Senate Finance Committee Passes $85 Billion Tax Extenders Bill

4 min readBy: Andrew Lundeen

The Senate Finance Committee passed a tax extenders package that includes extensions of two years or longer on over 50 provisions totaling $85.3 billion.

The package contains provisions dealing with individuals and businesses, as well as many targeted at the renewable energy industry. Some of the largest include $15.4 billion for the research and development tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. , $13.35 billion for section 45 and 48 renewable energy, $10.4 billion for active financing, and $6.4 billion for the state and local general sales tax deductionA tax deduction is a provision that reduces taxable income. A standard deduction is a single deduction at a fixed amount. Itemized deductions are popular among higher-income taxpayers who often have significant deductible expenses, such as state and local taxes paid, mortgage interest, and charitable contributions. .

The originally proposed package – the Chairman’s Mark – was released on Tuesday and included a two year extension on 45 provisions totaling $67.4 billion.

The final bill passed by the committee contained multiple modifications and additions as well as three revenue raising provisions, extending almost all the provisions in current law for 2013. In total, these changes added an additional $17.9 billion to the bill.

We’ve written in the past that not all tax extenders are worth extending, and that still holds true. Ideally, the 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. code would be neutral and only include provisions that help mitigate the biases in the current tax code against saving and investment. This includes provisions that deal with cost recoveryCost recovery is the ability of businesses to recover (deduct) the costs of their investments. It plays an important role in defining a business’ tax base and can impact investment decisions. When businesses cannot fully deduct capital expenditures, they spend less on capital, which reduces worker’s productivity and wages. , such as the small business expensing provision and 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. . These provisions help move us closer to correctly defined business income.

See the table below for a list of the provisions include in the bill passed by the Senate Finance Committee.

2014 Tax Extenders Proposed by Senate Finance Committee

Source: Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act

Note: Some provisions extended for two years; others extended permanently. See here for list.

Individual Provisions

In Millions

Deduction for expenses of elementary and secondary school teachers

$430

Mortgage Debt Relief

$5,400

Parity for employer-provided mass transit and parking benefits

$180

Deduction for mortgage interest premiums

$1,800

Deduction for state and local general sales taxes

$6,500

Above-the-line deduction for higher education expenses

$596

Tax-free distributions from individual retirement plan for charitable purposes

$1,800

Special rules for contributions of capital gain real property made for conservation purposes

$268

Subtotal

$16,974

Business Provisions

Research and experimentation tax credit

$15,400

4% Credit Rate Freeze for the Low-Income Housing Tax Credit Program

$49

Treatment of military basic housing allowances under low-income housing credit

$49

Indian employment tax credit

$124

New Markets Tax Credit

$1,800

Credit for railroad track maintenance

$414

Mine rescue team training credit

$5

Employer wage credit for activated military reservists

$274

Work Opportunity Tax Credit

$3,160

Qualified zone academy bonds (QZABs)

$284

Three-year depreciation for racehorses

$9

15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements

$4,800

Accelerated depreciation for business property on Indian reservation

$158

Enhanced charitable deduction for contributions of food inventory

$292

Bonus depreciation

$2,850

Acceleration of AMT credits in lieu of bonus depreciation

$602

Temporarily extend increase in the maximum amount and phase-out threshold under section 179

$3,100

Election to expense advanced mine safety equipment

**

Deduction for domestic production activities in Puerto Rico

$222

Modification of tax treatment of certain payments to controlling exempt organizations

$36

Treatment of certain dividends of regulated investment companies (RIC's)

$198

Definition of RICs as qualified investment entities under FIRPTA

$93

Exceptions under subpart F for active financing income

$10,400

Special rules for qualified small business stock

$1,950

Basis adjustment to stock of S corporations making charitable contributions of property

$104

Reduction in S corporation recognition period for built-in gains tax

$232

Temporary increase in limit on cover over of rum excise tax revenues (from $10.50 to $13.25 per proof gallon) to Puerto Rico and the Virgin Islands

$336

American Samoa economic development credit

$29

Multiemployer Pension Plan Funding Rules

**

7-year recovery period for motorsports entertainment complexes

$71

Special rules for certain film and television productions

$27

Look-through treatment

$2,450

Subtotal

$49,518

Energy Provisions

Plug-in Electric Motorcycles and Highway Vehicles

$2

Credit for alternative fuel vehicle refueling property (including hydrogen property)

$89

Cellulosic Biofuels Producer Tax Credit

$55

Incentives for biodiesel and renewable diesel

$2,600

Indian country coal production tax credit

$76

Credit for construction of new energy efficient homes

$612

Cellulosic Biofuels Bonus Depreciation

$1

Incentives for alternative fuel and alternative fuel mixtures (including liquefied hydrogen)

$903

Credit for fuel cell motor vehicles

$47

Credit for nonbusiness energy property

$1,650

Section 45 and 48 renewables

$13,350

Energy efficient commercial buildings deduction

$304

Subtotal

$19,689

Revenue Raisers

Extend paid preparer EIC due diligence requirements to the child tax credit

-$43

Increase levy authority on payments to Medicare providers with delinquent tax debt

-$818

Exclusion from gross income of certain clean coal power grants

-$4

Subtotal

-$865

Total

$85,316

**Estimate pending or no revenue impact.

Update: This post was updated to reflect the fact that some provisions are extended for two years, while others are extended permanently.

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