Senate Releases Details on Tax Extenders Legislation

The Senate Finance Committee has released the legislative text of the tax extenders bill, spelling out the reasons for extending certain tax breaks or for letting them expire, along with dissenting views from a trio of senators.

The legislative text of the Family and Business Tax Cut Certainty Act of 2012, the tax cut extenders bill written by Senate Finance Committee Chairman Max Baucus, D-Mont., and approved by the committee earlier this month, is now available on the committee’s legislation Web page, the committee said Tuesday.  The committee report on the bill is also available.

The bill extends the patch on the alternative minimum tax to prevent it from affecting millions more taxpayers (see Senate Panel Passes Bipartisan Tax Extenders Bill). “The Committee is concerned about the projected increase in the number of individuals who will be affected by the individual alternative minimum tax and the projected increase in tax liability for those who are affected by the tax,” said the report. “The provision will reduce the number of individuals who would otherwise be affected by the alternative minimum tax and will reduce the tax liability of the families that continue to be affected by the alternative minimum tax.”

Other provisions would extend the above-the-line deduction for elementary and secondary school teachers who purchase school supplies, parity for mass transit and parking benefits, the deduction of home mortgage insurance premiums, the deduction for state and local taxes, the deduction for qualified tuition and related expenses, and for leasehold improvements for restaurants.

The bill would also improve and make permanent the provision allowing the Internal Revenue Service to disclose certain tax return information to prison officials to curb tax fraud by prisoners.

“The Committee believes that sharing information with prison officials will allow the prison officials to take appropriate disciplinary and administrative action to deter prisoners from filing false federal tax returns,” said the report. “As many state prisons are run on a contract basis, and the IRS has identified a number of these prisons as sources of false returns, the Committee believes that equal disclosure authority should be afforded to such prison officials to address the matter.”

However, some tax breaks are not being fully extended, or some limitations are being imposed. For example, the bill would extend many of the tax credits for energy-efficient appliances to encourage their production and use for two additional years (through 2013), but the $25 dishwasher credit and the $175 clothes washer credit are not extended. Another provision would extend the alternative fuel excise tax credit and related payment provisions for non-hydrogen fuels for two additional years through Dec. 31, 2013, along with the alternative fuel mixture excise tax credit, but the companion payment outlay provision would not be extended.

Another provision would extend the credit for the production of Indian coal for one year through Dec. 31, 2013, but the placed-in-service date for qualified facilities would not be extended.

The report included a statement of dissenting views from three senators on the committee: Jon Kyl, R-Ariz., Tom Coburn, R-Okla., and Richard Burr, R-N.C.

“If this legislation was intended to be a prelude to tax reform, we believe it failed by not culling enough unwarranted provisions,” they wrote. “The tax code should not be used as a tool for picking winners and losers, nor should it reward politically favored industries or penalize disfavored ones. Among the dozens of tax provisions that expired last year or will expire this year, this package extends too many that have little to do with sound tax policy and are actually harmful, market-distorting subsidies. For example, we are concerned that the relentless dedication to subsidizing so-called “green energy” will prevent the most efficient development of energy sources and cause a loss of jobs in the broader economy. In addition, it was our understanding that this package would only extend items that enjoyed broad consensus. We were disheartened to see provisions included that were supported only by members of one party. This continued during the amendment process, when members of the other party added back a subsidy for plug-in motorcycles that we previously believed the committee had decided to end.”

They added that they are also “deeply concerned” about the expansion of the production tax credit for wind energy and the impact on the budget deficit. The bill would require that construction of wind energy facilities begin by 2013, but not necessarily be completed by then. They cited figures from the Joint Committee of Taxation estimating that the cost of the tax break would increase from $3.5 billion to nearly $12.2 billion as a result of the change, more than twice as large as all the other energy provisions in the package.

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