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Fate of Tax Extenders Tied to COVID-19 Relief Negotiations

Posted on Dec. 17, 2020

Extending a batch of expiring tax credits is looking more likely but hinges on the success of the ongoing negotiations over another COVID-19 relief package.

Congressional lawmakers appeared to be nearing a deal December 16 to combine an appropriations bill extending government funding with a COVID-19 relief package. But there is also hope among lawmakers and business groups that the government funding bill will include an extension of more than two dozen expiring tax credits.

Senate Finance Committee Chair Chuck Grassley, R-Iowa, told Tax Notes that the chances of the tax extenders being attached to the funding bill are good if the bill is accompanied by a COVID-19 relief package.

“There’s been a lot of progress made on it,” Grassley said of an extenders package.

The key issue remains whether negotiations between Democrats and Republicans will yield a COVID-19 bill. “I’ve been told that if we don’t have a COVID bill, we’re not going to have extenders,” Grassley said.

Grassley was tight-lipped about which tax extenders might be included in the bill. One group of lawmakers has been pushing for inclusion of a bill that would extend the carbon capture tax credit for five years. The 45Q Carbon Capture, Utilization, and Storage Tax Credit Amendments Act of 2020 (S. 4966), introduced by Sen. Shelley Moore Capito, R-W.Va., has bipartisan support and has been debated for years.

Despite support from progressives like Finance Committee member Sheldon Whitehouse, D-R.I., and Sen. Tina Smith, D-Minn., the measure has detractors among environmental activists for not going far enough, which could lead to complications over its inclusion.

Still, Senate Majority Leader Mitch McConnell, R-Ky., told reporters that negotiators had made “major headway” in their attempt to strike a deal on a relief package that appeases both sides.

The package pitched earlier in the week by a bipartisan group of lawmakers has been broadened after negotiators struck a deal to distribute another round of stimulus checks in the range of $600 to $700 per qualifying taxpayer — less than the amount distributed in the spring through the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136).

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