Senate Democrats have introduced legislation to extend unemployment benefits, a 65 percent subsidy for COBRA health insurance for the unemployed, and a large set of tax breaks that expired at the end of last year.

Max Baucus

Senate Finance Committee Chairman Max Baucus, D-Mont., and Senate Majority Leader Harry Reid, D-Nev., introduced the package as a follow-up to the jobs bill that the Senate passed last week (see Senate Passes Job Creation Bill).

Baucus and Senate Finance Committee ranking member Charles Grassley, R-Iowa, had originally included the jobs, unemployment, COBRA and tax extenders provisions in a single $85 billion bill they introduced last month, but Reid decided to split up the bills and try to pass them separately. Grassley rejected the bill proposed by Baucus and Grassley on Monday, saying on the Senate floor, "Don't let this package be mislabeled as the Baucus-Grassley package." He argued that the latest bill differs dramatically in cost, balance and intent.

However, the unemployment benefits extension and COBRA assistance for the unemployed expired over the weekend, lending urgency to passing those provisions. The House unanimously passed extensions of employment assistance and the COBRA health benefit subsidy last week.

The Senate legislation would extend unemployment insurance benefits and eligibility for unemployment health care benefits through the end of 2010, including extending benefits retroactively so families would receive the benefits that were suspended when these programs expired on Feb. 28.

The legislation also extends loan programs for small businesses and tax cuts for both individuals and businesses, including the Research and Development Credit and the ability to deduct state and local sales taxes until the end of the year.    

“The tax cuts and small business assistance in this bill support the creation of new jobs across the country,” Baucus said in a statement. “This legislation extends tax cuts that businesses count on, giving employers the certainty they need to open a new store or hire a new worker. Extending these tax cuts creates the right environment for job creation.”

The Senate bill introduced Monday, known as the American Workers, State and Business Relief Act, restores eligibility to receive unemployment insurance and COBRA health insurance benefits retroactively, beginning Feb. 28, when the program expired, through Dec. 31, 2010.

The House legislation passed last week extends unemployment benefits through April 5, 2010, and COBRA assistance through the end of March 2010.

The Senate bill retroactively extends tax cuts for families and small businesses that expired at the end of 2009. Tax cuts extended in this bill include a tax cut for research and development; a tax cut to allow restaurant owners to depreciate new construction and improvements and retail store owners to depreciate improvements over 15 years rather than 39.5 years;  a tax cut for small businesses that continue to pay employees who have been called to active duty in the military, so these businesses can continue to support these jobs and hire new workers; a tax cut to incentivize the use of biodiesel and renewable energy; a tax cut for teachers who buy classroom supplies out of their own pockets; a tax cut to help families afford college tuition; a tax cut to help families make homes more energy efficient and save money on utility bills; a tax cut to allow taxpayers to continue to deduct state sales tax on their federal tax returns; and a tax cut to encourage businesses to invest in low-income communities.

The bill also retroactively extends other vital safety-net services and provides relief for pension plans that were hit hard by the economic downturn to ensure retired workers get the benefits they deserve.

The legislation prevents a reduction in the federal poverty level from taking effect through 2010.  The scheduled reduction is caused by a decrease in the average cost of goods resulting from the economic downturn. Preventing this reduction will ensure that low-income families struggling to stay afloat in this tough economy may continue to qualify for programs such as Supplemental Nutrition Assistance Program or food stamps, Medicaid and home heating assistance.

In addition, the legislation allows individuals living below the poverty level to continue to disregard refundable tax credits and refunds as part of their income for 12 months after receipt. This provision ensures that families living in poverty are not penalized for receiving tax cuts by losing their eligibility for important safety-net programs.  

The bill also extends the increased federal assistance for state Medicaid programs, made available through the American Recovery and Reinvestment Act, for six months. Without this additional federal support, many states would be unable to fund their Medicaid programs and families would lose the health care coverage they need. 

In addition, the legislation continues funding for loan programs that provide small businesses with capital. The bill extends funding to reduce or eliminate fees under the Small Business Administration’s 7(a) loan guarantee program and the 504 loan program through the end of this year.

The legislation also reverses a scheduled 21 percent payment cut for doctors who provide services through Medicare and Tricare, ensuring that America’s seniors and military families will continue to have access to their physicians.  The legislation also extends several other important Medicare protections, including the exceptions process for Medicare beneficiaries who exceed their cap on therapy services and provisions impacting doctors who serve rural communities.

Baucus and Reid introduced the American Workers, State and Business Relief Act as a substitute amendment to H.R. 4213, the Tax Extenders Act of 2009.