A package of tax breaks, including one that allows tax-free charitable donations from individual retirement accounts, gained momentum in the Senate on Tuesday.
The Senate Finance Committee approved a
two-year extension of 52 individual, energy and business tax measures that expired on Jan. 1.
The IRA provision allows someone 70½ or older to transfer required minimum distributions of up to $100,000 to public charities tax-free. The donations would be excluded from the IRA holder's gross income. Other provisions in the bill include deductions for state and local sales taxes, a research and development tax credit, bonus depreciation and renewable energy tax breaks.
The bill, which would extend the tax provisions through 2016, will head to the Senate floor, where it could be attached to highway funding legislation. Even if that's not the vehicle, the committee's Republican and Democratic leaders want the extenders package to move quickly.
“They want to get this done sooner rather than later,” said Dean Zerbe, managing director of alliantgroup, a national tax services firm. “The desire is to avoid the dust-up we had last year.”
The House has passed legislation that would
make several of the extenders permanent. The White House has threatened to veto those bills, saying they are not paid for and would increase the federal deficit.
All of the so-called tax extenders were
renewed in December retroactively for 2014 but expired for this year as of Jan. 1. Congress often does not renew extenders until the last moment before they expire.
The uncertainty in the process can roil financial planning for clients who use the IRA charitable contribution provision.
Tim Steffen, director of financial planning at Robert W. Baird & Co., is happy to see extenders on a faster track than they were last year.
“This gives me hope we'll see something before the end of the year,” Mr. Steffen said. “But there's still a long way to go. History has shown us that these things go down to the wire every year.”
It's not clear how much of a challenge it will be to reconcile the Senate's two-year renewal with the House's effort to make several of the extenders permanent.
Senate Finance Committee Chairman Orrin Hatch, R-Utah, said he would “defer litigating the issue of permanence until a later time. But, make no mistake … my goal is to see many of these provisions made permanent.”
Many lawmakers would rather deal with extenders as part of comprehensive tax reform. But the prospects are dim for that effort before 2017.
“This legislation is going to lock these policies in place for two years, past the next election,” said Sen. Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee.
Mr. Steffen and his clients are planning for congressional approval of the extenders.
“We've gotten into the habit of assuming that things will get fixed by the end of the year,” Mr. Steffen said. “But we're putting the appropriate caveats on it.”
