TAX TAKE: Wishful Thinking: How a Year-End Tax Package Could Happen
Now that the House of Representatives has a Speaker and the end of 2023 is fast approaching, eyes are again turning to the potential for a year-end tax package. While the uncertainty of the appropriations process – including a potential government shutdown at the end of this week – has lowered expectations, here is our "glass is half full" analysis of how a tax package could come together before we ring in the new year.
- Johnson Defers to Smith. Although Speaker Mike Johnson (R-LA) now wields a significant amount of influence over tax policy, he could defer to House Committee on Ways and Means Chairman Jason Smith (R-MO) to lead the House's efforts in moving a tax package this year.
- Inclusion of SALT Relief. Speaker Johnson reportedly has assured moderate House Republicans that relief from the current state and local tax (SALT) deduction limitation will be addressed in a year-end tax bill. Inclusion of SALT relief would not only attract support from those moderate House Republicans, but likely House and Senate Democrats.
- A Child Tax Credit Deal. Democrats insist that any tax package include child tax credit (CTC) relief, which also has some level of Republican support (including that of Chairman Smith). Assuming a compromise on CTC relief can be reached – ideally at a revenue cost comparable to the cost associated with the "Big Three" Tax Cuts and Jobs Act (TCJA) tax extenders (research and experimentation (R&E) amortization, 100 percent bonus depreciation, and the section 163(j) earnings before interest, taxes, depreciation, and amortization (EBITDA) limitation) – a tax package could garner the necessary bipartisan support in the House and, most importantly, the Senate.
- An Acceptable Offset is Identified. In the current fiscal environment, both parties will likely insist that the revenue cost of a year-end tax bill is offset. Given that Republican proposals to date – the repeal of Inflation Reduction Act (IRA) green energy credits and a reduction in IRS funding – have no Democratic support, congressional taxwriters may need to find alternative sources of revenue acceptable to both parties.
- A Legislative Vehicle Emerges. A bipartisan omnibus appropriations bill – the most likely legislative vehicle for a tax package – may not materialize before year-end. And while a continuing resolution (CR) is not a likely vehicle for a tax package, a CR beyond the calendar year may create a window for other year-end legislation. Pending tax items – such as the United States-Taiwan Expedited Double-Tax Relief Act or the need to extend the Federal Aviation Administration (FAA) excise taxes – could become the vehicle for a year-end tax bill.
Supporters of a year-end tax package, particularly those of the Big Three TCJA extenders, are laser-focused given the need for these provisions to be extended retroactively and the low odds of a tax package developing in 2024 given the upcoming presidential and congressional elections. While a lot must fall into place for a year-end tax package to be enacted, we hope we have given some optimism for a reasonable alternative path forward outside the appropriations process. #TaxTake
Upcoming Speaking Engagements and Events
Loren and Tax Department Chair Layla Asali are speaking at the ABA 34th Annual Philadelphia Tax Conference on November 14 and 15.
Loren will present a legislative update and outlook at The Tax Council's Annual Meeting on November 16.
Marc will present at the 2023 Blue Cross Blue Shield National Tax Conference in Austin on November 29.
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