Numerous industry and environmental groups are nervously awaiting the outcome of Tuesday morning's cloture vote to proceed to a huge catchall bill full of extensions of expiring or expired tax breaks for individuals and businesses. That vote is expected Tuesday because a vote on the motion to proceed to a separate bill extending renewable energy incentives, offset through repeal of oil and gas company tax breaks and a new windfall-profits tax, is expected to fail, aides and lobbyists said. Sources said the subsequent vote could be very close to cut off debate on the tax extender bill, which as passed by the House would provide about $55.5 billion worth of tax extensions.
Senate Finance Chairman Max Baucus is readying a substitute aimed at wooing Republicans to get over the 60-vote hurdle, potentially adding a roughly $60 billion one-year patch for the alternative minimum tax without offsets. Other possible tweaks include expansions to the research and development credit, which expired last year, and the production tax credit for wind energy that expires at the end of this year, sources said. Details of Baucus' substitute are to be released later today. If the bill were to get 60 votes, it would be sent back to the House, where the Ways and Means Committee is preparing to vote as early as next week on a fully-offset AMT patch to placate the Blue Dog Coalition. The goal of House Democratic leaders is to pass that bill before the July Fourth recess. "It's totally a kabuki dance," one source said, as the House would eventually have to accept the AMT portions without offsets.
The Senate outcome is still unclear because Republican leaders have demonstrated they have enough votes to sustain a filibuster. Baucus plans to offset the cost of the non-AMT portion of the bill using provisions contained in the House version. In April, 41 Senate Republicans wrote to Baucus that they would oppose any offsets for extending tax breaks that are already in law, which GOP leaders are "waving around like a bloody shirt," an industry lobbyist said. One of the offsets would impose immediate taxation on deferred compensation tucked away in offshore accounts, mainly targeted at hedge fund managers, and the other would delay for another decade a new tax break allowing multinational firms flexibility in allocating their worldwide interest expenses. Senate Democratic Conference Vice Chairman Charles Schumer of New York told reporters today "we are worried" about lack of GOP support for an offset tax bill.
The White House and some business groups, notably the U.S. Chamber of Commerce, oppose the offsets. Senate Minority Leader McConnell, Minority Whip Kyl and Finance ranking member Charles Grassley introduced a non-offset version Friday, with the AMT patch, but it was unclear whether Democratic leaders would allow a vote on their substitute. Throughout the rest of the lobbying community, however, support is strong for the underlying tax bill, even with the offsets. "A number of companies are expressing a certain resentment that they're going to get hit with a whopping tax increase in the name of protecting hedge funds," another lobbyist said. But aides and lobbyists did not want to handicap the outcome, because so many Republicans are on record opposing offsets. One advocate for the bill said the strategy by Senate Majority Leader Reid could be to buy time for a more prolonged lobbying effort -- even if the motion fails, he could reserve the right to call up the bill again in a week or so. Another said the strategy was still risky. "Some of us implored them to give us more time" to lobby, an industry source sai
This article appears in the June 14, 2008 edition of National Journal Daily PM Update.