WASHINGTON – Sen. Chuck Grassley of Iowa on Dec. 16 praised the inclusion of a five-year extension of the wind energy production tax credit, his provisions to enhance Section 529 college savings plans, his measures to protect taxpayer rights and more welcome provisions in the newly released bipartisan, bicameral omnibus budget and tax package before Congress.
“Certainty and predictability in tax policy are necessary so businesses can plan and invest accordingly, which is important for job creation.” Grassley said. “A five-year extension of the wind energy provision will support jobs. It supports the renewable energy that consumers want for a cleaner environment and energy independence from countries that wish to do us harm. The college savings provisions help families and students afford college. They improve a tax incentive that’s popular with Iowans and others around the country who work hard to save money for their children and grandchildren to get an education. The IRS provisions are necessary to get the agency more focused on its number one job of taxpayer service.”
The five-year extension of the wind energy production tax credit is a victory for wind energy producers. The extension is meant to lead to a phase-down of the industry-specific tax credit. As included, the wind production tax credit will be 100 percent in 2015 and 2016, 80 percent in 2017, 60 percent in 2018 and 40 percent in 2019.
“As the father of the first wind energy tax credit in 1992, I can say that the tax credit was never meant to be permanent,” Grassley said. “I also can say that the wind energy industry is the only energy industry that came forward with a phase-out plan. The oil and nuclear industries have benefited from tax incentives that have been permanently on the books for decades. The five-year extension for wind energy brings about the best possible long-term outcome that provides certainty, predictability and a responsible phase-down of a tax incentive for a renewable energy source.”
On education, the tax package before Congress includes Grassley’s provisions to improve the already successful Section 529 savings program. Grassley’s provisions allow 529 funds to purchase a computer on the same tax-favorable basis as other required materials; cut outdated, unnecessary rules that increase paperwork and costs on plan administrators; and provide tax and penalty relief in instances where a student may have to withdraw from school for illness or other reasons.
Grassley introduced his bipartisan provisions in February. His reforms build on improvements to 529 college savings plans enacted in 2001 and 2006 under Grassley’s leadership on the finance committee and with broad bipartisan, bicameral support. The 2001 law made distributions from the plans tax-free if used for education expenses but it was scheduled to expire. The 2006 law made the tax-free provision permanent. The President proposed eliminating the 529 program earlier this year, drawing opposition from parents and Congress.
The measure includes another long-time Grassley provision, the extension of an above-the-line deduction for qualified tuition and related expenses for higher education. The deduction is capped at $4,000 or $2,000 for individuals, depending on income. Another long-time Grassley priority included is an extension and modification of a deduction for certain expenses of elementary and secondary school teachers, including school supplies that they purchase out of pocket.
The tax package includes an extension of the existing biodiesel fuel blenders credit, the small agri-biodiesel producer credit, the tax credit for cellulosic biofuels producers, the alternative fuel vehicle refueling tax credit, and bonus depreciation for cellulosic biofuel facilities. Grassley authored the initial version of many of the alternative fuels provisions when finance committee chairman.
Grassley hoped to include his bipartisan provision to modify the biodiesel blenders credit to a domestic production credit. “I’m disappointed that my common-sense, cost reduction modification was not included,” Grassley said. “We shouldn’t provide a U.S. taxpayer benefit to imported biofuels. The domestic production credit would have made sure that U.S. policy incentivizes a domestic industry instead of benefiting foreign producers, and I’ll continue to push this reform. Still, a blenders credit will help a growing industry that creates jobs and gives consumers alternatives to fossil fuels. The more fuel options, the better to meet demand.”
The measure includes the enhanced per-child tax credit, making it permanent. “This is helpful for families facing the tremendous expense of raising children,” Grassley said.
The tax package permanently extends enhanced Section 179 expensing for equipment purchases, which is popular with farmers and small businesses. This allows farmers and small business owners to deduct the cost, up to a limit, of major equipment and property purchases that contribute to farm and business operations and job creation. The permanence is a major achievement because this provision has been temporary over the last several years.
Included is a bipartisan measure Grassley led to increase the alternative tax liability limitation for small property and casualty insurance companies. These small companies largely serve rural communities, which rely on this adjustment to provide additional surplus and cash flow used to pay customers’ insurance claims.
“This provision helps to ensure that small mutual insurance companies will continue to be able to serve rural residents who have unique circumstances, such as living far from a fire station, and so are often unable to obtain private property insurance through traditional insurance companies,” Grassley said.
The package includes several provisions from Grassley’s Taxpayer Bill of Rights Enhancement Act of 2015, introduced in June amid gross mismanagement and inappropriate actions by IRS employees that have shaken what little confidence taxpayers may have had in the agency. The provisions include:
- Codifying the Taxpayer Bill of Rights, which includes the right to: be informed; quality service; pay no more than the correct amount of tax; challenge the position of the IRS and be heard; appeal a decision of the IRS in an independent forum; finality; privacy; confidentiality; retain representation; and a fair and just tax system and requires the IRS commissioner to ensure that IRS employees are familiar with and act in accordance with these rights.
- Prohibiting IRS employees from using personal email accounts for official business. This codifies an already established agency policy barring use of personal email accounts by IRS employees for official governmental business.
- Declaratory judgments for 501(c)(4) and other exempt organizations. The provision permits 501(c)(4) organizations and other exempt organizations to seek review in federal court in instances where the IRS fails to act on an application in a timely manner or makes a negative determination as to their tax-exempt status.
- Termination of employment of Internal Revenue Service employees for taking official actions for political purposes. The provision makes clear that taking official action for political purposes is an offense for which the employee should be terminated. The bill amends the Internal Revenue Service Restructuring and Reform Act of 1998 to expand the grounds for termination of employment of an IRS employee to include performing, delaying, or failing to perform any official action (including an audit) by an IRS employee for the purpose of extracting personal gain or benefit for a political purpose.
“The IRS has never been anyone’s favorite agency,” Grassley said. “But it shouldn’t repel and mistreat the people it exists to serve. The IRS’ level of customer service might be at all-time low. Taxpayers are at a disadvantage with an agency that has tremendous power over their money. The IRS might talk about good customer service. Too often, talk is all there is. The IRS needs to walk the walk. These changes will help swing the pendulum away from agency self-preservation and back to taxpayer service.”
The tax package adopts Grassley-led policy to ensure that those granted deferred action under the President’s executive actions on immigration cannot retroactively get the Earned Income Tax Credit based on earnings from work performed illegally in the United States.
Grassley is former chairman and a senior member of the Finance Committee, with jurisdiction over the IRS. Grassley championed the 1988, 1996 and 1998 taxpayer rights laws currently on the books.
