On The Hill

 

Lawmakers sent a two-part spending deal that includes a $426 billion tax cut to the White House this week. The deal includes an extenders package that removes several Obama-era health taxes and extends a number of tax credits that have expired, or are set to expire at the end of the year. Congress repealed three major health industry taxes that were created through the Affordable Care Act. Repealing of the Cadillac tax, a 40% excise tax on high-cost employer medical plans, a 2.3 percent tax on medical devices, and the health insurance tax (HIT), a $100 billion sales tax on insurance companies providing health policy premiums, is a major win for the health-care industry.^[1] The spending deal also included an extension through 2022 of the biodiesel excise tax credit that expired in 2017. The credit provides a $1-per-gallon tax credit to companies that combine renewable diesel and biodiesel into a petroleum-based diesel. Additionally, Congress extended a 50 cents/gallon excise tax credit that covers fuels such as compressed natural gas and liquefied gas, propane autogas, and liquefied hydrogen known as the Alternative Fuel Tax Credit (AFTC) through 2020.^[2] Both credits are retroactive and can be applied to 2018 and 2019 tax years. Tax credits for electric vehicles, and extensions of credits for wind and solar energy did not make the cut. Other parts of the plan extend the New Markets Tax Credit (NMTC), Work Opportunity Tax Credit (WOTC), an employer credit for paid family and medical leave, a significant cut in excise taxes on beer, wine and other alcohol, and clarify the Controlled Foreign Corporation (CFC) Look-Through Rule.^[3]

 

 

The House passed legislation to temporarily eliminate the $10,000 federal deduction on state and local taxes on Thursday (Dec. 19) in a 219-206 vote. 16 Democrats voted against the measure. The bill has no chance of moving in the Senate, but has picked up six Republican supporters: Reps. Tom Reed (R-NY), Pete King (R-NY), John Katko (R-NY), Brian Fitzpatrick (R-PA), Chris Smith (R-NJ), and Jeff Van Drew (R-NJ).^[5]

 

On Thursday (Dec. 19), the Department of Treasury finalized regulations on the Opportunity Zone program. The final regulations provide additional guidance for taxpayers eligible to elect to temporarily defer the inclusion in gross income of certain gains if corresponding amounts are invested in certain equity interests in Qualified Opportunity Zones (QOFs), as well as guidance on the ability of such taxpayers to exclude from gross income additional gain recognized after holding those equity interests for at least 10 years. The final regulations also address various requirements that must be met for an entity to qualify as a QOF, including requirements that must be met for an entity to qualify as a qualified opportunity zone business. The final regulations affect entities that self-certify as QOFs and eligible taxpayers that make investments, whether qualifying or non-qualifying, in such entities. “These regulations provide clarity and certainty for investors, which will enhance the flow of capital to new and expanding businesses, and create sustained economic growth in communities that have been left behind,” Treasury Secretary Steven Mnuchin said in a statement.^[4]

 

^[1] Luthi, Susannah & Emma, Caitlin “Congress to repeal 3 major health taxes, fund gun research in year-end spending deal” Politico Pro, 16 Dec 2019

 

^[2] Koning Beals, Rachel “Fossils fuels and biodiesel were tax-break winners while solar and electric vehicles lost” MarketWatch, 19 Dec 2019

 

^[3] Faler, Brian “House passes $426B tax cut” Politico Pro, 17 Dec 2019

 

^[4] Faler, Brian “Treasury finalizes Opportunity Zone regulations” Politico Pro, 19 Dec 2019

 

^[5] Lorenzo, Aaron “SALT relief bill passes House after spicy debate” Politico Pro, 19 Dec 2019