US Congress Will Punt-Legislative Update June 2011

Last year I spent a lot of time writ­ing about how the US Con­gress had done noth­ing with respect to resolv­ing tax issues.  Why is it impor­tant for Con­gress to pass tax law? It is very hard to do tax plan­ning before the end of the year, when you do not know what taxes you have to pay.  In 2010, the exten­ders pack­age, AKA the 2010 Tax Relief Act, finally passed and was signed on Decem­ber 17 of 2010-which meant the aver­age tax­payer had very lit­tle time to engage in tax plan­ning for 2010.  Fur­ther­more many of the pro­vi­sions in that act expire at the end of this year or the next. In oth­er­words the 111th Con­gress punted and left these issues to be resolved after the next pres­i­den­tial elec­tion.  Why should the 112 Con­gress be any different?

This year I have decided I won’t be spend­ing as much time repeat­ing that “con­gress still has not acted.”  I prob­a­bly won’t write about what Con­gress hasn’t been up to again until the end of the year.  Here is the mid-year update.

In their own lit­tle insu­lated world the US Con­gress is more focused on the next elec­tion in 2012, than on work­ing on issues.  Of course they are con­cerned about jobs, but they can’t do any­thing about that with­out deal­ing with many other painful issues, which they won’t do.  The 112 Con­gresses sole claim to tax leg­is­la­tion fame is pas­sage of Com­pre­hen­sive 1099 Tax­payer Pro­tec­tion and Repay­ment of Exchange Sub­sidy Over­pay­ments Act of 2011, which repealed the oner­ous expanded 1099-MISC report­ing requires buried in the Patient Pro­tec­tion and Afford­able Care Act of 2010. Heck, Con­gress only passed the 2011 bud­get on April 15, 2011-it should have been done by Sep­tem­ber 30, 2010; they were only 5 1/2 months late.  Do not expect Con­gress to do much of any­thing else until after the next elections.

What is Con­gress think­ing about? The debt ceil­ing and the bud­get deficit. The debt ceil­ing was reached ear­lier this year and on or about August 2nd the cre­ative account­ing that is allow­ing the US gov­ern­ment to keep bor­row­ing & run­ning will end.

What will Con­gress do? They will likely punt again.  They will prob­a­bly cre­ate some sort of a patch for the debt ceil­ing issue at the 11th hour, which will move the res­o­lu­tion over that issue until some­time after the next elec­tions. Don’t expect much of any­thing at all to hap­pen until the fall. Between now an then Con­gress is going to be tak­ing a week off for the 4th of July and then a month for the August recess.

There are many other tax issues await­ing res­o­lu­tion. On June 30th the 0.2% FUTA sur­tax expires. The AMT patch, Work Oppor­tu­nity Tax Credit, R&D Tax Credit, the lower 15-year lease­hold improve­ment depre­ci­a­tion sched­ule, the Energy Effi­cient Appli­ances Tax Credit & sev­eral other tax cred­its expire at the end of this year. Many other tax cred­its and breaks that were extended at the 11th hour in 2010 expire at the end of 2012. With the deficit looming, tax breaks such as 110% & 50% Bonus Depre­ci­a­tion, lower tax rates on cap­i­tal gains, Bush Era tax cuts, the repeal of the mar­riage penalty, per­sonal exemp­tion phase out & item­ized deduc­tion phase out, $500,000/$2,000,000 Sec­tion 179, shorter depre­ci­a­tion time­frames for lease­hold improvements,etc., the $250 adjust­ment to income for edu­ca­tors, the Amer­i­can Oppor­tu­nity Edu­ca­tional Tax Credit, the Child Tax Credit, the Adop­tion Tax Credit,  are all on the table-don’t expect them all to be extended.  Right now Con­gress is not talk­ing about any of them.

So that is the update, such as it is.  Hope you take a break this sum­mer, Con­gress sure will.

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