The uncertain outcome of the 2022 midterm elections has some tax experts thinking about how the final session of the current Congress and the upcoming term of the next Congress will consider tax issues, Accounting Today reported. As of Monday afternoon, the Democrats had retained control of the Senate, 50-49, with a runoff scheduled for Georgia in December, and control of the House was still unclear but favoring Republicans.
Three immediate business issues for the current Congress, which will sit until December, are deferring research-and-development expensing, deferring the change in interest expense deduction rules from earnings before interest, taxes, depreciation and amortization (EBITDA) to earnings before interest and taxes (EBIT), and deferring the phasedown of 100 percent bonus depreciation, which starts next year, according to Dave Kautter, a former acting commissioner of the IRS and assistant secretary for tax policy at the Treasury Department who is currently federal specialty tax leader at RSM US.
“[I]t seems to me [that those] are three business provisions that are front and center,” Kautter told Accounting Today.
Kautter said there is bipartisan interest in deferring all three provisions during the lame-duck session, although some Democrats would like to see any business tax changes linked to an extension of the enhanced child tax credit, which lapsed last year. He also said that Congress will also need to contend with the remaining set of tax extenders that were not made permanent by the Tax Cuts and Jobs Act of 2017 and other legislation.
He told Accounting Today that the business incentives, the Child Tax Credit and the extenders will probably pass by the end of the year.
IRS funding is one issue that may attract attention. Republicans have threatened to block the $80 billion allocated over 10 years to the tax collection agency, or try to limit how much it IRS can spend on extra enforcement and tax audits.
Kautter said that he does not believe that that Senate will be able to confirm President Joe Biden's nominee to be the IRS’s new commissioner, David Werfel, by the end of the session. Werfer was previously acting IRS commissioner as well as controller of the Office of Management and Budget during the Obama administration. He now works in the private sector at the Boston Consulting Group.
“I think the Republicans want to take a close look at his work, not because they've got any questions about his background,” he said. “I think they're just curious as to what his views are.”
Looking ahead to 2023 and 2024, Kautter told Accounting Today that he doubts that Congress will lift the $10,000 cap on state and local tax deductions imposed by the 2017 Tax Cuts and Jobs Act. He also said that Republicans will want to push to extend some provisions of that legislation that are set to expire at the end of 2025, but there would still be time for that to be happen after 2024.