NAICU Washington Update

Tentative Payroll Tax Agreement Doesn't Include Extenders

February 16, 2012

On Tuesday, House and Senate leaders announced a "tentative" deal to extend the payroll tax break. The benefit was previously extended at the end of December for two months (see earlier Washington Update story), currently set to expire on February 29.

Though the agreement isn't yet in legislative language, House and Senate staff indicate the bill won't include the extension of a set of tax breaks that expired at the end of 2011 - including the IRA charitable rollover and tuition deduction.  The bill does include a further extension of federal unemployment benefits and fixes a scheduled cut in reimbursement for doctors who participate in Medicare. The extension on these items is expected to be for 10 months, until the end of 2012.

If the payroll tax bill is adopted, it's likely that the already expired 2011 tax extenders will be shelved until closer to the end of the year, when Congress will also have to address a larger list of expiring 2012 provisions.  Congress then will likely extend the 2011 provisions retroactively in the same bill the 2012 provisions are extended.  It's unclear what the length of extension might be, or how the larger battle over income cap limitations will play out.

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