Congress Deals With Its Committment Issues
Every guy has a friend like my buddy Todd, who despite being an otherwise normally functioning adult, thinks it’s an indictment on his manhood to admit that he’s really into a girl.
The thing is, he’s not fooling anyone. He’s been dating this same girl exclusively for the last nine months. He’s met her family. She’s met his. They go camping together, skiing together, make fondue together, all the adorable crap that defines the traditional boyfriend-girlfriend relationship.
Only Todd refuses to refer tothis girl as his “girlfriend.” Won’t do it. Even though everyone they come into contact with walks away certainthat she is just that, he won’t concede it to his friends, lest a level of permanency attach to their relationship and jeopardize his self-aggrandizing “ladies man” persona.
Ridiculous, right? We’ll that’s exactly the same silly posturing Congress has engaged in for the last fifty years by refusing to make certain tax provisions permanent, instead enacting them with arbitrary deadlines and routinely allowing them to expire before retroactively extending them again and again and again.
Take, for example, the R&D credit. According to Congress, the credit is a “temporary” provision, but it’s been in the Code for 30 years! Every few years, the credit expires — as it did most recently on December 31, 2011 — and taxpayers and practitioners alike are left to put their faith in their pattern recognition skills and trust that Congress will again retroactively reinstate Section 41. Based on the history of these extenders, we can be confident it will get done, but we can never really be certain, and it makes tax planning needlessly complicated.
So why does Congress go through this song and dance every few years? It’s simple really: when the national budget is determined, any tax provisions that are set to “expire” at the beginning of the year are left out, typically yielding a much smaller budget deficit than what would otherwise appear. I wish I were making that up.
Luckily, Montana Senator Max Baucus is taking up our cause, calling for a long-term solution that would end the uncertainty caused by the frequent renewal required for more than 50 tax provisions.
Until that day comes however, we’re left doing the annual year-end will-they-or-won’t-they bit. As for this year, according to MSNBC, our best chance at seeing expired provisions — including the R&D creidt — extended in the near future is if Congress is willing to tack the extenders package onto the proposed extension of the payroll tax cut, which is set to expire at the end of February.
Whether it happensremains to be seen, but in the interim, it can be awfully awkward extolling the virtues of an R&D study to a client when the statute permitting the credit technically no longer exists.
