NAICU Washington Update

Payroll Tax Cut Extension Tops Congressional Agenda

January 25, 2012

As Congress reconvenes for its next session, a top priority will be further extending the payroll tax cut. The current two-month extension expires on Feb 29, and was the final contentious agreement produced before Congress adjourned at the end of the year.

Until the very last minute of negotiations on the December extension, it was unclear if additional 2011 expiring tax provisions would be included (see December 20 Washington Update).  The final agreement, though, didn't roll in the larger list of expiring provisions, which includes the IRA charitable rollover and deduction for higher education expenses - both of major interest to the higher education community.

Now, as Congress renews debate on extending the payroll tax cut, there will again be consideration of the expired 2011 provisions. It's unlikely that the larger package of expiring provisions will be attached to the payroll bill if that bill turns out to be only a short-term extension.  However, if Congress agrees to a one-year extension, the larger extenders package stands a better chance of being included.

Members of both the House Ways and Means and Senate Finance Committees fully intend to extend the now-expired 2011 provisions, and plan to do it retroactively so that the provisions will have remained in effect during the time they were technically expired. If this doesn't happen as part of the payroll tax benefit extension, it's not clear when it will be addressed. It's entirely possible that Congress may then wait until closer to the end of 2012, and address 2011 and 2012 extenders in one bill.

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