Expired U.S. Business Tax Breaks May Stay in Limbo Past Election
Business-backed efforts to extend dozens of expired U.S. tax breaks including those for corporate research, teachers’ out-of-pocket expenses and energy-efficient appliances probably won’t be considered until a post-election session of Congress, lawmakers and lobbyists said.
Lawmakers, including Senate Majority Leader Harry Reid and Senate Finance Chairman Max Baucus, tried to include some of the breaks in pending legislation to extend an expiring payroll tax cut. That effort didn’t succeed, and the intense politics surrounding U.S. tax policy may discourage lawmakers from acting until the end of 2012.
“It just makes it impossible to get where we need to be until after the election” on Nov. 6, said Representative Patrick Tiberi, an Ohio Republican and member of the House Ways and Means Committee.
In a so-called lame-duck session before defeated lawmakers leave office, Congress would consider extending these breaks along with expiring income tax cuts, automatic spending cuts that start in 2013 and the expiration of the payroll tax break Congress is now trying to extend for the rest of 2012.
“The CEOs have really gotten fed up with the idea that everything in the tax code seems to be temporary,” said John Engler, president of the Business Roundtable, a Washington-based association of chief executives at corporations including the Bank of America Corp. and PepsiCo Inc. “They want a permanent tax code.”
For the Investors
Democratic Representatives Richard Neal of Massachusetts and Joseph Crowley of New York said they expect the tax extenders to be addressed in the lame-duck session. Crowley said he hoped Congress could act more quickly.
“We’d all like to have that done for the sake of the investors,” Crowley said.
The so-called tax extenders have lapsed and been continued retroactively before. Many of the same tax breaks expired at the end of 2009 and didn’t get new life until the end of 2010.
Among the expired tax benefits are the research and development credit, the ability to defer taxation on some overseas financial-services income and a grant program for renewable energy projects.
Companies including General Electric Co. and Microsoft Corp. lobby for at least one of the tax breaks. Business groups complain that the frequent lapses and retroactive reinstatements interfere with their ability to use the incentives effectively.
“While the IRS muddles through and does its best by rushing through revised forms and instructions, last-minute retroactive extensions cause significant taxpayer confusion, with a clean-up that often drags on for many months,” Douglas Shulman, commissioner of the Internal Revenue Service, said in a speech to corporate tax directors yesterday, according to prepared remarks.
Kenneth Kies, a Republican tax lobbyist in Washington, said it’s still possible the tax break extensions would be enacted before the election.
“The two tax-writing committees have got to figure out something to do with their time between now and November,” said Kies, whose clients include Caterpillar Inc. and the American Council of Life Insurers.
Obstacles to extending the tax breaks include disagreements over whether and how to make up the one-year loss of about $35 billion in revenue.
Democrats and Republicans also disagree on which provisions should be continued. Democrats prefer the renewable-energy tax breaks, some of which were created in the 2009 economic stimulus law. Republicans have resisted extending those provisions.
If lawmakers consider culling the extenders list, businesses may be more reluctant to make investments based on the belief that lapsed tax breaks will be renewed, said Patrick Heck, a partner at K&L Gates LLP in Washington. He is a former chief tax counsel to Senate Finance Committee Democrats.
“It’s uncertainty on top of uncertainty,” said Heck, who represents the National Restaurant Association in its effort to extend a depreciation provision. “There isn’t anybody on Capitol Hill that can tell you how that lame duck is going to turn out.”
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