Dan Houser, the chief financial officer of International Speedway Corp., knows his industry is a potential target for lawmakers scrubbing the tax code for narrow breaks they can eliminate.
The one with the “sexy tag” of a NASCAR tax break, he said, can be twisted and criticized unfairly. The provision lets track owners depreciate capital costs over seven years instead of the usual 15 or 39 years.
“It just would be unfortunate for something that I think is really a plus to kind of end up on the cutting floor just to have something that’s going to sound nice in the headline,” said Houser, who said the provision encourages his company and others to make investments.
A House Ways and Means subcommittee today is scrutinizing dozens of tax breaks, including for motor sports, producing wind energy, maintaining short-line railroad tracks and making investments in the District of Columbia. The beneficiaries of such breaks are lobbying to avoid becoming casualties of a winnowing effort.
“For too long Congress has simply rubber-stamped the extenders package without any review, without any oversight,” said Representative Patrick Tiberi, an Ohio Republican who is chairing the hearing.
Tiberi and five other members then proceeded to list the tax breaks they want to extend without identifying any they would eliminate.
Lawmakers haven’t decided what to do about the motor sports provision and others that expired in 2011 or are set to expire at the end of 2012.
Some of the breaks may be part of an end-of-year deal that includes extensions of expiring income-tax rate cuts. Some may be jettisoned. They could be extended in anticipation of a future tax-code overhaul that would trade breaks for lower rates. They also might be paired with spending cuts or tax increases to reduce the effect on the U.S. budget deficit.
Representatives Rick Berg of North Dakota and Aaron Schock of Illinois, Republicans on the Ways and Means Committee, said that until the president and Senate are willing to work with the House on overhauling the tax code, many expired provisions should be revived to prevent tax increases.
“We should not effectively raise taxes on small businesses and families in our current economy,” Berg said.
No Automatic Extension
What’s clear is that automatic extension of all of these tax breaks may no longer an option. House Republicans, who are holding the hearing, are prompting interest groups and lobbyists to explain the reasons for the provisions and demonstrate whether they are working as intended.
“House Republicans in particular and maybe Senate Republicans and others think that at some point we shouldn’t all blindly be extending all this stuff,” said Kenneth Kies, a Republican tax lobbyist whose clients include Pfizer Inc. and Starwood Hotels & Resorts Worldwide Inc.
Kies said that Congress allowed many provisions created by the 2009 stimulus law to expire at the end of 2010. Republicans have circulated a list of 73 lapsed items as proof that lawmakers can allow tax breaks to end.
The list of expired and expiring provisions includes those affecting a swath of multinational corporations, such as the research and development tax credit used by companies including Intel Corp. and the ability to defer active international finance income used by General Electric Co. and Caterpillar Inc.
More targeted business breaks are on the list, too, including the motor sports benefit and tax credits for energy-efficient appliances made by companies such as Whirlpool Corp.
Targeted to Individuals
Also being examined are provisions that affect individuals, such as the ability to deduct teachers’ out-of-pocket expenses and a deduction for state sales taxes.
“Like everything else in Congress, it’s hard to get anything done right now,” said Steve Elmendorf, a Democratic lobbyist whose tax clients include the Managed Funds Association. “There certainly, though, are people on both sides of the aisle who’d like to get them done.”
The rules for the hearing limit which tax breaks can be considered, excluding the big-picture fiscal questions on income tax rates that Congress will consider later in the year.
Only members of Congress who have introduced bills on the specific breaks are allowed to testify. Twenty-seven of them are on a witness list. Away from the witness table, lobbyists are trying to build support among the lawmakers who champion their issues.
‘Own These Things’
“I assume why they’re doing it is they want people to own these things,” Elmendorf said. “Most of them, somebody does.”
The Council on Foundations wants Congress to extend a tax break that lets taxpayers send mandatory distributions from their individual retirement accounts directly to charities. The tax code’s lack of certainty makes it tough for people to plan, said Andrew Schulz, vice president for legal and government relations at the group, based in Arlington, Virginia.
“You can’t go into something like this and take it for granted,” Schulz said. “We’re hoping that if everyone had a chance to make their case, we’ve got a really strong case.”
Schulz said he welcomed the chance for the provision to gain attention.
“We’re not some secret back-room dealings that evolved over time,” he said. “We’re always pleased to talk about what we do and how it changes our communities.”
Kies said negative publicity about renewable-energy incentives will make it more complicated for those provisions to be extended.
Denise Bode, chief executive officer of the American Wind Energy Association, told reporters on a conference call yesterday that thousands of jobs hang on the fate of the production tax credit. That tax break, which doesn’t lapse until the end of 2012, is affecting jobs now because turbines must be in place and producing energy by Dec. 31 to qualify.
“Obviously, with the tremendous lack of coordination across the aisle, it is very difficult to do anything, to see anything happening,” she said. “But I guess we’re heartened by the fact that they’re holding this hearing” and that House and Senate leaders are discussing the provisions.
Houser, of the speedway company, said motor sports advocates will rely on lawmakers from districts with racetracks who can discuss the economic benefits they provide. ISC has tracks across the country, including Daytona International Speedway and Michigan International Speedway.
And, like many of the other tax-break advocates, he ties his item to the top issue for politicians: job growth.
“It’s really private-sector stimulus money,” Houser said.