Dueling Highway Funding Plans Move Ahead in Congress with Tax Compliance Provisions

(Bloomberg) Lawmakers in the U.S. House and Senate are advancing dueling measures today that would provide a short-term cash infusion through May 2015 to a fund covering the federal share of road, bridge and mass-transit projects.

Both measures seek to forestall a slowdown in construction as early as next month resulting from Congress’s years-long inability to reach consensus on boosting infrastructure spending. The Senate plan relies on tax-compliance measures while the House doesn’t.

The action marks a departure by members of the Senate Finance Committee who earlier sought a shorter, six-month “patch” to pressure lawmakers to get a longer-term solution by year’s end.

A multiyear highway measure, covering as many as six years, is a top goal for business groups led by the U.S. Chamber of Commerce. House Speaker John Boehner said today there’s little prospect of Congress passing such a plan any time soon. Boehner reiterated his own opposition to raising the nation’s 18.4 cent-per-gallon gas tax that funds highway projects.

“We’re not going to get a long-term highway bill here over the next couple of months,” Boehner told reporters.

Lawmakers have just weeks to agree, as the existing two- year funding measure expires Sept. 30. The Department of Transportation predicts the Highway Trust Fund will run close to dry by next month.

IRS Tools
The Senate Finance Committee plans to meet at 2:30 p.m. Washington time on a plan designed to draw support from members of both parties.

The biggest difference between the proposals is the Senate plan’s inclusion of two tax-compliance changes projected to generate $3.4 billion over the next decade, according to a summary released today by the Joint Committee on Taxation.

The Senate plan would have to pass on the floor of the chamber and be reconciled with the House plan.

The Senate proposal would require banks to give the Internal Revenue Service more information about mortgages, including the unpaid balance and property address. That would provide the IRS with additional tools in auditing taxpayers’ mortgage-interest deductions.

Another tax-compliance provision would give the IRS more time to pursue taxpayers who overstate their basis in certain transactions and thus underreport capital gains.

The Senate proposal doesn’t include a provision in an earlier version that would have required people who inherit individual retirement accounts to take taxable distributions within five years, rather than over an extended period linked to the heirs’ life expectancy.

It also doesn’t include language from prior versions that would have allowed U.S. officials to revoke the passports of people with significant tax debts.

Congress Divide
The main division in Congress is over how to boost transportation funding as the current methods for paying into the trust fund rely on gasoline and diesel-fuel taxes that haven’t kept up with the pace of new projects.

Transportation Secretary Anthony Foxx has said that without a deal in Congress, federal payments to states will begin to slow as soon as Aug. 1, at the height of the construction season.

The House Ways and Means Committee today approved, by voice vote, a plan to provide about $10 billion for road, bridge and mass transit projects through May 2015. The panel rejected, 16-23, a Democratic amendment to provide funds only through Dec. 31 with the intention of approving a six-year plan by then.

Representative Sander Levin of Michigan, the panel’s ranking Democrat, said a year-end deadline is the only way to keep enough pressure on lawmakers in both parties to agree to a better and broader way to finance infrastructure.

Republican Chairman Dave Camp, also from Michigan, argued for his longer-term approach to forestall another trust fund solvency crisis right after the November elections.

“A funding package that just goes to the end of 2014 would only create a larger crisis in December,” he said.

Increased Pressure
The Obama administration and outside groups have stepped up the pressure on Congress to resolve the Highway Trust Fund issue.

At the White House yesterday, Vice President Joe Biden urged business leaders to call on lawmakers to act. He said inaction would force states to defer 112,000 highway projects and 5,600 transit projects, affecting about 700,000 jobs.

“Since when did it become a bad investment?” Biden said in remarks to the White House Business Council, an advisory group of business and top government officials that included representatives of American Airlines Group, General Motors Co. and CVS Caremark Corp.

Senators in both political parties this week lambasted the idea of postponing action on a longer-term plan into 2015. Senator Bob Corker, a Tennessee Republican, said Camp’s plan is “an embarrassment.” Senator Barbara Boxer, a California Democrat, also called for a shorter-term solution.

A coalition that includes business groups like the U.S. Chamber of Commerce, the AFL-CIO and state governments have pushed for a long-term bill in a lame-duck session of Congress after the November election. They say that would provide more certainty for infrastructure projects needed in a slow-growing economy.

“In the chamber’s view, the longer the patch the easier it will be for Congress to kick the can down the road and avoid the tough question: How will we maintain federal investment in highways, public transportation and highway safety?” Bruce Josten, the top Chamber of Commerce lobbyist, wrote in a letter to lawmakers on the Ways and Means Committee yesterday.

The House and Senate proposals both generate about $10 billion, according to the JCT summaries. They include customs fees, changes to pensions that lower companies’ short-term contributions, and revenue from a leaking underground storage tank fund.

It would cost $8 billion to extend the trust fund’s capabilities to the end of December, according to the nonpartisan Congressional Budget Office.

Delay Risk
There already were plenty of signs that the longer-term funding debate risked being moved into 2015 amid few signs of consensus on raising taxes to fund it.

While the Senate Environment and Public Works Committee voted in May to reauthorize highway and mass transit programs for six years and the White House has proposed a four-year, $302 billion plan, House Transportation and Infrastructure Committee Chairman Bill Shuster said yesterday he may decide to wait until next year to introduce his bill.

Some lawmakers said today they don’t rule out some work on a longer-term measure after the elections, although prospects look weak.

“It doesn’t fix the long-term problem, which ultimately we have to deal with,” Senator John Thune, a South Dakota Republican and Finance panel member, said of the Senate measure. “But it’s probably for now the best we can do.”

Companies including Caterpillar Inc., United Parcel Service Inc. and Honeywell International Inc. are among corporations pushing for a long-term bill. A 2012 proposal collapsed in a dispute over financing and resulted in the current two-year law that expires at the end of September.

—With assistance from Derek Wallbank in Washington.

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