Ways and Means Committee Approves Extenders Package

1 min readBy: Kyle Pomerleau

Yesterday, the House Ways and Means Committee voted to permanently extend a number of the currently expired “tax extenders.” The committee approved a total of six taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. provisions that expired at the end of 2013.

Tax Extender Bills Approved by House Ways and Means Committee (April 29, 2014)

Bill Number

Title

Ten Year Cost

HR 4429

“To amend the Internal Revenue Code of 1986 to permanently extend the subpart F exemption for active financing income.”

$58.8 billion

HR 4438

“To amend the Internal Revenue Code of 1986 to simplify and make permanent the research credit.”

$155.5 billion

HR 4453

“To amend the Internal Revenue Code of 1986 to make permanent the reduced recognition period for built-in gains of S corporations.”

$1.5 billion

HR 4454

“To amend the Internal Revenue Code of 1986 to make permanent certain rules regarding basis adjustments to stock of S corporations making charitable contributions of property.”

$0.7 billion

HR 4457

“To amend the Internal Revenue Code of 1986 to permanently extend increased expensing limitations, and for other purposes.”

$73.1 billion

HR 4464

“To amend the Internal Revenue Code of 1986 to make permanent the look-through treatment of payments between related controlled foreign corporations.”

$20.3 billion

Total Cost

$309.9 billion
Many of the 55 tax provisions that expired in January are economically distortive. However, a select few should be extended and made permanent. These help make the tax code more neutral by mitigating the tax code’s biases against saving and investment (List Here). The approved provisions generally fall under the umbrella of extenders that help make the tax code more neutral.

An important provision that is missing is bonus depreciationBonus depreciation allows firms to deduct a larger portion of certain “short-lived” investments in new or improved technology, equipment, or buildings in the first year. Allowing businesses to write off more investments partially alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs. . Bonus depreciationDepreciation is a measurement of the “useful life” of a business asset, such as machinery or a factory, to determine the multiyear period over which the cost of that asset can be deducted from taxable income. Instead of allowing businesses to deduct the cost of investments immediately (i.e., full expensing), depreciation requires deductions to be taken over time, reducing their value and discouraging investment. allows businesses to immediately deduct half their investment in equipment and software. This tax provision is an important step towards full expensingFull expensing allows businesses to immediately deduct the full cost of certain investments in new or improved technology, equipment, or buildings. It alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs. . Permanently extending this provision would boost GDP by over 1 percent, wages by 1 percent and create over 200,000 jobs.

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