On July 1, 2020, the House of Representatives passed the Moving Forward Act (H.R. 2), a sweeping infrastructure rebuilding plan amounting to over $1.5 trillion. The Act encompasses all types of infrastructure, including air, rail, highways, bridges, transit systems, alternate fuel automobiles, broadband, all types of energy, schools, housing and water.
While the Act is unlikely to pass the Senate (per past comments from Senate leadership) and the White House has threatened to veto the legislation, it does present a starting point for infrastructure plans and parts that could be included in any Stimulus 4 legislation. For tax-related matters, the bill does extend and enhance green tax incentives and enacts tax credit bond provisions.
Included in the Act are extensions and expansions of several popular tax credits:
- Under the drafted legislation, the New Markets Tax Credit national funding limit would increase the allocation amount to $4 billion for 2019 (currently $3.5 billion), and $7 billion for 2020 (currently $5 billion). The legislation would make the credit permanent with a $6 billion allocation for 2021, and $5 billion thereafter, adjusted annually for inflation.
- The rehabilitation tax credit applicable percentage would increase to 30% of qualified rehabilitation costs for taxable years beginning in 2020 through 2024. This applicable percentage slides back to 20% by 2027 and beyond. The Act includes special provisions for smaller projects.
- The Act would extend the renewable electricity production credit through 2026, instead of 2021, as long as qualified construction begins before January 1, 2026.
- The legislation would extend the energy credit (for equipment using qualified solar energy, fuel cell, small wind, and ground water) to tax years beginning before January 1, 2027.
- The Act would extend the residential energy-efficient property tax credit through December 31, 2027. The bill also expands the credit to include battery storage technology and energy efficient biomass fuel property to the list of eligible expenditures.
- The bill would extend the energy-efficient commercial building deduction (currently set to expire at the end of 2020) to December 31, 2025. Plus, it would increase the maximum deduction from $1.80 per square foot to $3.00 beginning in 2021.
- Finally, the Act would extend the new energy-efficient home credit to December 31, 2025. It also increases the maximum credit from $2,000 to $2,500.
The Act would also temporarily repeal the limitation on personal casualty losses for tax years beginning after December 31, 2017, as well as excludable from taxable income monies received as part of a state catastrophic loss program for tax years beginning after December 31, 2019.
What can we expect to happen next?
As noted above, the Moving Forward Act is unlikely to pass the Senate (or the White House) in its current state. In fact, the Senate seems more focused on passing smaller, issue-specific infrastructure bills.
However, we may see some of the provisions of the Moving Forward Act in the reauthorization of the Highway Trust Fund, a broader infrastructure package, or, like suggested above, the next round of coronavirus stimulus legislation.
Prior to the COVID-19 pandemic, the White House began to form different infrastructure proposals. Currently, it is about to publish a $1 trillion infrastructure spending proposal which appears to have little traction in either chamber of Congress. Unless Congress and the administration come to an agreement on infrastructure legislation in the near future, it is unlikely we will see any bill passed before the November elections.
Traditionally, Congress recesses for much of August. This year also brings presidential nominating conventions and campaign season – both of which result in minimal legislative activity. However, the continuing COVID-19 crisis could force lawmakers to look for additional ways to stimulate the economy, especially as states pause or step back their reopening plans.
We suggest that you continue to monitor the developments, but should not rely on any bill proposal until actually enacted.
How can Squar Milner help?
While this bill is far from law, it does indicate the tax priorities of the Democrat-controlled House. It will be interesting to see which provisions make it into future iterations of the bill, the Highway Trust Fund, or future COVID-19 stimulus bills. To discuss how these changes may affect your tax situation, please get in touch with your Squar Milner tax advisor.
More generally speaking, your Squar Milner tax team is here to help you capitalize on available tax credits and incentives in order to maximize your tax savings. Our highly skilled team of professionals stands ready to help you develop the most effective and efficient tax strategies for the benefit of you and/or your business.
Disclaimer: This material has been prepared for informational purposes only, and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional tax planner or financial planner. All information is provided “as is,” with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.
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