Lawmakers move to revive tax incentives

House tax writers are preparing a slew of bills to revive lapsed tax incentives, after getting urged on by Ways and Means Chairman Dave Camp (R-Mich.).

Camp, who announced his retirement this week, previously had asked his GOP colleagues to hold off on more targeted tax bills, so the Ways and Means panel could devote its full attention to his longstanding goal of rewriting the code.

ADVERTISEMENT
But with that goal out of reach this year and his broad draft overhaul already released, Camp is now trying to cement his tax legacy by moving the ball forward on reform, seeking to either dump dozens of temporary tax breaks for good or extend them long-term.

That also gives more rank-and-file members a chance to make the case for their favored preferences – but also to curry favor with voters back home.

“I’m fine if members have items they want to highlight by introducing. Now’s the time,” Camp said. “This is the beginning of a process that’s going to extend through the spring and summer.”

Camp is ramping up his examination of the so-called tax extenders just as the Senate Finance Committee cleared a package that extended all but a handful of the more than 50 temporary tax breaks that expired at the end of 2013.

The Michigan Republican told reporters Friday that he expected multiple hearings and mark-ups on the lapsed provisions, suggesting he wouldn’t craft a broad extenders package like Finance Chairman Ron Wyden (D-Ore.).

Lobbyists expect Camp to concentrate first on the popular credit for research and development, and a tax break commonly known as Section 179 that allows businesses to deduct certain purchases.

But that still leaves space for Camp’s fellow Republicans to drop their own bills, and gives the Ways and Means chairman a vehicle to extend a tax provision permanently if he wants it.

Both Wyden and Camp have said they want to move on extenders before November’s elections. But the best bet, lawmakers say, is that a final deal won’t materialize until the lame-duck session after voters have gone to the polls.

Rep. Jim Gerlach (R-Pa.), who’s also not seeking re-election this year, introduced a bill this week to extend the New Markets Tax Credit with Rep. Richard Neal (D-Mass.).

That tax credit, which has fans on both sides of the aisle, seeks to spur private investment in struggling neighborhoods.

“Out of respect, certainly, for the chairman, we wanted to wait to get through the discussion draft,” Gerlach told The Hill. “Once that was completed, we’ve been able to now move forward on a couple of ideas.”

Rep. Kevin Brady (R-Texas), who has made it clear he wants to succeed Camp atop Ways and Means, told The Hill he would consider introducing an extension of the deduction for state and local sales taxes – a key incentive for states, like Texas, that don’t have an income tax. Brady added that he strongly supported a longer-term extension to the research credit.

Rep. Charles Boustany (R-La.) said he’s interested in extending a provision that allows corporations to shift assets among foreign subsidiaries without paying taxes.

“We all feel strongly about these tax provisions. The frustration’s been the temporary nature of them,” said Brady, adding that lawmakers have been “shooting ourselves in the foot” by not having a permanent research and development credit.

Camp has cast his goal of seeking a permanent solution to tax extenders as the logical next step in the march toward reform, and as a way to perhaps ease some of the trade-offs required to lower tax rates.

Official congressional scorekeepers assume the tax extenders, which are generally dealt with on a start-and-stop basis, will remain expired – the same assumption Camp made in his own tax reform draft.

If he made some of those tax breaks permanent, Camp would be giving more breathing room to the would-be reformers who succeed him, allowing them to maybe keep more popular tax provisions.

“If we’re taking provisions that are temporary and making them permanent, that is part of tax reform,” said Boustany. “It’s an incremental step.”

Still, it’s also fairly clear that some of the targeted tax breaks face an uphill climb to getting extended in the House. Camp outright repealed two-thirds of the extenders in his draft, including the sales tax deduction and preferences for Puerto Rican rum distillers and NASCAR track owners.

Other preferences, like the research and development credit and provisions on offshore corporate income, were extended in the draft, with modifications in some cases. Still others, like the new markets credit, aren’t even discussed at all.   

With his plan for months of hearings and mark-ups, Camp is also making clear that he doesn’t want a repeat of two years ago, when the Senate Finance extenders bill got tacked on to the fiscal cliff deal.

House Republicans took a dim view of that extenders package, but hadn’t dealt with the grab bag of incentives themselves.

Now, Camp is urging his fellow GOP tax writers to do so, which also allows Republican incumbents to follow up on priorities of their constituents. Still, lawmakers said that cut both those ways.

“It’s always helpful to say we’re working on the major package, and we’re not going to do single-shot deals,” said Rep. Kenny Marchant (R-Texas). “It’s been helpful to me to not have to introduce a bunch of bills.”