Tax Provisions Expiring in 2016 (“Tax Extenders”)

Summary

In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions. Collectively, these temporary tax provisions are often referred to as “tax extenders.” Most recently, in December 2015, Congress addressed tax extenders in the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016 (P.L. 114-113). This legislation extended all of the 52 provisions that had expired at the end of 2014. Unlike past tax extenders legislation, however, a number of provisions that had expired at the end of 2014 were made permanent. Several others were extended through 2019. Many provisions were temporarily extended for two years, through 2016.

Thirty-four temporary tax provisions are scheduled to expire at the end of 2016. Most of these provisions were extended for two years as part of the PATH Act. Options related to extenders in the 114th Congress include (1) extending all or some of the provisions set to expire in 2016 before the expiration date; or (2) allow these provisions to expire at the end of 2016 as scheduled. If temporary tax provisions are allowed to expire at the end of 2016, retroactive extensions may be considered in the first session of the 115th Congress. In the past, retroactive extensions have been common for expired temporary tax provisions.

There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis provides legislators with an opportunity to evaluate the effectiveness of tax policies prior to expiration or extension. Temporary tax provisions may also be used to provide economic stimulus or disaster relief. Congress may also choose to enact tax provisions on a temporary rather than permanent basis due to budgetary considerations, as the foregone revenue from a temporary provision will generally be less than if it were permanent.

The provisions set to expire at the end of 2016 are diverse in purpose. There are education- and housing-related provisions for individuals. For businesses, there are several provisions related to the territories, Indian tribes, and economic development, in addition to provisions for specific industries. There are also a number of energy-related tax provisions that are scheduled to expire at the end of 2016.

As lawmakers consider whether to extend expiring tax provisions beyond 2016, cost is one factor. Since many provisions were made permanent in the PATH Act, a temporary extenders package for provisions expiring in 2016 would cost less than past extender packages. There are fewer provisions to extend, and many provisions with the largest revenue cost were made permanent in the PATH Act.