisions.

Negotiations

According to reports, lawmakers have discussed making permanent some of the more widely used extenders, such as the research tax credit. Some energy incentives could also be made permanent. However, the wind energy tax credit appears to be a candidate for possible elimination. It is unclear at this time if bonus depreciation would be extended, and at what rate, and if Code Sec. 179 small business expensing would be enhanced. There have also been discussions about consolidating the education tax incentives. The American Opportunity Tax Credit, an enhanced version of the Hope education credit, is a temporary incentive scheduled to sunset after 2017.

White House Response

On November 25, Deputy White House Press Secretary Jen Friedman signaled that President Obama would veto the developing proposal. Friedman said that the package “would help well-connected corporations while neglecting working families.”

Previously, White House Spokesperson John Earnest said President Obama wants a tax package that benefits middle-income taxpayers. “We certainly don’t want to see a package that benefits corporations but not middle-class families. That’s something that we’d strongly oppose.”

Treasury Secretary Jack Lew made similar comments on November 24. “Making permanent expiring business provisions without addressing tax credits for working families is the wrong approach,” Lew said.

House Ways and Means Committee ranking member Sander Levin, D-Mich., endorsed the president’s views. “The president’s veto message is very clear in the priorities it sets forth, and we should go back to the drawing board and create a package that benefits working families, strengthens our economy, and creates a realistic path for tax reform.”

Provided by CCH

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