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Bid to Resurrect Expired Tax Breaks Likely to Drag Out Bid to Resurrect Expired Tax Breaks Likely to Drag Out

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NJ Daily

Bid to Resurrect Expired Tax Breaks Likely to Drag Out

Restoring incentives, credits, and write-offs that ended Dec. 31 is just one more thing Congress is unlikely to do in this election year.

Brakes on: NASCAR lost a tax write-off.(Photo by Royce DeGrie/Getty Images for Mars Chocolate North America)

photo of Billy House
March 26, 2014

The Senate Finance Committee is set to consider as early as Wednesday an extension of special tax write-offs for NASCAR racetracks, federal rum rebates to Puerto Rico, and more than 50 other similar special incentives or breaks for film producers, railroads, businesses, and individuals that expired Dec. 31.

Even so, consider these items as still locked in limbo, stuck on the ever-expanding list of potentially thorny legislative activities this Congress is unlikely to complete until after the midterm elections in November, if then.

Democrats who control the Senate have already shrugged off doing a blueprint for a budget this year, saying that previously agreed-upon spending levels for 2015 suffice for appropriators. House Republicans led by Budget Committee Chairman Paul Ryan plan to unveil a budget in upcoming weeks, but even some of them concede it will be more of an “aspirational” political-messaging tool than a real spending proposal.

 

Meanwhile, neither the House nor the Senate will move forward this year on a previously promised overhaul of the nation’s tax code.

All of which begs the question: What else can Congress decide not to do during this election year?

One increasingly likely candidate is further delay in restoring the 55 special business and individual tax write-offs, credits, or incentives that expired three months ago at the end of 2013.

For sure, these items represent a broad array of controversial and noncontroversial measures. They include a state and local general sales-tax deduction, write-offs for research and development and other business expenses, and a deduction that teachers can take for out-of-pocket expenses for classroom materials. There also are tax credits for such things as two- or three-wheeled plug-in electric vehicles and certain types of federal health coverage, as well as items relating to charities and disaster relief.

But there are also several expired provisions that draw regular criticism and scornful headlines, including:

  • A seven-year cost-recovery period for certain motor-sport racetrack facilities, the so-called NASCAR tax credit. This allows NASCAR and other organizations that promote motor sports to depreciate the investment in new facilities over seven years instead of 15 to 39 years, allowing a much larger deduction after the initial capital investment. This had been projected to result in lost tax revenue of about $24 million in 2014 (the cost was $46 million in 2013).
  • A 50 percent tax credit for certain railroad expenditures made by short-line and regional operators to maintain tracks, projected to result in $99 million in lost tax revenue in 2014 ($232 million in 2013).
  • Special “expensing rules” for TV and film production in the United States, projected to result in $164 million in lost tax revenue in 2014 ($266 million in 2013).
  • A rebate to Puerto Rico and the U.S. Virgin Islands that increases their take of the excise tax on rum, projected to result in $23 million in lost tax revenue in 2014 ($199 million in 2013).

Altogether, these and other breaks represent roughly $938 billion in potential lost revenue through 2023, according to projections by the Congressional Budget Office.

Regardless of relative merit or prevailing lawmaker perspective, however, uncertainty abounds over what will happen as these items remain in limbo.

That doubt remains, despite some reported movement Wednesday on the Senate side of the Capitol. Senior staff and other sources with knowledge of these details on and off the Hill said new Finance Committee Chairman Ron Wyden, D-Ore.—following discussions with other committee members—now plans to have his committee mark up an extender bill as early as next Wednesday.

Exactly which items will be in the bill and whether the list will be whittled down from the 55 measures that expired in December remain unclear. Whether the proposed extensions would run for one or two years was also unsettled. The bill is expected to be unveiled Monday.

It is unlikely Wyden would use the bill introduced by Majority Leader Harry Reid in December that would have extended most of the items retroactively through the end of 2014. That’s because Wyden is widely perceived to want to cut the number of extensions, and voting to actually delete provisions from a bill is viewed, politically, as a potentially bad move.

As a result, sources say the strategy could be to hold separate votes on whether to add items such as extensions of the provisions dealing with NASCAR, film production, and electric motorbikes.

A committee spokeswoman, Lindsey Held, would not comment, saying only that addressing the expired extenders “is a top priority for the chairman” and that Wyden is in talks with ranking member Orrin Hatch and other committee members. “We are targeting early April (stay tuned) but not discussing further as this time,” she said in an email statement.

Julia Lawless, a spokeswoman for Hatch, confirmed that discussions are ongoing with Wyden, but that no final decisions have been made about what is to occur. She also reiterated that Hatch believes there is “a lot of fat that needs to be cut,” and that “a committee markup would provide an opportunity to expose these provisions to scrutiny and sunlight.”

But even if an extender package does progress through the Finance Committee and gets through the Senate, the possibility of parallel House action before November seems remote. About 50 House Republicans have said they will refuse to support an extender bill that is not offset.

And House Ways and Means Committee Chairman Dave Camp himself seemed to indicate Monday to fellow committee members that any swift final action on an extender bill might not be in the cards. Instead, he is suggesting a more deliberative and selective “policy-by-policy” approach starting in April on deciding which extenders should possibly be made permanent.

“One important goal of tax reform is to provide certainty to American taxpayers. I think we can all agree that a short-term extension of tax policies is no way to legislate and is even worse for the families and businesses who utilize those tax benefits,” Camp wrote to his committee colleagues in a memo provided to National Journal.

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