Tax Committees Consider Expired Tax Provisions
April 4, 2014
This month, House and Senate tax-writing committees are taking the first steps to retroactively extend dozens of tax measures that expired on December 31, 2013. Altogether, 55 provisions expired at the end of last year. The process to pass tax-extender legislation has been complicated by efforts to seek overhaul reform of the tax code and disagreements over the scope and size of the extenders package.
NACUBO Weighs In
In a letter sent Friday, March 28, NACUBO joined American Council on Education (ACE) and 11 other higher education associations in urging House and Senate tax-writing committee leaders to include extensions of two key higher education provisions in any tax-extenders legislation enacted this year:
- Above-the-Line Deduction for Qualified Tuition and Related Expenses. This deduction allows eligible taxpayers to deduct up to $4,000 in tuition expenses as an above-the-line exclusion from income.
- Tax-Free Distributions from Individual Retirement Accounts for Charitable Purposes. The IRA charitable rollover allows individuals 70½ and older to donate up to $100,000 from their IRAs and Roth IRAs to public charities, including colleges and universities, without having to count the distributions as taxable income.
In another letter, NACUBO joined 60 organizations in supporting the extension of the energy efficient commercial building deduction. Internal Revenue Code section 179D permits a government building owner (for example, public institutions of higher education) to allocate the deduction to one or more persons "primarily responsible for designing the property"; this party can include architects, engineers, contractors, environmental consultants, or energy services providers. The letter also encourages the expansion of the provision to allow tax-exempt organizations (including private institutions) to allocate the deduction as well.
Ways and Means Chairman Deliberates Action, Announces Retirement
In a March 24 memo to House Ways and Means Committee members, the committee’s chairman, Dave Camp, stated, “Beginning in April, the Committee will continue its work by going policy by policy to determine which extenders should be made permanent.That process will include both hearings and markups.”
Camp also announced, on Monday, March 31, that he will not seek re-election to congress. He noted, "During the next nine months, I will redouble my efforts to grow our economy and expand opportunity for every American by fixing our broken tax code, permanently solving physician payments for seniors, strengthening the social safety net and finding new markets for U.S. goods and services."
Senate Finance Takes Action on Extenders
On Thursday, April 3, the Senate Finance committee approved the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act, which would reinstate most of the tax incentive provisions that lapsed on December 31, 2013.
The bill approved by the Senate Finance Committee would:
- Reinstate Tax-Free Distributions from Individual Retirement Accounts for Charitable Purposes. The proposal extends the exclusion from gross income for qualified charitable distributions from an IRA for two additional years (for distributions made in taxable years beginning before January 1, 2016).
- Reinstate Modification of Tax Treatment of Certain Payments to Controlling Exempt Organizations. The proposal extends the special rule for two years to payments received or accrued before January 1, 2016. Accordingly, under the provision, payments of rent, royalties, annuities, or interest income by a controlled organization to a controlling organization pursuant to a binding written contract in effect on August 17, 2006 (or renewal of such a contract on substantially similar terms), may be includible in the unrelated business taxable income of the controlling organization only to the extent the payment exceeds the amount of the payment determined under the principles of section 482 (i.e., at arm's length). Any such excess is subject to a 20-percent penalty on the larger of such excess determined without regard to any amendment or supplement to a return of tax or such excess determined with regard to all such amendments and supplements. The proposal is effective for payments received or accrued after December 31, 2013.
- Reinstate Above-the-Line Deduction for Qualified Tuition and Related Expenses. The proposal extends the qualified tuition deduction for two years, through 2015.
- Reinstate the Tax Credit for Research and Experimentation Expenses. The proposal extends the research credit for two years (through 2015).
- Reinstate the Energy Efficient Commercial Building Deduction, Section 179D. Senators approved an amendment to the EXPIRE Act that would not only extend the deduction for 2014 and 2015 but also—for the first time—permit 501(c)(3) nonprofit organizations to allocate the deduction to the "person primarily responsible for designing the building." As a result, in addition to public institutions, nonprofit colleges, which had previously been excluded from the 179D provision, can qualify and allocate the value of deducting certain energy-efficient commercial building expenditures to construction firms, architects, and other designers that incorporate green building design and construction technologies into academic buildings and other constructions projects.
While the Senate Finance Committee has taken the necessary first step in passing tax-extenders legislation, final Congressional action on tax extenders likely won't take place until after Election Day in November.
Director, Federal Affairs