Congress Poised to Tackle Funding the Government, Expiring Tax Breaks and a Looming Debt Ceiling Debate

Oct 23, 2015
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While GOP members of the U.S. House of Representatives decide who will be the next Speaker of the House, a series of tough votes await both chambers in Congress as the year comes to a close.

Funding for the Federal government is set to expire at midnight on December 11. Prior to that, however, Congress will need to raise the debt ceiling limit so that the U.S. can continue to borrow money necessary to pay its debts on time, as well as decide whether or not to extend 54 federal tax provisions that expired at the end of 2014. If extended, the tax provisions are expected to have a retroactive extension for 2015 and be extended through December 31, 2016.

On the tax front, the Senate Finance Committee voted in July to pass a ‘tax extenders’ bill out of committee, but the legislation still needs to be considered by the full Senate. Likewise, the House Ways and Means Committee has approved tax extender legislation but has taken a more incremental approach, approving certain provisions in a series of focused bills, all of which must be considered on the floor of the House as well. Several HR tax items in need of extension include:

  • Transit Benefits – The monthly limit on the exclusion from tax for combined transit pass and vanpool benefits would be increased to $250, which is the same tax free monthly dollar limit on the exclusion for qualified parking benefits.
  • Tax-free distributions from individual retirement accounts (IRA) for charitable purposes – The exclusion from gross income for qualified charitable distributions from an IRA, would be extended.
  • Indian Employment Tax Credit- Extends the credit against income tax liability for the first $20,000 of qualified wages and qualified employee health insurance costs paid or incurred by the employer with respect to certain employees.
  • Employer Credit for Differential Pay for Active Military Service Personnel – Eligible small employers will be able to receive a tax credit for differential pay provided to an employee (the difference in pay between their military and civilian pay) who is called to active duty. An eligible small employer is defined as an employer with less than 50 employees, is allowed a credit against its income tax liability for a taxable year in an amount equal to 20 percent of the sum of the eligible differential wage payments for each of the employer’s qualified employees during the year.
  • Work Opportunity Tax Credit (WOTC) – Extends the WOTC, which allows employers to receive a tax credit for hiring individuals from one of nine targeted groups. These groups include – families receiving TANF, qualified military veteran, qualified ex-felon, designated community resident, vocational rehabilitation referral, qualified summer youth employee and qualified supplemental nutrition assistance program benefits recipient. The long-term unemployed were included as a group within this credit and employers would be eligible for a 40 percent credit on the first $6,000 of wages paid to such individual, for a maximum credit of $2,400 per eligible employee hired by employers.

SHRM will continue to monitor developments with these tax provisions and will keep HR practitioners apprised of any action designed to renew these valuable tax credits for employees and employers.

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