Has This Year’s Tax Extenders Spurred a Tax Reform?

capitol-720677_960_720Certainty, no metaphorical ‘lumps of coal’ were found in any Christmas stockings from Congress this year. Instead, Congress wholly embraced the holiday season by providing taxpayers with a gift in the form of tax extenders. Hence, has the annual uncertainty and ritual of tax extenders become the Ghost of Christmas past?

Like clockwork, Congress votes on prolonging a set of temporary tax provisions every year or two. Tax extenders, as they are collectively known, are often renewed at the very last minute, providing uncertainty to businesses around the nation.

However, as we mentioned in our post yesterday, the Protecting Americans from Tax Hikes (PATH) Act of 2015 was signed into law on the 18th December 2015 by President Obama. The package of tax extenders will cost $622 billion over the next decade and permanently extends many popular business and individual incentives.

Undeniably, the Path Act has provided long-term certainty for many incentives. In fact, this year, 52 tax provisions that have expired have either been temporarily extended or made permanent. Almost two dozen are made permanent, including the important R&D Tax Credit.  Since the announcement of the Path Act, advocators have heralded the tax extenders legislation as a stride towards a tax reform.

Traditionally, making extenders permanent is seen as step one for fundamental tax reform because it allows a more accurate revenue target when forecasting feedbacks from changes to the tax code. According to Mark Bloomfield, president and CEO of the American Council for Capital Formation, the permanent tax legislation released last week could bear the possibility of a tax reform. Bloomfield writes that the settlements in the Path Act could be the road map in 2017 for the first 100 days of the new president. Expanding on this, Bloomfield notes that in the first 100 days the new president has his maximum political capital and Congress is inclined to follow presidential leadership.

Nonetheless, whether or not making the tax extenders permanent will fuel a tax reform is yet to be known. However, the bottom line is that the Path Act is essentially good for taxpayers and businesses, as it allows them to plan their activities with increased certainty. Moreover, Swanson Reed welcomes the permanency of the R&D Tax Credit which is vital to our clients. To discuss the credit further, please contact one of our specialist R&D Tax consultants.

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