Senate negotiators reached agreement Tuesday on a massive package of tax-cut extensions for families and businesses, disaster relief for the Midwest and other provisions, with votes possible as early as Thursday.
Senate Finance Chairman Max Baucus and ranking member Charles Grassley characterized the bill as an economic stimulus measure and urged both chambers to pass it quickly. The deal could finally pave the way for renewal and expansion of provisions such as the research and development credit, which expired last year despite heavy lobbying by manufacturing and technology firms.
"This is the best news coming out of Washington in months," said Ralph Hellman, senior vice president for government relations at the Information Technology Industry Council, which represents corporate powerhouses like Apple and Microsoft. The U.S. Chamber of Commerce, which had expressed reservations about proposed offsets, also threw itself behind the effort Tuesday.
The provisions would be added as amendments to a pending House-passed tax extenders bill, and sent back to the House. The final disposition remains up in the air as House Democratic leaders are indicating there could be trouble with passing portions of the measure that are not fully offset.
The realities of a 51-49 partisan split in his chamber are not lost on Senate Majority Leader Reid. He plans to hold a test vote on a fully offset "patch" for the alternative minimum tax to demonstrate to the House that he does not have 60 votes for that approach.
To assuage House leaders and claim a bipartisan accomplishment before the elections, Reid has pushed for splitting off a $17 billion collection of fully offset renewable energy incentives and moving it through the chamber separately.
Senate Minority Leader McConnell insisted on all the provisions being combined, to put pressure on the House to swallow some unpaid-for measures or risk adjourning for the elections having left 24 million taxpayers unprotected from the AMT.
House Majority Leader Hoyer said his chamber would have no problem signing off on the energy provisions before adjourning at the end of the month. But with the AMT and other extenders mostly not offset, Hoyer suggested the House might wait on those provisions, split the issues up procedurally and only act on the energy portion.
"The part that is not paid-for, we'll look at it, but we want to move the energy extenders paid-for," Hoyer said. "And we will make arrangements for the energy extenders which the Senate passes paid-for be passed through the House and sent back to them."
That move could put Senate Republicans in the awkward position of a take-it-or-leave-it offer from the House right before adjourning, forcing them to choose between accepting only the energy provisions or nothing at all.
Senate GOP and Democratic negotiators reached a hard-fought compromise on offsetting the energy provisions, accommodating Republican concerns by agreeing not to single out the major integrated oil and gas companies. Instead, Senate Democrats agreed to freeze the current manufacturing deduction at 6 percent going forward, applying to all affected companies evenly.
The more controversial House proposal, which would deny the deduction altogether for the "Big Five" integrated oil and gas firms, met with a Bush administration veto threat Tuesday.
The Senate bill would make up the lost revenue by scaling back tax breaks for oil and gas firms' overseas operations; requiring investment brokers to report the cost-basis of securities transactions to the IRS; increasing payments into the Oil Spill Liability trust fund and extending the federal unemployment insurance surtax paid by employers.
Included in the energy tax package is a one-year extension of the production tax credit for wind and geothermal power, and adds eight years to the investment tax credit for commercial solar projects.
Residential solar tax credits are extended for two years, and a $2,000 annual credit cap is removed. "We're very proud of this package. We think it's a great bipartisan bill," said National Republican Senatorial Committee Chairman John Ensign of Nevada, who worked on the energy tax provisions with Sen. Maria Cantwell, D-Wash.
The $64 billion cost of raising the income threshold for the AMT and other related provisions would not be offset, and the cost of extending the other expired or expiring provisions would only be partially offset, by cracking down on offshore deferred compensation plans.
That only raises enough money to cover one year of the extenders, whereas provisions such as the R&D credit and state and local sales tax deduction, which also expired last year, are renewed for two years.
House Ways and Means Chairman Charles Rangel, who Baucus briefed Tuesday, suggested one possible way out of the logjam. "It's fully offset for one year but not for two as it relates to extenders, so it could be paid for if we cut it back a year," Rangel said. "We're more concerned about AMT not being paid for right now."
This article appeared in the Saturday, September 20, 2008 edition of National Journal Daily.
Want to stay ahead of the curve? Sign up for National Journal’s AM & PM Must Reads. News and analysis to ensure you don’t miss a thing.
Join the Discussion