Dome of the U.S. Capitol Building
Authored by Paul Dillon and Michelle Hobbs

Immediately preceding the Independence Day holiday, the House of Representatives passed the Moving Forward Act (the Act); a sweeping infrastructure rebuilding plan. More than 2,300 pages in length and estimated to cost over $1.5 trillion, the Act encompasses all types of infrastructure (air, rail, highways, bridges, transit systems, alternate fuel automobiles, broadband, all types of energy, schools, housing, water). Should the Act pass the Senate (which is unlikely based on past comments from Senate leadership), the White House threatened to veto the legislation due to a variety of concerns. However, this could be the starting point for negotiations on an infrastructure plan and parts could be included in any Stimulus 4 legislation.

Included in the Act are extensions and expansions of several popular tax credits.

  • The New Markets Tax Credit national funding limit would increase to $7 billion from $5 billion for 2020 and 2019’s limit would jump to $4 billion (as opposed to the current $3.5 billion). The amounts would decrease to $5 billion by 2022, indexed for inflation for tax years after 2022.
  • 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 forward. Special provisions for smaller projects are also embedded in the Act.
  • The renewable electricity production credit would be extended through 2026, instead of 2021, as long as qualified construction begins before Jan. 1, 2026.
  • The energy credit (for equipment using qualified solar energy, fuel cell, small wind, ground water) would be extended to tax years beginning before Jan. 1, 2027.
  • The residential energy-efficient property tax credit would be extended through Dec. 31, 2027.
  • The energy-efficient commercial building deduction would be extended to Dec. 31, 2025.
  • The new energy-efficient home credit would be extended to Dec. 31, 2025.

The Act would also repeal, temporarily, the limitation on personal casualty losses for tax years beginning after Dec. 31, 2017, as well as exclude from taxable income monies received as part of a state catastrophic loss program for tax years beginning after Dec. 31, 2019.

Instead of a sweeping omnibus-style bill, the Senate is looking to pass smaller, issue-specific bills related to infrastructure. For the past year, it has been trying to reauthorize the Highway Trust Fund for another five years. Two months ago, the Senate Committee on Environment and Public Works released bipartisan bills on water infrastructure. Finally, the American Energy Innovation Act, which would create energy-efficiency improvement and green energy incentives, stalled in March.

Prior to the COVID-19 pandemic, the White House flirted with 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 sometime soon, it is unlikely anything will pass before the November elections. Traditionally, Congress recesses for most of August. After the presidential nominating conventions and the Labor Day holiday, if tradition holds, it will be campaign season with 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.

Please reach out to your Baker Tilly tax advisor to discuss how these changes may affect your tax situation.

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