| 3.23.22

Should Congress Extend Tax Deductions and Credits for 2014? (H.R. 5771)

Do you support or oppose this bill?

What is H.R. 5771?

(Updated July 19, 2017)

This bill was enacted on December 19, 2014

This bill would extend specified tax provisions for one year, after they expired on December 31, 2013. Basically, if H.R. 5771 is passed, those provisions would be in effect when the 2014 tax filing season begins. This would prevent tax increases on individuals and businesses.

It would also address clerical and technical errors in the tax code, while eliminating provisions that no longer serve any purpose.

Argument in favor

If this bill were to fail, many individuals and businesses would see their tax bill increase when they go to file their 2014 returns. That would hurt the outlook for economic growth in 2015.

Argument opposed

Extending for one year a number of very popular tax credits and deductions is not a good way to run the government, and looks more like the desperate workings of a lame duck Congress.

Impact

Taxpaying individuals and businesses, and the Internal Revenue Service.

Cost of H.R. 5771

A CBO cost estimate is unavailable. The Joint Committee on Taxation estimates that enacting this legislation would reduce revenues by $44.7 billion between 2015-2024, which amounts to a $4.47 billion per year reduction.

Additional Info

Of Note:

Here are some of H.R. 5771's highlights:

Tax Extenders for Individuals

This bill would extend the exclusion of qualified primary residence debt from gross income, reducing tax revenues by over $3 billion over the 10-year period.
The treatment of mortgage insurance premiums as qualified residence interest would be extended, reducing tax revenues by $919 million over the 10-year period.
Deductions for state and local sales taxes would be extended and an option for an itemized deduction would be included, reducing tax revenues by $3.1 billion over the 10-year period.
The above-the-line deduction for qualified tuition and expenses related to higher education would be extended, subject to limits on the deduction size and the individual’s income. For individuals making less than $65,000 per year the deduction is $4000, and for those making less than $80,000 per year the deduction is $2000 (both caps are doubled for joint filers). This provision would reduce tax revenues by $300 million over the 10-year period.
The rule for contributions of capital gains of real property for conservation purposes would be extended. This would reduce tax revenues by $129 million over the 10-year period.
The provision allowing individuals over 70.5 years of age to exclude from gross income qualified charitable distributions from Individual Retirement Accounts (IRAs). The exclusion is capped at $100,000 per taxpayer. This provision would reduce tax revenues by $384 million over the 10-year period.

Business Tax Extenders

The research and development (R&D) tax credit would be extended, allowing a 20% credit for qualified research expenses, or a 14% simplified credit. This would reduce revenues by $7.6 billion over the 10-year period.
The new markets tax credit would be extended, and an additional $3.5 billion would be authorized for use as a tax credit for 2014. This provision encourages investment, business creation, and loan origination in low-income communities. It would reduce tax revenues by $978 million over the 10-year period.
The work opportunity tax credit would be extended through 2014, and would reduce revenues by $1.375 billion over the 10-year period.
A railroad track maintenance tax credit would be extended, and would be equal to 50% of qualified railroad track maintenance expenditures. This would reduce tax revenues by $207 million over the 10-year period.
The issuance of $400 million of qualified zone academy bonds during 2014 would be extended, allowing proceeds to be used for school improvements with at least 10% of the cost being matched by private entities. This would reduce tax revenues by $126 million over the 10-year period.
The enhanced charitable deduction for contributions of food inventory would be extended, reducing tax revenues by $143 million over the 10-year period.
The small business expensing limitation would be extended, and phase out amounts in effect from 2010 to 2013 ($500,000 and $2 million) to property in service during 2014. These amounts are $25,000 and $200,000, respectively. The special rules allowing expensing for computer software, qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property would be extended through 2014. This would reduce tax revenues by $1.4 billion over the 10-year period.
The extension of dividends, interest, rents, and royalties between controlled foreign corporations. This provision would reduce tax revenues by $1.1 billion over the 10-year period.
Economically distressed areas would continue to have tax incentives such as employment credits, increased expensing, tax-exempt bonds, and gain exclusion from the sale of small business stock. This would reduce tax revenues by $251 million over the 10-year period.

Energy Tax Extenders

The credit for purchases of non-business energy property - up to 10% of the amount paid or incurred by the taxpayer up to $500 - would be extended. This provision would reduce tax revenues by $832 million over the 10-year period.
The extension of incentives for biodiesel and renewable diesel would be extended, specifically the $1 per gallon credit for biodiesel and the agri-biodiesel producer credit of 10 cents per gallon. Also extends the $1 per gallon production tax credit for diesel fuel from biomass. This would reduce tax revenues by $1.3 billion over the 10-year period.
The production tax credit for wind and other renewable sources of electricity for projects that began before the end of 2014 would be extended, reducing tax revenues by $9.6 billion over the 10-year period.
Extends the credit for energy efficient new homes, with eligible contractors claiming a tax credit of $1000 or $2000 for the construction or manufacture of a new energy efficient home that meets qualifying criteria. This would reduce tax revenues by $267 million over the 10-year period.