Lame Duck Session Update: Tax Bill and Appropriations

Congress returns this week after its Thanksgiving break with a full agenda.  Priorities include extending funding for most federal agencies for FY 2019, which expires on Dec. 7, and a potential tax package. Chairman of the House Ways and Means Committee Kevin Brady (R-TX) released a tax bill that Congressional Republicans hope to pass during the lame-duck. The bill makes corrections to the Tax Cuts and Jobs Act of 2017, extends several expiring tax measures, includes disaster tax relief and makes changes to retirement and savings tax provisions.  Notably, it would extend the LIHTC public use provisions from 9 percent allocations to also include 4 percent allocations explicitly states that preferences for veterans are allowed for both 9 percent and 4 percent allocations.   It would also extend the Section 179D energy efficiency commercial buildings deduction, the Section 45L energy efficient homes credit which are occasionally utilized in affordable housing developments.  Notably, it does not extend the New Markets Tax Credit which expires at the end of 2019 nor does it include other LIHTC changes in the Affordable Housing Credit Improvement Act (S. 548/H.R. 1661).  Neither does measure not include any provisions from the Historic Tax Credit Improvement Act (HR 1158).

Chairman Brady said he hopes to vote on the bill on Friday, Nov. 30 and when it will likely pass the House. The bill is largely seen as an opening bid in negotiations with Congressional Democrats since they will need 60 votes in the Senate. Sen. Chuck Grassley (R-IA), who is the presumptive next chair of the Senate Finance Committee following Sen. Orrin Hatch’s (R-UT) retirement, said the tax package will likely need to be coupled with the spending bill if it is to be considered in the Senate.

My guess is that Congress will pass a short-term Continuing Resolution (CR) perhaps extend through the end of the year that gives them time to negotiate a tax package without shutting down the government on Dec. 8. From there, the tax package could be coupled with a CR through the end of FY 2019 or an omnibus that funds the remaining 9 appropriations measures (including the Transportation-HUD bill) that have yet to be approved for all of FY-2019. Congressional Republicans are eager to pass, and perhaps willing to negotiate on, some version of tax reform 2.0 as they face the reality of losing control of the House come January.  We are hopeful that this creates a window to adopt select provisions from Affordable Housing Credit Improvement Act (S. 548/H.R. 1661), the Historic Tax Credit Improvement Act (HR 1158) as well as potentially extend the NMTC.

Other important items on the legislative agenda include votes within the Democratic Caucus on its candidates for leadership in the next Congress.  Rep. Nancy Pelosi (D-CA) was nominated by the Democratic Caucus to be its candidate for Speaker of the House when the new Congress Convenes.   Congress will also need to decide if they want to reauthorize the National Flood Insurance Program which expires on Nov. 30 or let the program lapse now that the 2018 hurricane season is officially over.

–Kaitlyn Snyder, Director, Policy