Close Senate Midterm Elections Cloud Outlook for Lame Duck Session

October 23, 2014

US Capitol domeThe midterm elections are less than two weeks away with political pundits reporting daily on the latest polls showing that a number of races are too close to call, especially for some of the seats of the dozen vulnerable U.S. senators up for re-election.  The stakes for political control of the Senate are so high that Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) adjourned the Senate at the earliest date in more than 50 years – ensuring that senators would go home to campaign rather than stay in Washington.
As each political party jockeys for the best electoral position, the heavy legislative lifting of the current Congress will certainly come during the lame duck session scheduled to begin on November 12.  The targeted adjournment date for the year is December 11.  That’s the date the Continuing Resolution (CR), which is the current short-term legislation to keep the government open, ends and the government – barring another extension of the CR or the passage of an omnibus budget bill – will run out of money. 

How Congress deals with a backlog of legislative agenda items in those few weeks depends on the outcome of the November elections.  There is also a wild card scenario in which control of the Senate will not be determined until December or January because of runoff election laws in Georgia and Louisiana. 

Should the GOP win a majority in the Senate, it is probable that Majority Leader Reid will look for quick passage of a number of pending legislative issues.   Under this scenario, look for the Senate to focus on issues like the Ebola crisis and ISIS, as well as passage of a short-term CR to fund the government into next spring and perhaps short-term extensions on a few issues.  It is assumed that Reid would also focus on confirming as many federal judges and Administration appointees as possible.

If Democrats retain control of the Senate, many believe the lame duck session will include real negotiations on a host of legislative issues, most of which will be included in an omnibus funding package that will fund the government through next September.  The list of potential issues includes:  tax extender provisions that expired at the end of 2013 or will expire at the end of this year, a terrorism risk insurance program that expires at the end of this year and the Main Street Fairness Act/Internet Tax Freedom Act.

Tax Extenders

Republicans and Democrats have expressed a desire to pass a tax extenders bill prior to the end of the year.  However, whether Congress can agree on legislation may be influenced by the outcome of which party will control the Senate during the 114th Congress. 

Earlier this month, IRS Commissioner John Koskinen wrote a letter to Senate Finance Committee Chairman Ron Wyden (R-Ore.) urging Congress to make a decision about whether they will pass an extenders bill.  Commissioner Koskinen warned that passing a retroactive bill in 2015 would likely result in “service disruptions, millions of taxpayers needing to file amended returns, and substantially delayed refunds.”   

The American Institute of CPAs (AICPA) urged Congress in a September 15 letter “to immediately address” the fifty-seven tax provisions that expired at the end of 2013 and the six tax provisions that will expire at the end of 2014.  The AICPA told lawmakers that Congressional inaction on the tax extenders leaves taxpayers without the certainty required for tax planning and compliance.