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Policy Update

Fourth Quarter – 2014

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The Republicans in Congress continue to play hard-ball with the Senates EXPIRE ACT (which was an attempt to get a two year extension of 55 separate expired federal tax provisions), including the PTC and Bonus Depreciation. Both the House and the Senate are still planning for an early Christmas adjournment and both congressional bodies are intentionally working as few days after the elections as possible.

As of December 9th, following the president’s executive order on immigration and his separate threat to veto any tax extender act that focused too much on business rather than individual tax provisions, the House Republicans essentially retaliated and passed a one year extension of these expired provisions.  This put the Senate Democrats in a tough procedural and political spot, leaving Senate leadership with essentially two options.  One option, do nothing and wait until January when the new Republican controlled Congress is convened and try to use their force in opposition to get a longer term extension, or a second option, agree to pass the one year extension to avoid taxpayer agony in the short term and fight it out in other tax bills in 2015 in another extender bill. 

As of December 9th, it appears the Senate will take the first option and it also appears that the President will sign a one year extension and thus the PTC and Bonus Depreciation and the other 52 tax provisions will also get extended for only the final weeks in 2014, making the extension retroactive for all of 2014, but with all 55 of the extended provisions once again expiring immediately on January 1, 2015. 

Since the election, and since the President’s Immigration policy actions angered Republicans, the pre-election prevailing notion of leaving the new House Ways and Means Chairman (Paul Ryan) with a cleaner tax plate in 2015 seems to be prevailing but with a modification.  Now it seems, by allowing these tax provisions to again expire in 2015, the Republicans may use the issue as a bargaining chip in their effort to begin overall tax reform right away, rather than wait.

Separately, general odds are still on 2017 as the earliest date for overall tax reform, with 2019 being a rational bet.   However, in recent days, Paul Ryan has made some well nuanced noises about bringing up on the issue of tax reform quite early in his new Chairmanship. 

Only time will tell how this will all play out once the new Congress is sworn in and open for business.

So, with extenders now all but settled as a last minute patch, most eyes are also currently focused on the post-election Congress, and the new Republican control of the Senate in 2015, with Democrats taking over for the Republicans as the ones leading the opposition, and the Obama administration’s use of the veto to block what the Republicans may attempt when necessary. Gridlock as usual is therefore expected, with only the opposition party having changed.

Immediately after the elections, many tax policy wonks in the renewable energy sector were hoping that the House Ways and Means Committee race between Rep. Kevin Brady (R-Tx) and Rep Paul Ryan (R-Wi), would see Brady chairing Ways and Means, and Ryan holding back in preparation for another run at the White House.  In the end, Paul Ryan got the nod in November and so in 2015, he’ll be the man in charge of your tax legislation in a Republican Congress.  Experienced congressional analysts note that Ryan has made fiscal strength and integrity his lodestar. While Brady focuses on growth.  Ryan, though always alluding to growth, hasn’t yet made growth his main theme.

If you view the PTC and ITC and MACRS and MLPs as pro-growth, pro-investment federal tax policies, leaders like Brady are your kind of chairman. However, if you view the PTC and ITC and MACRS as “costs” to the Treasury and the tax policy equivalent of excessive government spending, then a person like Paul Ryan is your pick.

As you know, House Ways and Means is the most important tax-writing committee there is. Much, if not all of the important action now depends on Ryan’s leadership as chairman, and thus, how your PTC,  ITC, MACRS depreciation, bonus depreciation, or even MLPs will fare in 2015 and beyond depends on whether Ryan likes or dislikes your industry and how it fits the conservative political narrative of the Republicans.

In the end, in less than two weeks we should all know what Congress does or doesn’t do on extenders , whether and how the PTC is extended, whether and how bonus depreciation fares and whether and how Commence Construction for the ITC might fare in the next Congress.

For more information, please contact Lee Peterson, senior manager, at or 404-847-7744.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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