(8-13-2015) Despite a desire from Congressional leaders to address so-called tax extender provisions like the IRA Charitable Rollover early in the calendar year and even last-minute action on extenders by a key Senate committee, lawmakers left town last week for their annual summer recess without completing work on the issue or even articulating a clear path forward. Now, the House and Senate will reconvene the day after Labor Day and begin work on a growing “to do” list, all the while facing a dwindling number of days left in session.
This year’s stalemate on tax extenders is thanks, in large part, to different strategies the House and Senate have chosen to pursue. Early this year, much to the delight of the charitable sector, the full House approved legislation (the America Gives More Act, H.R. 644) making a number of extender provisions – including the IRA Rollover and several other important charitable provisions – permanent. The full Senate, however, has not taken up any extender bills and, to date, Senate leaders have balked at the notion of making any extender provisions permanent. Instead, late last month the Senate Finance Committee approved a bill that would retroactively renew tax extender provisions – again, including the IRA Rollover – but only for two years, through the end of 2016.
It is worth noting that several Finance Committee members did file amendments to the legislation under consideration last month that would have made the IRA Rollover permanent. Unfortunately those amendments did not receive up-or-down votes as lawmakers wanted to quickly adopt the underlying extenders legislation before August recess. Also worth noting, Senator Orrin Hatch (R-UT), Chairman of the Committee, did come out in favor of permanent extenders at the July hearing. He said, “I believe we should be working to make a number of these tax extender provisions permanent. The House has passed several bills that would do just that, and I think there are enough votes here in the Senate to do the same, at least with regard to some of the more important provisions.” Hatch ultimately concluded, however, that he has “agreed to defer litigating the issue of permanence until a later time.”
What exactly Hatch means by “a later time” is still not clear, but lawmakers will have to figure out some way forward on extenders by the end of the year in order for donors to take advantage of the IRA Rollover in 2015, and leaders in both parties continue to say they do not want to wait until November or December to deal with extenders because of the uncertainty that causes for taxpayers. Given this time crunch, lawmakers and Congressional staff are beginning to discuss ways in which extenders could move in the fall. The best way for this to happen is for extenders to hitch a ride on “must pass” legislation such as a reauthorization of highway funding (which could in turn include a broader deal on an international tax overhaul) or even a spending bill to keep the government funded in the new fiscal year. Ultimately it will be up to Congressional leaders such as Majority Leader Mitch McConnell (R-KY) to determine if extenders move as a stand-alone package or as part of another larger bill.
For its part in the tax extenders debate, the White House has largely stayed on the sidelines, but it has indicated in the past that the President will not sign legislation making extenders permanent if the cost of that legislation is not offset with other savings to the government. The White House has also gone on record opposing a December 2014 plan to make some extenders like the IRA Rollover permanent, citing the cost concerns and arguing that that specific package (which did have Democratic support in Congress) was skewed toward businesses and high-income earners because it did not include an expansion of the earned income and child care tax credits. Congressional leaders will remain mindful of the White House position as they work to craft an extenders package, be it a two-year retroactive extension or something offering more permanency, in the weeks and months ahead.
Although many questions remain about when and how renewal of the IRA Rollover will happen this year, there is more certainty in another area of legislative interest to PPP: comprehensive tax form. For the past few years, lawmakers had pledged to overhaul the tax code, raising the possibility of either elimination of or modification to the charitable deduction as well as changes to numerous other provisions that would no doubt affect charitable giving in America. The two tax-writing committees have taken a number of important steps toward this type of comprehensive reform, including last year’s release of a nearly 1000-page draft bill in the House. Over the last few months, however, Congressional leaders have conceded reform affecting the individual side of the tax ledger will likely not happen until after the 2016 Presidential election.
In the Senate, Finance Committee Hatch said, “Let me put it this way, it took three years to do the ‘86 bill and they had a much less comprehensive tax code than we have now. We think we can do it in a shorter period but it is going to take tremendous presidential leadership, and I'm not sure that this president is that involved. He wants to do business tax reform first, [Ways & Means Committee Chairman] Ryan and I have said if you'll submit a detailed and well-thought out plan, we'll see what we can do. We've said that for the last several months and we haven't seen anything.” Senate Majority Leader McConnell has shared similar sentiments. Over in the House, Chairman Ryan has labeled comprehensive reform as a “2017 project” but has a called for a “down payment” on reform in the near term to include permanent tax extenders and international tax reform this year.
PPP will continue to monitor legislative developments on the IRA Charitable Rollover, tax reform, and a host of other issues affecting charitable giving when Congress returns from its August recess next month. In the meantime, PPP members should plan to join the next Legislative Update Virtual Meeting on September 16th and attend the Federal Advocacy Update for Charitable Gift Planners session at the National Conference on Philanthropic Planning in October for all the latest information.