Tax Extenders Legislation Finally Moving On Capitol Hill
It’s been almost 365 days since more than 50 important federal tax provisions expired, but it now appears Congress has reached an agreement that would extend the policies, albeit only for the current year (2014). Last Wednesday, the U.S. House passed H.R. 5771, the Tax Increase Prevention Act of 2014 on a wide bipartisan vote. (See how your member of Congress voted here.)
The legislation would extend the research and development tax credit, bonus depreciation and other expensing rules, deferral on income earned overseas from active financing operations, several small business and S-corporation tax credits, the state and local income tax deduction and other provisions. The U.S. Senate is expected to take up H.R. 5771 within the next week and while last week Connecting the Dots reported President Barack Obama signaled he might veto a tax extenders bill, it now appears the White House is willing to accept the short-term compromise.
While the one-year extension is welcome, it still does not help U.S. businesses to plan for the long-term. Indeed, the American Wind Energy Association (a credit for wind energy is part of the bill) wrote last week “that it is virtually impossible for a three-week extension to drive new wind development. There’s simply not enough time for any substantial number of new projects to physically begin construction before the end of the year.” The same argument could be made for nearly any industry. As such, MSCI encourages members of Congress to quickly finish up work on this short-term extension, but then to turn quickly in 2015 to legislation that would extend these provisions on a longer-term basis or that would reform the federal tax code in its entirety.