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TAX TAKE: With or Without You – Potential Formulations of a Lame Duck Tax Title

Tax Alert

As tax policy observers await the outcome of the November midterm elections and the start of the lame duck legislative session, attention is turning to the potential contours of a year-end tax package. Although there is a long list of potential items for inclusion, the ultimate composition of a tax title will depend on a variety of factors including the election results, the availability and type of moving legislative vehicle for the title to ride on, and the ability of Democrats and Republicans to negotiate a bipartisan deal.

How Congress deals with funding the federal government beyond December 16, 2022 (when the current continuing resolution expires) will be pivotal. An omnibus appropriations bill to fund the federal government for the full fiscal year would present an ideal vehicle to which a tax title could be attached, whereas it would be extremely challenging to add any tax provisions to another short-term continuing resolution. That said, with both leaders of the Senate Committee on Appropriations retiring at the end of this year, the odds of an omnibus appropriations bill being enacted are good, regardless of the outcome of the elections.

Assuming there is a suitable legislative vehicle, the likely anchoring component of a tax title would be the pending retirement security package, which has the added advantage of being deficit neutral. Whether the tax title goes beyond the retirement security package is dependent upon a number of factors – none perhaps as important as how policymakers negotiate a balance of individual tax relief and business tax relief. In particular, negotiations over the scope of child tax credit relief – a priority for Democrats – will dictate the potential scope of business tax relief included in the tax title. At a minimum, the R&D amortization fix likely would be included, but whether other business tax relief – e.g., the section 163(j) EBITDA fix, a delay in the pending phase-out of 100 percent bonus depreciation, tax extenders – is highly dependent on whether or not a deal can be struck on child tax credit relief.

There is a spectrum of what could be included in a lame duck tax title. On one end, it could be limited to the retirement security package, perhaps with the R&D amortization fix added. On the other end, it could become an expansive title that would pick up other business tax relief if the parties can negotiate a deal on child tax credit relief. Stay tuned. #TaxTake

Upcoming Speaking Engagements and Events

Loren will speak at the TEI 77th Annual Conference in Scottsdale, AZ on October 24. She will present "Swamp Talk: Federal Tax Legislative & Regulatory Update - Midterm Elections and 118th Congress Preview."

Jorge will speak at the Philanthropy Southwest 74th Annual Conference in Colorado Springs, CO on October 28. His panel, "Washington Legislative Update: Innovative Philanthropy & Trending Topics," will cover the latest federal legislative policy updates affecting the charitable sector.

On November 2, Loren will be in Los Angeles to present "Trends in International Tax Controversy Including IRS Campaigns, Appeals, and ICAP," at the IFA USA/TEI Los Angeles International Tax Conference.

Loren will speak on a panel titled "Tax Policy," at the ABA 33rd Annual Philadelphia Tax Conference on November 15.

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