House Ways and Means Chairman Kevin Brady has refashioned his year-end tax package to try to maximize GOP votes for a stand-alone bill, while dropping provisions the Senate could still pick up and pass this year, possibly as part of a huge wrap-up spending bill.
Brady, R-Texas, deleted $29.9 billion worth of tax provisions, collectively known as “extenders” because they are continually revived for a year or two at a time, that faced GOP opposition in the House. That includes one revenue-raiser disliked by the coal mining industry, which would extend the current tax they pay to support disabled miners with black lung disease; the tax would otherwise be slashed substantially next year.
At the same time, Brady added a host of measures favored by Republicans, including rollbacks of several health care-related taxes, a fix to last year’s tax law for the recreational vehicle industry and add-ons favored by conservatives, such as an expansion of 529 education savings accounts for home-schooling expenses and repeal of the so-called Johnson Amendment, which prohibits churches and charities from making political endorsements or risk losing their nonprofit status.
While Brady referred to the new package as the “tweaked” version of the bill, more than half of the original cost of the legislation was stripped out. Changes to the 2010 health care law alone would add $52 billion to deficits over the next decade. The total cost of the new package, Brady said, is $80 billion.
That includes provisions from the original bill, such as $13.5 billion in 10-year costs for retirement savings incentives and $1.8 billion to exempt churches and other nonprofits from being taxed on parking and other transportation fringe benefits.
The Treasury Department and the IRS issued guidance Monday on the transportation fringe benefit provision. Under the 2017 tax law, it would make such benefits fall under “unrelated business taxable income,” which applies to revenue-generating activities carried out by nonprofits that aren’t part of a nonprofit’s core mission, charitable or otherwise.
The guidance would retroactively allow church groups and others to change their employee parking arrangements so as not to fall under the tax, but it does not fix the underlying issue. However, due to Senate Democratic opposition to targeted tax law fixes without a top-to-bottom review next year, church groups and others may have to live with the IRS ruling for the time being.
The original year-end tax bill stalled Nov. 30 when an expected vote in the House was scrapped because the measure didn’t have the votes to pass, lawmakers said.
Republicans were particularly aggrieved that Brady’s bill would extend increased rates of $1.10 per ton of coal mined underground and 55 cents per ton of surface-mined coal through 2019. Otherwise the tax would have reverted to 50 cents and 25 cents, respectively. The one-year extension would raise $169 million.
The extension is not in the new version of the bill.
“This represents, I think, improvements that we’ve listened to from our members in the House, our discussions as we listened to Democrats and what’s important to them as well,” Brady said. “And so we’re introducing this today and hoping to move it forward.”
The new bill also would extend the same favorable treatment to the recreational vehicle industry as was extended to auto dealers in last year’s tax overhaul, with certain financing arrangements carved out of new limits on the deductibility of interest expense. RV trailer dealers were unintentionally left out of the legislation and were hit with the law’s new interest deductibility limits on their floor plan costs, or short-term loans used to finance inventory.
Meanwhile, Brady would further delay the onset of several of the 2010 health care law’s taxes that Congress has already repeatedly pushed back, namely the excise tax on medical device manufacturers, a fee applied to health insurers and the so-called Cadillac tax on high-cost employer-sponsored health plans.
Brady’s revised bill would extend the medical device tax suspension for five years, through 2024; suspend the health insurer fee for two years through 2021; and delay the Cadillac tax from taking effect for one additional year, through 2022. In addition, the measure would repeal the law’s tax on indoor tanning-bed services, at a relatively small cost of about $400 million over a decade.
“This package looks familiar because it delivers bipartisan relief from some of the Affordable Care Act’s most egregious taxes,” Brady told reporters. He called the new package “95 percent bipartisan.”
The other 5 percent, however, is bound to cause a few problems, in particular the Johnson Amendment repeal. “It’s been rejected over and over,” said David L. Thompson, vice president of public policy at the National Council of Nonprofits. “This doesn’t have public support, or Senate support.”
The generally popular tax extenders package was dominated by a seven-year extension and phaseout of the biodiesel tax credit, scored at a $16.9 billion cost, and a one-year extension of the alternative fuels tax credit, scored at a cost of $7.1 billion.
“Now that’ll run on a separate track, so we’re looking for signals from the Senate,” Brady said of the extenders package.
Brady repeated his hopes of Democratic support because of sections of the bill that would overhaul the IRS, which the House passed as a stand-alone bill by a vote of 414-0 earlier this year; temporary tax breaks for residents in areas hit by hurricanes Michael and Florence, among other natural disasters; and retirement savings provisions that have garnered support from Democrats.
The extenders portion, along with disaster relief and the IRS provisions in particular have wide support in the Senate, said Sen. Charles E. Grassley, R-Iowa. However, he predicted that the only viable option for these sections to become law is as part of a year-end spending bill.
“I think anything we did on this, even if it was the way Brady originally wanted it, it would have to be on the spending bill,” said Grassley, who is likely to assume the Finance Committee chairmanship next year.
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Kate Ackley contributed to this report.