Treasured tax breaks set to expire

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Congressional tax writers have put K Street on notice that a treasured collection of tax breaks won’t be renewed by the end of the year.

House Ways and Means Committee Chairman Dave Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) have vowed to deal with the so-called extenders package in comprehensive tax reform.

But with the fate of that effort uncertain, lobbyists are unsure when, if ever, Congress will get around to reauthorizing dozens of breaks that deal with everything from wind energy to research and development to electric vehicles.

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“The point that the chairman has made consistently is, any time we do extenders, it takes the pressure off comprehensive tax reform, and it takes away from the debate of comprehensive tax reform,” said Rep. Patrick Tiberi (R-Ohio), the chairman of the Ways and Means subcommittee that deals with taxes.

“The message is: All eyes are on comprehensive tax reform.”

The Joint Committee on Taxation, Congress’s official scorekeeper, says 55 temporary tax provisions are scheduled to expire at the end of 2013. 

 The expiring provisions include incentives for investing in communities in need and for using mass transit. Other provisions benefit Puerto Rican rum producers, NASCAR tracks and the film industry.

The expiration of the tax breaks is no surprise to the business community, which has become accustomed to Congress extending them retroactively — most recently in the “fiscal-cliff” deal in January.

Business lobbyists say the tax breaks provide critical support to a variety of industries and argue Congress’s stop-and-go approach makes it harder for companies to plan.

But they acknowledge that Camp and Baucus’s tax reform efforts have made their jobs harder.

“Many on Capitol Hill view tax extenders as being held hostage to the tax reform question,” said Bob Van Heuvelen, principal and founder of VH Strategies. “It’s seen as a carrot to motivate support for tax reform.”

Some K Street hands privately acknowledge that extenders legislation from Camp or Baucus would be all but an admission that tax reform is doomed.

Baucus is not running for reelection next year, and Camp is term-limited with the Ways and Means Committee gavel — meaning 2014 is the two chairmen’s last chance to craft an overhaul.

Their schedule for reform has already slipped, with Camp acknowledging on Wednesday that he wouldn’t release a tax reform bill this year.

“They have been trying to keep their eye on the prize,” said Liam Donovan, director of legislative and political affairs at Associated Builders & Contractors (ABC). “They have tried to make the beginning and the end of every tax conversation about tax reform.” 

One hurdle for business lobbyists is the cost of extending the tax breaks.

A package extending some or most of the provisions is likely to cost billions of dollars. The extenders measure approved early this year, for instance, had a price tag of around $76 billion.

Van Heuvelen, a former chief of staff to ex-Sen. Kent Conrad (D-N.D.), is lobbying to re-up incentives for biodiesel and renewable fuel, which are set to expire at the end of this year. His clients include Imperium Renewables and Renewable BioFuels — two large biodiesel producers.

The research and development credit is also a top priority for many groups on K Street, including the National Association of Manufacturers (NAM).

“I’m sure that tax extenders won’t happen this year because there’s an enormous amount of interest of holding them back to develop consensus for tax reform,” Van Heuvelen said.

But lobbyists say the longer that Camp and Baucus hold off on extenders, the more pressure they’ll face to act.

“Moving on tax extenders is an acknowledgement that we are not moving on a tax reform bill this year,” said Donovan, whose group wants to see movement on a number of expiring breaks, including the depreciation credit that could help the construction industry. “But the writing is on the wall. We are in December now.”

The problem for lobbyists is that next year’s calendar doesn’t seem to provide many openings.

Congress is scheduled to deal early next year with deadlines on the budget and debt ceiling, which often take up much of the oxygen on Capitol Hill.

And with Baucus and Camp not showing any appetite for tax extenders, K Street isn’t expecting them to produce legislation that could be hitched on to a broader vehicle. 

Baucus had tax extenders legislation marked up and ready to go when Congress was facing the fiscal cliff.

“My sense is, if we were to mark up an extenders bill, we would definitely lose momentum,” Rep. Charles Boustany Jr. (R-La.), a senior member of the Ways and Means Committee, told The Hill. “It sort of deflates the effort.” 

Boustany suggested that keeping tax extenders at arm’s length would strengthen tax writers’ hands as they try to marshal support for reform.

Holding off on extenders would force business groups to make their case for prized preferences within the tax reform debate, after some of them balked at the proposed trade-offs for lowering tax rates.

“Well, I think it is leverage. I think it’s to try to keep everybody’s interest aligned with a reform effort, and not just business as usual,” Boustany said. 

“It’s really, I think, a tool to keep the business community focused on a longer-term reform.”