Weekly Legislative Update - July 29, 2019
Finance Chairman Grassley's Floor Statement On Tax Extenders Benefits
Below is a statement on "Tax Extenders Benefits" that Senate Finance Committee Chairman Charles Grassley delivered to the Senate last week.
Senator Grassley calls for immediate extension of tax extenders through 2019, and then work to produce another bill providing long-term extensions for as many extenders as possible.
In the statement, Senator Grassley asks the naysayers in the House of Representatives who oppose tax extenders, "If you can't fund the Indian Employment Tax Credit and Empowerment Zone tax credit, how are you going to fund the Work Opportunity Tax Credit and New Markets Tax Credit which cost more?"
Prepared Floor Remarks by U.S. Senator Chuck Grassley of Iowa
Chairman, Senate Finance Committee
Tax Extenders Benefit Individuals, Green Energy and More
Wednesday, July 24, 2019
"For the past week there have been ongoing discussions between congressional leadership and the Administration relating to an agreement on budget caps and raising the debt limit. Those discussions produced an agreement that was announced Monday night.
While I understand reaching an agreement was important to ensure the full faith and credit of the United States, I am disappointed the final agreement does not address a subject that has been causing heart-ache for millions of taxpayers for at least the past six months. That subject is what is known as "tax extenders."
For decades, Congress has routinely acted on a bipartisan basis to extend a number of expired or expiring provisions. Typically, their extension would be included as part of a larger spending package or budget deal at the end of the year.
Unfortunately, this never occurred at the end of last year. Now, here we are almost seven months after the end of 2018 and three months after the close of the regular tax filing season, and taxpayers still have no answer.
The budget and debt limit agreement announced Monday is yet another missed opportunity to provide answers for the millions of taxpayers - both individuals and businesses - who are waiting on Congress so they can finalize their 2018 taxes and in some cases even stay in business.
While Finance Committee Ranking Member Wyden and I have been ready and willing to address tax extenders since early on in this Congress, the new Democratic majority in the House of Representatives has been reluctant to act.
It seems as though the House Democrats are unaware of the historic bipartisan nature of tax extenders or how these provisions even apply to taxpayers, industries and the economy. This is evident from characterization of these provisions by some of these members as 'just tax breaks for corporations and business.'
In fact, the overwhelming majority of the "tax extenders" either benefit individuals and families directly, or they benefit our communities by giving a boost to local businesses that many people directly rely on for jobs and to support their local economies.
For illustration purposes, I've broken the tax provisions that expired in 2017 into four categories: 1. Tax Relief for Individuals, 2. Green Energy Incentives, 3. Employment and Economic Incentives for Distressed Area, and 4. General Business Incentives.
If you look at this chart you will see these categories broken down by the relative cost of the extension of the tax extenders in each category.
As you can see, based on JCT estimates of a two-year extension of these provisions for 2018 and 2019, the largest cost associated with extending them is for what I term "green energy incentives." These green-energy incentives account for nearly 60 percent of the cost of an extension.
These incentives include provisions to encourage the use and production of clean and renewable fuels, to promote electricity generation from certain clean and renewable sources and tax incentives for more energy efficient buildings and homes.
Here I would have thought the new Democratic majority in the House would be all about "green jobs" and reducing our nation's carbon emissions through alternative-energy sources. Yet, they have been reluctant to embrace a bipartisan tax package with nearly 60 percent of the cost dedicated to green-energy incentives.
The long delay in addressing these provisions is needlessly putting thousands of good paying green jobs at stake. A couple of weeks ago we saw a biodiesel plant in Nebraska close down, costing about 40 employees their job. And just today Renewable Energy Group (REG) announced it's closing a Texas plant due to the uncertainty of the tax credit. Should we fail to extend the biodiesel tax credit soon, many more could follow. That would put the 60,000 jobs supported by the biodiesel industry nationwide in jeopardy.
After "green energy" provisions, individual provisions represent the second largest component of the tax extenders, totaling nearly a third of the cost.
These provisions include relief for homeowners who obtain debt forgiveness on a home mortgage, a deduction for mortgage-insurance premiums and a provision that allows college students to deduct tuition and related expenses. They also include incentives for individual consumers to purchase energy efficient products for their home, as well as certain types of alternative vehicles.
To highlight just one of these provisions, in 2017, over 1.5 million taxpayers took advantage of the college tuition deduction. You can think of that as over 1.5 million students who have been left dangling for 2018 and so far this year as Congress continues to consider whether or not to extend this deduction. And, for some, this deduction of up to $4,000 for education expenses can be the difference between continuing their education or waiting another year to finish a degree and move up to a better job.
The remaining two categories are small in terms of cost in comparison to the first two.
The provisions relating to Employment and Economic Incentives for Distressed Areas makes up only 4.1 percent of the overall cost and consists of two provisions. They are the Indian Employment Credit and the Empowerment Zone Incentives. I find it hard to believe the New House Democratic majority finds it objectionable to incentivize employers to hire Native Americans or provide incentives to encourage businesses to locate and bring jobs to low-income areas. And, if we can't address these two employment and economic incentives, how are we going to deal with two much larger ones that expire at the end of this year - the Work Opportunity Tax Credit and the New Markets Tax Credit?
So, I guess it must be the final category, which I have termed General Business Incentives that the House Democratic majority must find so objectionable. These provisions make up a whopping 4.5 percent of the total cost of extending provisions that expired at the end of 2017.
Most of these provisions have very minimal cost as they only accelerate when a business may deduct certain deductions and not whether the costs are deductible in the first place.
However, the most costly of what I term general business incentives is also likely the most popular. That's the Short Line Tax Credit. This provision offers a tax credit to short-line railroads for qualified maintenance expenditures. This credit isn't available to the largest railroads, or Class I railroads.
This credit benefits smaller railroads that are critically important for farmers and many manufacturers to get their products to the global market. For example, in Iowa, according to recent data from the American Short Line and Regional Railroad Association, there are nine short line and regional railroads.
This credit isn't just supported by and important to the railroads themselves, it's also supported by the users of short line railroads who depend on them to get their products to markets around the world. For example, Midwest soybean farmers selling to the Asian market typically must ship their crop by rail to the Port of Seattle, and the short-line railroads are critical to that transportation network.
The fact is this provision is far more than some sort of "give away" to business. It's a provision that's important to whole communities. This is probably a big reason why legislation making this credit permanent currently has 50 cosponsors in the Senate and 228 cosponsors in the House.
I hope I have been able to clear up some of the misunderstanding regarding tax extenders for the New Democratic majority in the House. Extenders are not just about businesses or corporations. They overwhelmingly benefit individuals, green energy and promote job creation in urban and rural communities alike.
In order to provide certainty to the people who relied on these provision in 2018 and potentially this year, we should extend them at least through 2019 as quickly as possible. This could have been done as part of the bipartisan agreement on the budget and debt limit announced Monday. Unfortunately, I fear a misunderstanding of what extenders are and who they benefit on the part of the new Democrat House Majority contributed to them being left out of the deal.
I know that there are those who question the need to extend these provisions in perpetuity, and I agree with them. That's why the Finance Committee created a series of task forces to examine these policies for the long-term. The task forces were charged with examining each of these provisions to determine if we can reach a consensus on a long-term resolution.
I look forward to receiving the submissions of the task forces later this week. Hopefully, these submissions will provide a basis for the Finance Committee to put together an extenders package before then end of the year that includes longer-term solutions for as many of these temporary provisions as possible. This is important so we can stop the annual exercise of kicking the can down the road.
However, in the meantime I remain committed to acting as soon as possible so taxpayers who have relied on these provisions in 2018 don't end up feeling like Charlie Brown after Lucy pulls the football away."
Beneficial Ownership Legislative Update
On June 12, 2019, H.R. 2513, The Corporate Transparency Act of 2019 was favorably reported out of the House Committee on Financial Services.
It is our understanding that House Financial Services is requesting this legislation be brought to the House floor the first week back in September. We are preparing like that is going to happen.
On the Senate side, the Banking Committee held two hearings on the topic on May 21, 2019 and June 20, 2019. The Senate Judiciary Committee also held a hearing on the topic on June 19.
Shortly before the June 20 hearing Senators Warner, Cotton, Jones, and Rounds floated the draft ILLICIT CASH Act which is very similar to the Corporate Transparency Act from the House.
We are expecting this Senate group of 4 to formally introduce the ILLICIT CASH Act this week or next.
Lastly, the Wall Street Journal published an editorial on July 16, 2019 in opposition to the Corporate Transparency Act of 2019.
DOL Proposes Rule to Create Private-Sector Apprenticeship Programs
On June 25, 2019, the Department of Labor (DOL) published a proposed rule to create an apprenticeship program run by private-sector partners recognized by the agency.
The agency would designate "standards recognition entities" or SREs from the private sector. These bodies would approve individual "industry-recognized apprenticeship programs" or IRAPs. SREs would focus on specific industries or occupational areas, and they would be recognized by DOL to ensure that its requirements are met.
The agency would not, at least initially, accept applications from SREs seeking to recognize apprenticeship programs in the U.S. military or in the construction industry. Industry apprentice programs (or IRAPs) may be developed by trade and industry groups, large and small businesses, nonprofit organizations, unions and joint labor-management organizations.
Small businesses seeking to create an industry apprenticeship program would apply with the SRE and pay a $3,000 fee.
DOL is seeking feedback on this new program, and the economic impact of this rule on the small business community.
Comments on this rule are due on August 26, 2019.
* The text of this proposed rule and further information is posted HERE.
* Comments on this proposed rule are due by August 26, 2019 and can be submitted HERE.
**CONGRESS WILL ADJOURN FOR AN AUGUST RECESS. THEREFORE, WE WILL RESUME THE LEGISLATIVE UPDATE AFTER LABOR DAY**