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What a Tax Overhaul Means for the Business Community

Posted Friday, November 4th, 2016

Public Policy, Advocacy, Action Teams, Energy, Health Care, Middle Market, Roadmap for Growth, Education & Talent

Last month, the Chamber was pleased to host a roundtable with U.S. Senator Robert P. Casey, Jr. to discuss the prospects of a comprehensive tax overhaul in a new Congress and Administration next year. Senator Casey serves on the Senate Committee on Finance which is responsible for taxation and revenue to the United States government. His position on the committee makes him a powerful voice in Congress on the issue of tax reform.

The legislative recess before the November election allowed Senator Casey to break away from business on Capitol Hill to meet in Philadelphia with a cross-section of the Chamber membership representing small business, the middle market, health care, energy, manufacturing, non-profit, and higher-education among others. As Senator Casey prepares for the prospect of a tax debate early next year, the roundtable discussion equipped him with policy reforms that can accelerate growth within the regional economy.

Senator Casey directed the group’s attention to the legislative achievements on tax-related issues in the last year, specifically the PATH Act, which provided permanent tax relief for non-profits, small business and enterprises on the forefront of innovation. Many of the Chamber’s tax priorities were achieved through the PATH Act:

  • Expansion and permanent extension of the expired Research & Development (R&D) tax credit;
  • Permanent extension of the expired provision that enables tax-free qualifying charitable distributions directly from IRAs by individuals age 70 ½ and older;
  • Permanent renewal of the expired Section 179 small business expensing limitation and phase-out amounts;
  • Two-year suspension of medical device excise tax which unfairly targets an important industry to the region by taxing medical device sales regardless of profitability; and
  • Permanent extension of Section 1202, the exemption of capital gains taxes on the sale of qualifying small business stock held for at least five years by non-corporate taxpayers.

The roundtable offered many other specific points within the tax debate for Senator Casey’s insight and reaction. Of the many issues discussed, some are listed below:

  • Current tax extenders bill: Prominent among the expiring tax provisions is Section 48C, a 30% Investment tax credit for qualifying advanced energy projects to expand or establish a manufacturing facility to produce renewable energy for transmission. The debate after the election in a lame duck session will consider how to address tax provisions—hybrid solar lighting, fuel cells, small wind, geothermal heat-pumps, micro turbines, and combined heat and power systems—omitted from last year’s omnibus as well as extend Section 48C expiring at the end of this year.
  • Protecting the charitable deduction: The region’s charitable organizations and non-profits rely heavily on contributions and philanthropic support where today’s cash-strapped governments cannot help. Limiting itemized deductions will lead to a significant decrease in charitable giving which may ultimately reduce jobs and services for the needy and underprivileged.
  • Transportation user-related revenue sources, e.g., gas tax, that would provide increased and adequate funding to support a safe and reliable network of transportation infrastructure: Due to the increasing presence of fuel efficient and alternative fuel vehicles coupled together with inflation, the impact of motor fuel and other highway use taxes that support the Highway Trust Fund is declining. The 18.4 cents per gallon tax on gasoline in 1993 is worth about 11.5 cents today.
  • Health Insurance Tax (HIT), a tax imposed on health insurance premiums: At the end of 2015, Congress suspended the impact of the HIT for one year. Opponents of the HIT argue that it will negatively affect the national economy by forcing higher premiums on families over the next decade and impacting access to care.
  • Regulations under Section 385 that would further reduce the benefits of corporate tax inversions, the practice in which US companies are purchased by foreign companies to lower their tax liability. Since our meeting, the final regulations from the U.S. Department of Treasury and the Internal Revenue Service were issued. The new rule would limit the ability of companies to lower their tax bills through transactions involving debt that do not support new investment in the United States. These regulations require large corporations claiming interest deductions to document loans to and from their affiliates.

Senator Casey is no stranger to discussing tax priorities with the Chamber. He met with Chamber members in a similar forum back in August 2013 which turned out to be a very constructive dialogue. The Chamber thanks Senator Casey for his time and looks forward to working with him on this issue and others in the weeks and months ahead.

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