The word repeal appears 278 times in the summary of Representative Dave Camp’s ambitious plan to revamp the U.S. tax code. Credit unions and pipelines are among the businesses relieved that the slashing doesn’t apply to them.
Small oil-and-gas drillers, second-home owners and land conservation advocates also ensured that their provisions largely escaped Camp’s knife, in part through years-long lobbying campaigns and support from Republicans on the tax-writing panel.
“We’re very, very pleased with this very big, big win,” said John Magill, executive vice president for government relations at the Credit Union National Association, whose members benefit from a tax exemption worth $700 million this year that wouldn’t be repealed under Camp’s proposal. “The tax exemption is our very heart and soul.”
Camp’s draft, released last week, isn’t likely to become law this year. Instead, it provides a marker in the debate over revamping the tax code and a template for future proposals.
Lobbyists and companies that lost breaks or face new taxes are trying furiously to build political opposition.
In addition to fighting the credit union tax break, banks are attacking Camp’s plan to add a 3.5-basis point quarterly tax on the assets exceeding $500 billion of the biggest U.S. financial institutions, including Bank of America Corp. and JPMorgan Chase & Co.
The companies and industries whose breaks are included in the plan have a better strategic position going forward.
Unlike a proposal last year from former Senate Finance Chairman Max Baucus, Camp’s plan preserves the ability for independent oil and gas producers to write off certain intangible drilling costs immediately, rather than spread them over time.
That was a significant victory for the Independent Petroleum Association of America, which said slower cost recovery would impede capital investment.
“We’ve been arguing all along that this is an important provision for our capital, and we’ve sustained that argument in this draft,” said Lee Fuller, the group’s vice president of government relations, in a phone interview. “It’s always better to be where you want to be at the start of the debate than to try to recover from changes that are being imposed.”
Fuller and the oil producers had help from Representative Charles Boustany, a Louisiana Republican on the House Ways and Means Committee who said he advocated to keep the break in place even as other oil industry provisions were axed to finance the rate reductions.
“That was going to be devastating to the energy revolution we’re seeing now,” Boustany, who represents an oil-producing region of southern Louisiana, told reporters in the Capitol last week.
Camp, the Ways and Means chairman, wrote the draft after three years of public hearings, input from bipartisan working groups and months of closed-door meetings with Republicans on his panel to hash out the details.
That final stage of the process gave lawmakers a chance to advocate for specific provisions, and there were “pulls and tugs” among committee members along the way, Representative Pat Tiberi of Ohio, a senior committee Republican, told reporters last week.
Camp said the bill changed “a lot” as he developed it.
“My main focus was that we have an ultimate plan that grows the economy that will create jobs and will raise incomes,” he said in a brief interview outside his office last week. “And so I looked at every provision with that in mind.”
He declined to discuss specific provisions that he wanted to preserve. When asked about the credit union break at a news conference, Camp said, “That portion is not going to be addressed in this bill.”
Boustany said he also advocated to ensure that pipeline companies were able to keep their tax structure as master limited partnerships, which allows them to access capital markets and avoid the corporate income tax.
Camp’s draft retained that provision for energy companies while requiring private-equity firms such as Blackstone Group LP and KKR & Co. LP to convert to taxable corporations or go private.
That was a victory for companies including Kinder Morgan Energy Partners LP and Magellan Midstream Partners LP.
“We are pleased that the Ways and Means Committee supports the continuation of the MLP structure as an effective way to raise capital for the construction of new pipelines, storage and distribution systems,” Bruce Heine, a Magellan spokesman, said in a statement.
Representative Jim Gerlach, a Republican on Ways and Means, said in a brief interview at the Capitol that he was glad to see the plan retains the ability for people to donate conservation easements and made permanent a provision that lets taxpayers spread the deduction’s benefit over longer periods.
The conservation easement break lets people donate the value of the development rights to property, such as farmland in Gerlach’s district near Philadelphia, without relinquishing ownership.
Camp’s plan has some limits, including a ban on deductions related to golf courses.
The proposal also didn’t touch the mortgage interest deduction for second homes, one of the few breaks that 2012 Republican presidential candidate Mitt Romney specified when he talked about limiting deductions to pay for tax-rate cuts.
The second-home break would be curbed by other changes Camp includes for the mortgage interest deduction. He proposed limiting the amount of principal eligible for the break to $500,000, down from $1 million. The plan also would effectively cap the value of the deduction at 25 percent, making it less beneficial for high-income taxpayers.
Real estate agents, home builders and representatives from vacation destinations had been resisting any changes to the second-home deduction, warning lawmakers of the potential negative effect on home prices in resort areas.
The provision also had natural allies on the committee. A Bloomberg analysis last year found that members of the congressional tax-writing committees are eight times more likely than the average American to own a second home with a mortgage.