The tax legislative agenda for the rest of 2019
With Congress back in session after its August recess, the possibility of tax legislation before the end of the year remains an open question. While the items that have been looked at by both the House and the Senate might be more likely to be part of a tax package, other issues could find their way into end-of-year tax legislation as well, according to John Gimigliano, principal-in-charge of KPMG’s Federal Tax Legislative & Regulatory Services.
Proposals that both the House and Senate have shown interest in include:
- Temporarily extending through 2020 the 30-plus expired or expiring tax preferences (extenders) that have already expired or that will expire at the end of 2019;
- Disaster relief;
- Retirement savings; and,
- A fix in Tax Cuts and Jobs Act provisions relating to the Kiddie Tax on the children of Gold Star Families (families that are immediate relatives of members of the U.S. Armed Forces killed in combat or in support of certain military activities).
Additionally, technical corrections to the TCJA and the Unrelated Business Income Tax treatment of fringe benefits that produced undesirable results (technical regrets versus technical corrections) could be on the table, Gimigliano said.
“There’s little chance that the extenders will advance as a stand-alone bill,” he said. “They will have to be attached to something bigger, and the most logical area will be government funding. October 1 marks the beginning of a new fiscal year, so there’s very little time to get a comprehensive agreement funding the federal government past September 30. It’s likely that there will be several rounds of short-term funding measures, or continuing resolutions, to buy time to iron out all the issues in the budget. The extenders will have to be attached to some ‘must-pass’ legislation such as this.”
“If you had to bet on just one thing being in a tax bill, it would probably be the extenders,” Gimigliano added. "But there are other items that might be part of a consensus legislative package. Both houses have expressed interest in fixing the Gold Star Family provision in the TCJA. The act had unintended consequences on military survivor benefits received as earned income by a child.”
“Both the Senate and the House have introduced retirement security legislation, which are similar to each other but not identical,” he said. “They include similar revenue-raisers relating to stretch IRAs, increased penalties for failing to file, and increasing excise tax information sharing.”
House versus Senate
Recently-passed House bills include provisions repealing the “Cadillac tax” on high-cost employer-sponsored health coverage and clarifying the tax treatment of legally married same-sex couples and allowing them to change their filing status outside the statute of limitations (the PRIDE Act).
“We don’t know to what extent, or if at all, the Senate will support repeal of the Cadillac Tax or the tax treatment of legally married same-sex couples,” said Gimigliano. “The provisions for Gold Star Kiddie Tax relief, the retirement legislation (the ‘SECURE Act’ in the House, and the ‘Retirement Enhancement Savings Act’ in the Senate) and the extenders have varying degrees of activity in each legislative body, but at a minimum both houses have indicated they are supportive.”
“There may be motivation to get all of these, but there probably is not enough time,” he said. “There are not enough days left in the legislative year to properly take up all of these proposals even if they wanted to.”
“The Joint Committee on Taxation has identified over 100 potential technical corrections,” he noted. “While there’s no guarantee we’ll get any of them, the ones we’re most likely to see include the net operating loss carryback provisions, the tax treatment of sexual harassment claims, and the inclusion of qualified improvement property in first-year bonus depreciation.”
There may be some pressure to get these done before year’s end, since it will be harder to do in an election year, according to Gimigliano. “The parties will have other priorities, and getting anything done will be a challenge,” he said. “Both parties will be trying to show voters, ’Here’s what we believe tax policy should be,’ and the two positions won’t likely align with each other.”