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.

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National Journal
Billy House
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Billy House
March 26, 2014, 4:24 p.m.

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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