Senate Finance Committee Approves Two-Year Extenders Bill

Published by Michael Novogradac on Tuesday, July 21, 2015 - 12:00am

On July 21, the Senate Finance Committee approved legislation that included a 2015 and 2016 extension of most tax provisions that expired at the end of 2014. It came on a strong bipartisan vote of 23-3, with only Sens. Michael Enzi, R-Wyo.; Pat Toomey, R-Pa.; and Dan Coats, R-Ind., opposed. Included in the bill are the following:

  • An extension of the minimum 9 percent low-income housing tax credit (LIHTC) applicable percentage for allocations made by the end of 2016.
  • A minimum 4 percent applicable percentage for LIHTC used to finance the acquisition of existing properties for allocations made by the end of 2016.
    • It should be noted that this provision does not apply to 4 percent LIHTC generated by multifamily housing private activity bonds.
  • Two additional rounds of new markets tax credit (NMTC) authority, adjusted for inflation from 2007, to provide $3.94 billion annually. This is the first authority increase since the temporary increase authorized by the American Reinvestment and Recovery Act of 2009 (ARRA).
  • An extension of the Section 45 renewable energy production tax credit (PTC) for projects that commence construction by the end of 2016.
  • An extension of the election to claim the Section 48 investment tax credit (ITC) in lieu of the PTC by the end of 2016.
  • An extension of 50 percent first-year bonus depreciation for property placed in service by the end of 2016.
  • An extension of the Section 45L new energy-efficient home tax credit for eligible homes acquired by the end of 2016.
  • An extension of the Section 179D energy-efficient commercial and multifamily buildings deduction for two years, through the end of 2016.
    • In addition to the extension, the bill allows nonprofits and tribal governments to allocate the deduction to the person primarily responsible for designing the property, just as current law permits for public property.
    • The bill also increases the efficiency standards such that by 2016 qualifying buildings are determined relative to the ASHRAE/IESNA 90.1-2007 standards.

Several senators offered amendments during committee deliberations, but because of strict ground rules that only permitted provisions that addressed expired tax provisions and allowed those provisions to be effective no later than the end of 2016, those amendments were ruled not germane and were withdrawn.

For example, Sen. Toomey offered an amendment to repeal the PTC entirely, arguing it was inefficient and bad policy, but decided to withdraw the amendment, recognizing the lack of support on the committee. Sen. Coats expressed support for Sen. Toomey’s amendment, and offered an amendment to phase-down the PTC by 20 percent, citing the wind industry past support for a phase-down, but like Sen. Toomey, he withdrew his amendment. Sen. Rob Portman, R-Ohio, noted his amendments to phase down both the ITC and PTC by 30 percent in 2017 and 40 percent in 2018, followed by the elimination of the PTC in 2019, while allowing the ITC to be effective for projects that commence construction by the end of 2016, provided policy “parity” with the PTC. However, these amendments were also withdrawn.

These PTC-related amendments indicate the controversial nature of that credit, and it is unclear whether the PTC will remain in the final extenders bill.

Sen. Dean Heller, R-Nev., along with Sens. Maria Cantwell, D-Wash., Portman, and Michael Bennet, D-Colo., offered an amendment focused solely on providing ITC the policy “parity” on commence construction and Sen. Ron Wyden, D-Ore., also filed a similar amendment. However, these amendments were ruled non-germane and withdrawn.

Before the committee action, senators on the committee filed several other noteworthy amendments, described below. While they were not offered, the fact that senators filed them is significant and portends possible positive legislative action in the future.

  • Cantwell and Pat Roberts, R-Kan., filed an amendment to make the minimum 9 percent LIHTC applicable percentage permanent and establish a permanent minimum 4 percent applicable percentage for LIHTC used to finance the acquisition of existing property.
  • Charles Schumer, D-N.Y.; Portman; Ben Cardin, D-Md.; Cantwell; Debbie Stabenow, D-Mich.; Sherrod Brown, D-Ohio; Bob Casey, D-Pa.; and Bob Menendez, D-N.J. filed an amendment to make the NMTC permanent at $3.5 billion annually.
  • Cardin, Schumer, Brown, Stabenow, and Menendez offered an amendment to increase NMTC authority in 2015 and 2016 by providing an inflation adjustment from 2000, which was estimated to provide $4.9 billion in 2015 and $5.1 billion in 2016.
  • Schumer, Cantwell, Bennet, Casey and Menendez offered an amendment to provide disaster tax relief for federally declared disasters in 2012-2015, similar to a separate bill Sens. David Vitter, R-La., Bill Cassidy, R-La., and Schumer introduced last week, S. 1795. Among several provisions, it would provide:
    • Special LIHTC allocation equal to greater of $8 per capita in affected areas or 50 percent of the state’s LIHTC ceiling;
    • Special $500 million NMTC allocation for projects in affected areas;
    • Increased Section 47 rehabilitation tax credit percentages: 26 percent for historic structures and 13 percent for non-historic structures placed in service before 1936; and
    • Special allocation of private activity bond authority.

It is unclear when the full Senate will consider the Finance Committee-approved extenders bill. Chairman Orrin Hatch, R-Utah, had suggested that it may be attached to the highway trust fund financing bill that is expected to be considered in the full Senate during the week of July 20, but that is uncertain.

Meanwhile, House Ways and Means Committee Chairman Paul Ryan, R-Wis., has announced his intention to consider extenders legislation “in the fall.” There is hope that the final extenders bill could be approved much earlier than mid-December, as was the case last year.