Congress reaches agreement on year end tax legislation

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December 2019

Overview

The House today passed FY 2020 funding legislation that includes a significant year-end tax package that was agreed to by Congressional leaders and Trump administration officials. The tax package agreement (the Agreement) includes extensions to more than 30 expired or expiring tax provisions, modifications to certain 2017 tax reform act provisions, retirement savings incentives, disaster relief tax provisions, and repeal of three Affordable Care Act (ACA) tax provisions. The Joint Committee on Taxation (JCT) staff estimates that the Agreement will reduce federal revenues by $426 billion over 10 years.

Congressional leaders and the Trump Administration, however, were unable to reach an agreement on technical corrections to the 2017 tax reform act, expansion of refundable tax credits, and new ‘green energy’ tax provisions.

The Senate is expected to vote on the FY 2020 funding legislation with its accompanying tax provisions by the end of this week, before the current temporary government funding measure expires at midnight on December 20. The spending measures provide $1.4 trillion to fund federal departments and agencies, including the IRS, for the remainder of FY 2020 (through September 30, 2020). Administration officials have indicated that President Trump will sign the legislation.

The House later this week also is expected to vote on a revised United States-Mexico-Canada Agreement (USMCA), articles of impeachment, and a temporary suspension of the state and local tax (SALT) deduction limitation. The House and Senate will return in January for the second session of the 116th Congress.

The takeaway

The FY 2020 government funding bill has provided a ‘must pass’ vehicle for a significant year-end tax package that includes tax extenders, three modifications to the 2017 tax reform act, retirement provisions, disaster relief tax measures, and repeal of three ACA tax provisions. Congressional leaders and the Trump Administration, however, were unable to reach an agreement on technical corrections to the 2017 tax reform act, expansion of refundable tax credits, and new ‘green energy’ tax provisions.

There may be limited opportunities for Congress to enact tax reform technical corrections and other tax proposals during the 2020 election year. With government funding for FY 2020 in place through September 30, 2020 and the federal debt limit previously suspended through July 31, 2021, there are few ‘must pass’ bills that will require action by the House and the Senate next year. Congress will need to act on new government funding legislation for FY 2021, which begins on October 1, 2020, to avoid a government shutdown shortly before the November 3, 2020 elections.

Additional information

For a JCT revenue estimate of tax provisions included in the FY 2020 funding agreement, click here.

Contact us

Rohit Kumar

Washington National Tax Services Co-Leader, PwC US

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