The tax cut and unemployment extension bill that Congress passed earlier this month also included a host of obscure tax breaks, including for TV shows, imported rum and motor sport race tracks.
The bill contained extensions of a large number of expiring tax breaks that Congress had tried to pass in earlier tax extender bills, but had been unable to because of the pesky requirement of having to pay for them. Those bills typically ran aground over objections to imposing revenue-raising offsets like increasing the 15 percent tax on the carried interest income of hedge fund managers and private equity firm partners, who apparently had a direct phone line to many lawmakers’ offices.
But with the Bush tax cut extension bill practically sailing through Congress in the waning days of the term, attempts at imposing those offsets were thrown to the four winds.
That meant extensions of popular tax breaks like the Research & Experimentation Credit, the Earned Income Tax Credit, the Child Tax Credit, and the ability to deduct state and local sales taxes. But it also meant extending a number of items that favor particular industries and interests, as the Associated Press pointed out in an eye-opening article.
Among them are extensions of a number of tax credits that had expired at the end of 2009. The two-year extension means that many of them are thus extended retroactively for this year as well as next year.
That includes an expensing election for certain film and television production costs, which is good through 2011. However, movie and TV producers will need not only their accountant, but also the dreaded censor, because sexually explicit productions are ineligible, according to the AP. The cost of the tax break is estimated to be $101 million, which should be enough to make one or two movies these days.
Nascar got the winner’s flag with an extension of the seven-year straight-line cost recovery period for motorsports entertainment complexes. Let’s hope that the IRS doesn’t try to sue any more race car drivers for unpaid taxes to make up for the lost revenue. That didn’t work so well with Helio Castroneves, who beat tax evasion charges last year.
Other beneficiaries of the tax breaks in the bill include producers and importers of rum from Puerto Rico and the Virgin Islands. “The U.S. imposes a $13.50 per proof-gallon tax on imported rum, and sends most of the proceeds to the two U.S. territories,” said the AP. “Previously, the rebate was $10.50 a gallon. The new law extends a more generous rebate of $13.25 a gallon through 2011. Cost: $262 million.”
Captain Morgan, your ship has come in.