Have you ever wondered what “expiring provisions” are? How about “tax extenders”? Well, both names refer to the same unique bundling of tax provisions in our tax code. Understanding what they are is key to understanding why they deserve the attention they receive.
The term “expiring provisions” refers to a group of tax breaks which are authorized for only a limited time. Because Congress considers extending them all or part of them as a group, they become collectively known as the “tax extenders.” The temporary-but-not-temporary nature of these provisions complicates tax policy and budgeting, especially when extension occurs retroactively.
Some extender provisions reward businesses, some reward investment, and some reward consumers. In recent years, for instance, breaks have commonly been awarded for energy-related economic decisions, such as the use of renewable power sources and alternative fuels.
Some provisions are temporary because they were created to address short-term needs, such as economic recession, market collapse, a national emergency or a natural disaster. Others are temporary simply because the cost of making them permanent falls outside of budget limitations at the time they are implemented.
Many expiring provisions have been reviewed and extended on numerous occasions. For example, the Work Opportunity Tax Credit program (WOTC) has been renewed 11 times since 1996. In other cases, expiring provisions are made permanent. An example of this came at the end of 2015, when the research and experimentation credit (which had been temporarily renewed 16 times since 1981) was written into permanent tax legislation.
At the end of 2020, 33 temporary tax provisions were scheduled to expire. In the year-end spending and relief bill passed by Congress on December 21, the extenders were dealt with ahead of their expiration dates. According to an analysis by the Tax Foundation, just one extender was allowed to lapse, several extenders were made permanent, 11 were extended for five years, and 19 for shorter terms. The following is a list of provisions that had expiration dates on December 31, 2020:
|1||Credit for certain nonbusiness energy property (sec. 25C(g))|
|2||Credit for qualified fuel cell motor vehicles (sec. 30B(k)(1))|
|3||Credit for alternative fuel vehicle refueling property (sec. 30C(g))|
|4||Credit for two-wheeled plug-in electric vehicles (sec. 30D(g)(3)(E)(ii))|
|5||Credit for health insurance costs of eligible individuals (sec. 35(b)(1)(B)) (Health Coverage Tax Credit)|
|6||Second generation biofuel producer credit (sec. 40(b)(6)(J))|
|7||Beginning-of-construction date for renewable power facilities eligible to claim the electricity production credit or investment credit in lieu of the production credit (secs. 45(d) and 48(a)(5))|
|8||Credit for production of Indian coal (sec. 45(e)(10)(A))|
|9||Indian employment credit (sec. 45A(f))|
|10||New markets tax credit (sec. 45D(f)(1))3|
|11||Credit for construction of new energy-efficient homes (sec. 45L(g))|
|12||Mine rescue team training credit (sec. 45N(e))|
|13||Employer credit for paid family and medical leave (sec. 45S(i))|
|14||Work opportunity credit (sec. 51(c)(4))|
|15||Exclusion from gross income of discharge of indebtedness on principal residence (sec. 108(a)(1)(E))|
|16||Benefits provided to volunteer firefighters and emergency medical responders (sec. 139B(d))|
|17||Treatment of premiums for certain qualified mortgage insurance as qualified residence interest (sec. 163(h)(3(E)(iv))|
|18||Three-year recovery period for racehorses two years old or younger (sec. 168(e)(3)(A))|
|19||Seven-year recovery period for motorsports entertainment complexes (sec. 168(e)(3)(C)(ii) and (i)(15)(D))|
|20||Accelerated depreciation for business property on an Indian reservation (sec. 168(j)(9))|
|21||Special depreciation allowance for second generation biofuel plant property (sec. 168(l)(2)(D))|
|22||Energy-efficient commercial buildings deduction (sec. 179D(h))|
|23||Special expensing rules for certain film, television, and live theatrical productions (sec. 181(g))|
|24||Medical expense deduction: adjusted gross income (AGI) floor set at 7.5 percent (sec. 213(f))|
|25||Deduction for qualified tuition and related expenses (sec. 222(e))|
|26||Special rule for sales or dispositions by a qualified electric utility to implement Federal Energy Regulatory Commission (“FERC”) or state electric restructuring policy (sec. 451(k)(3))|
|27||Look-through treatment of payments between related controlled foreign corporations under the foreign personal holding company rules (sec. 954(c)(6)(C))|
|28||Empowerment zone tax incentives|
|29||Black Lung Disability Trust Fund: increase in amount of excise tax on coal (sec. 4121(e)(2))|
|30||Oil Spill Liability Trust Fund financing rate (sec. 4611(f)(2))|
|31||Provisions modifying the rates of taxation of beer, wine, and distilled spirits, and certain other rules (secs. 263A(f)(4), 5001, 5041, 5051, 5212, and 5414)|
|32||Incentives for alternative fuel and alternative fuel mixtures|
|33||American Samoa economic development credit (sec. 119 of Pub. L. No. 109-432, as amended)|
Source: The Joint Committee on Taxation, List of Expiring Federal Tax Provisions 2020-2029.