Legislative update - Ways and Means acts to extend six expired provisions 

April 29:  The House Ways and Means Committee today approved—on a mostly partisan basis—bills that would permanently extend six of the more than 50 “tax extenders.” The committee approved no revenue offsets for any of the extensions, which together would cost $310 billion over 10 years.

Tax extenders to be made permanent

The six bills (each identified below by the bill number) would make permanent:

  • Research and experimentation credit (H.R. 4438)
  • Exceptions under subpart F for active financing income (H.R. 4429)
  • Look-through treatment of payments between related controlled foreign corporations (CFC) under the foreign personal holding company rules (H.R. 4464)
  • Section 179 expensing (H.R. 4457)
  • Basis adjustment to stock of S corporations making charitable contributions of property (H.R. 4454)
  • Reduction in S corporation recognition period for built-in gains tax (H.R. 4453)

Research credit proposal

Under the research credit bill (H.R. 4438), for tax years beginning after 2013, the “traditional” method of computing the credit would be repealed, and the Alternative Simplified Credit (ASC)—which has been elective—would be the only available method of computing the credit.

  • The ASC would be raised from 14% to 20%, for research spending in excess of 50% of the average spending in the three preceding tax years.
  • A special ASC method for taxpayers that did not have research expenses in all three preceding years would be modified to allow them a credit of 10% of their current research spending.
  • The credit for “basic” research spending would be modified to make it, also, a credit equal to 20% of current year “basic” research spending in excess of 50% of the three-prior-year average spending.

Senate Finance action on tax extenders

On April 3, the Senate Finance Committee approved legislation that would extend 53 of the expired provisions for two years, through 2015. The extensions would cost $85 billion over 10 years.

Finance Chairman Ron Wyden (D-OR) on April 28 introduced a bill representing the committee’s action. It is not yet available.

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