Concord Policy Primer, Volume 1

Welcome to the first edition of the Concord Policy Primer, a monthly news bulletin designed to keep tax and industry professionals informed about tax policy developments in Washington. Prime Policy Group is proud to collaborate with Concord on this initiative, and we hope it will become a useful and insightful tool for those following the debates around tax reform and the Section 179D tax deduction. Prime is Washington’s leading bipartisan government affairs firm, offering decades of expertise in policymaking, strategic counsel, and direct advocacy.

The U.S. Congress has entered its month-long August recess period and will return to Washington on September 5. Tax reform will be front and center beginning in September (along with a host of other critical issues requiring congressional action) with a (very difficult) goal of moving comprehensive legislation by the end of the year.

The Bottom Line. The fate of tax reform – and tax policy, generally – is in a state of flux, with the Trump Administration, Congress, and interested stakeholders from across the economy in the midst of tough and complex discussions.

The universe of what is possible will become more apparent as negotiations and legislative activities unfold this Fall. Reform efforts showing ample movement legislatively and with bipartisan support would entice GOP congressional leaders to allow negotiations to bleed into next year and, consequently, undermine movement in 2017of other tax-related legislation. However, if reform efforts begin to crumble, Congress would face substantial pressure to pass a more discrete package of tax provisions that could include tax extenders and other miscellaneous revenue provisions.

Not unlike August pennant-race predictions in baseball, no one can predict with certainty the ultimate outcome of the tax policy debate about to unfold. Only time – the wisest counselor of all – will tell.

Pivot to Reform. The Senate’s failure to advance a package repealing the Affordable Care Act has prompted Congress and the Trump Administration to turn their attention to tax policy and an effort to reform the tax code. It is important to note that as a candidate President Trump ran on a platform emphasizing lower taxes – not necessarily an overhaul of the entire tax code. However, senior members of his administration – including Treasury Secretary Mnuchin and National Economic Council Director Gary Cohn – have been in daily talks with GOP congressional leaders to develop a “common template” for tax reform, progress on which was detailed in a July 27 joint press release. This contrasts with the irregular and disjointed coordination on the ACA repeal effort.

Despite coordination at the top, ambiguity remains about the process and the ultimate legislative proposal. Will the GOP pursue a go-it-alone strategy using budget reconciliation (a brief primer on reconciliation can be found here) or follow regular legislative order to advance tax reform? For the reconciliation route to take flight, the House and Senate must pass a Fiscal Year 2018 budget; achieving the votes necessary to pass the FY18 budget have been difficult, particularly in the House, and may hinge on the specifics of what will be included in the reform package. Members of Congress are clamoring for details (what will the corporate rate be, will it be deficit-neutral, which deductions will be eliminated, how will it impact the major job producers in my district?) but details, thus far, have been in short supply.

Reform Timing Considerations. Senate Finance Committee Chairman Orrin Hatch (R-UT) recently announced the committee will begin in September a series of hearings and legislative action on tax reform, and indicated a strong desire to move a package through regular order by working with Senate Democrats. The White House offered an ambitious schedule for tax reform, encouraging the House to pass a bill in October followed by Senate passage in November. Few GOP congressional leaders have parroted the White House line on timing, with some in Congress indicating ultimate passage could be pushed into early 2018.

State of Play for Section 179D. Bipartisan House legislation was introduced in July that would make Section 179D a permanent provision of the Code. H.R. 3507, sponsored by Reps. Dave Reichert (R-WA), Earl Blumenauer (D-OR) and Tom Reed (R-NY), is a strong statement in support of Section 179D from senior members of the House Ways and Means Committee, and provides momentum to stakeholders seeking to extend the deduction. The bill also serves as motivation for efforts to develop bipartisan legislation in the Senate, where Senator Ben Cardin (D-MD) is leading the charge.

H.R. 3507 will not move through the legislative process on its own; instead, it will be used to demonstrate to congressional tax writers the bipartisan and broad industry support for the policy. This will be important both for consideration in tax reform and/or a smaller potential tax package this Winter.

Section 179D enjoys the backing of a broad and committed group of industry stakeholders. Coordinated efforts to date (and over the years) have enabled lawmakers a better understanding of the economy-wide benefits associated with Section 179D and the breadth, geographically, of the deduction’s support.

Scenario Planning. As mentioned earlier, it is imprudent to attempt to predict with any certainty the outcome of the looming tax reform push or the fate of Section 179D. Too much remains open and undefined. What is certain is the Trump Administration and GOP leaders will push vigorously to achieve their reform principles, and the next several months will be spent engaged in this effort.

Should reform fall short, a host of options would be available to Congress to move less ambitious tax legislation. Various upcoming legislative vehicles would be ripe for including tax extenders and other revenue provisions. When and if lawmakers and industry stakeholders begin to feel reform efforts losing steam pressure will be brought to bear for a smaller tax package.

There is a recognition on Capitol Hill that urgent tax policy considerations (outside of reform) should be addressed in 2017. However, tax staff underscore the fact that decisions on the fate of these issues will come much later in the year and depend on the progress of tax reform.

At Concord LP, we do everything in our power to give our clients every possible advantage with our comprehensive Section 179D certification services. We look forward to talking with you as the future of Section 179D unfolds. Keep in mind, there’s still time to take advantage of the 179D deduction for your building projects.  For more information Contact us at 888-897-5445 or via the following link, and find out what Concord can do for you.