Tax Extenders on Tap for Lame-Duck Congress, Tax Reform Likely to Get Attention in 2015

As a result of the mid-term elections, several tax issues are like to take center stage as areas of bipartisan compromise between the Obama administration and lawmakers. President Obama cited tax reform as an area of compromise during his remarks before reporters on November 5. Lawmakers and their tax staffers have repeatedly promised to address the expiring tax provisions known as extenders during the lame-duck session. However, it is not yet decided whether final passage will happen in mid-November or early December.

House

In the House, Budget Committee Chairman Paul Ryan, R-Wis., appears the likely choice to replace retiring Rep. Dave Camp, R-Mich., as chairman of the Ways and Means Committee. Rep. Kevin Brady, R-Tex., currently the chairman of the Joint Economic Committee, is also seeking the Ways and Means gavel. During a November 4 interview, Ryan said he was ready to work on tax reform, which he said would likely need passage by 60 Senate lawmakers, not the simple majority of 51 votes.

Democrats will likely lose seats on the Ways and Means panel, making room for an expanded GOP majority. Potential Republican lawmakers headed for the panel include Reps. Kristi L. Noem, R-S.D., and Patrick Meehan, R-Pa. Departing Democrats from the panel include Rep. Allison Schwartz, D-Pa.

Senate

In the Senate, Finance Committee ranking member Orrin G. Hatch, R-Utah, is poised to take over as chairman at the start of the next session in January 2015. Hatch and current Chairman Ron Wyden, D-Ore., worked together in passing a bipartisan extenders bill that stalled in the Senate. Democrats will lose Finance Committee member Jay Rockefeller, D-W.Va., who did not seek re-election. Because Republicans will control the Senate in the 114th session, party ratios on the Finance Committee will change from their current levels of 13 Democrats and 11 Republicans. Republicans will most likely add new members while Democrats are expected to let the vacant seat created by Rockefeller’s retirement go unfilled and potentially have to bump a junior member on the committee.

Staffers Weigh In

Speaking at a post-election event sponsored by KPMG LLP in Washington, D.C. on November 6, congressional staffers said a two-year extenders package will likely be passed during the lame-duck session. “A one-year bill would be a disaster,” said Cathy Koch, chief advisor to Senate Majority Leader Harry Reid, D-Nev. She said the package had the potential to become a large, all inclusive bill that could contain other tax provisions, as well as an omnibus budget bill. “I don’t see a lot of floor time in this lame duck,” said Koch. Congress is slated to reconvene on November 12, and then recess on November 20 for Thanksgiving. Lawmakers will return on December 1 and work until mid-December.

George Callas, staff director for the House Ways and Means Select Revenue Measures Subcommittee, told the audience that the differences remaining in the two chambers’ respective extenders bills are “easily resolvable.” He added that he has not witnessed any “hard line drawing” going on among lawmakers; instead, there appeared to be great flexibility among members. “There is space and a willingness to do this during the lame duck,” he said. Moreover, Callas emphasized that most realize it is “important to try and get a good deal now,” as the new session under new leadership is unpredictable. “It will be a missed opportunity if we don’t,” he said.

Looking ahead to 2015 and beyond, staffers said they were optimistic that Congress would complete some form of tax reform. “I think there is a lot of room for compromise on tax reform,” Koch told the audience. Staff members diverged, however, on whether or not the reform would only address corporate tax provisions or also include individual provisions. Warren Payne, the majority policy director for the House Ways and Means Committee, said they are still waiting to hear from the administration on tax reform, as their input is critical. “The ball is in their court,” he said.

Mark Prater, deputy staff director and chief tax counsel for Republicans on the Senate Finance Committee, said that “there’s a good environment for us to pursue tax reform,” adding that four years of tax reform work has already been completed. “We hope to get this accomplished quickly,” said Payne. “There is a sweet spot where we can come together, and there is plenty of room for compromise.”

Koch differed slightly in her opinion, saying that the arithmetic in just doing corporate tax reform is difficult. “You can’t ignore the individual side of the economy. It is our responsibility to do it,” she said. Payne stressed that lawmakers really need the administration, especially the Department of Treasury, to engage in tax reform discussions in order to get the ball rolling. “If they (the administration) are serious, they have to, at a minimum, come up with a detailed tax reform draft,” he said. Prater seconded Payne, saying that the Treasury has “tremendous resources” and an institutional perspective. “They bring another dimension to the discussion,” he said. “There will have to be talks between the Administration and Hill staff, beyond that, there’s a lot of room for compromise,” said Prater.

“I think the foundation (for tax reform) is there,” said Todd Metcalf, chief tax counsel for Democrats on the Senate Finance Committee. “In the end, we all have to sit down in the same room and work toward agreement.”

By Jeff Carlson and Stephen K. Cooper, CCH News Staff

 

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

All stories by: Wolters Kluwer Tax and Accounting