An Update on Tax Extenders in Congress

US Capitol

As Congress returns from its August work period and sets its sights on the 2019 finish line, there is a pretty good chance it will engage in the years-long tradition of playing footsy with tax extenders.Tax extenders are those tax breaks Uncle Sam gives out for certain economic activities.The thinking is that these tax breaks will spur investment, job, and economic growth. For more than a decade Congress has enacted these breaks on a relative short-term basis (just a year or two), allowing them to expire (often because of political gridlock), then scrambling to retroactively reauthorize and “extend” them on the backs of must-pass legislation.

Congress is now considering the future of more than two-dozen tax breaks that have expired over the last two years. A few of these provisions are of great interest to technology companies, including:

  • the alternative motor vehicle credit for qualified fuel cell motor vehicles;
  • the credit for two-wheeled plug-in electric vehicles; and
  • the credit for construction of new energy efficient homes.

Work on extenders has been slow in both chambers. Senate Finance Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) introduced legislation in the spring that would extend 29 currently expiring tax incentives for 2018 and 2019, along with extending 26 tax incentives that expired at the end of 2017. While there has not yet been a hearing or a markup of their bill, the two senators have spearheaded the creation of task forces to find possible solutions that would provide long-term tax certainty in an array of sectors. Four task forces have released their findings (found here, here, here, and here), and others will be doing so in short order.

In the House, Ways and Means Chairman Richard Neal (D-MA) held a markup on his extenders bill in June only after much prodding. While the Ways and Means Committee did pass the legislation, it isn’t clear when –or if –the bill will be considered on the House floor.

It’s unlikely the extenders issue will be resolved by October 15th, when those businesses that asked for a 2018 extension to file their taxes will have to do so. So, it remains most likely that their 2018 returns will have be amended if Congress ends up extending these provisions at a later date.

Tackling extenders can be a politically touchy issue, especially in the face of mounting populism within the electorate. But even against this backdrop, lawmakers shouldn’t be deterred from making permanent key tax incentives to spur tech investment and growth. According to our own Cyberstates reporting, the tech industry contributed almost $2 trillion to the U.S. economy, and employed almost 12 million people in 2018. In extending these important provisions just a year or two at a time, and then scurrying to get them passed at the eleventh hour, Congress is needlessly putting our country’s innovation and key economic driver at risk. Congress can help ensure the industry’s growth and stability by passing a commonsense extenders package that spurs investment, job, and economic growth.

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