Business advocates are hoping Congress, which returns for another session in the coming weeks, will be able to quickly extend a number of tax provisions that expired at the end of 2011.
But following the bruising December battle over extending the payroll tax cut, K Street sources and other tax analysts are far from certain a quick extension of the provisions is within reach.
Dealing with the so-called tax extenders, a list that currently includes a well-known credit for research and development and other breaks for alternative energy and manufacturing, has become something of a year-end tradition for lawmakers — and an effort that has at times bled into the following session of Congress.
The advocates say that quickly extending the cuts would give more stability to business owners trying to map out their company’s future. In all, the Joint Committee on Taxation said that more than 50 temporary tax provisions, aimed at helping both businesses and individuals, expired at year's end.
“I’m as hopeful as I can be that Congress will act, that they want to act,” Monica McGuire, the senior director for tax policy at the National Association of Manufacturers, told The Hill. “They recognize the impact of these provisions, and that’s encouraging.”
Historically, lawmakers have attached an extenders package to an existing tax bill, making a deal to extend the payroll tax cut a likely target for advocates. Under the deal struck in December, the two-percentage point decrease in the payroll tax would expire at the end of February.
But given the fierce back-and-forth late last year, some observers believe that lawmakers will have enough on their hands in hammering out a year-long extension of the payroll tax cut — without having to discuss the tax extenders and, presumably, how to offset their cost.
Senate Democrats had said late last year that they wanted to extend some $35 billion worth of expiring tax breaks.
In addition to the payroll tax cut, the conference committee looking at the payroll tax cut would likely also try to deal with unemployment benefits and the Medicare reimbursement rate for doctors.
That, in turn, could push the fate of the extenders even deeper into the 2012 calendar — possibly even past this year’s election, when lawmakers will have to deal with other hot-button issues.
“The other shot would seem to be in a lame-duck session, when they’re dealing with all that other stuff, like the sequester and the Bush tax cuts,” said Howard Gleckman of the Urban-Brookings Tax Policy Center.
Congress has extended tax breaks like the research credit in lame-duck sessions before — including in 2010, when they also extended all of the Bush-era tax cuts for another two years and initially cut the payroll tax rate for workers.
Several other factors — including the debate over tax reform and the 2012 election — could also impact the extenders debate.
Top lawmakers spent much of 2011 discussing an overhaul of the tax code, in which credits and deductions like the expired tax breaks would likely be exchanged for lower rates.
“As we work together on comprehensive tax reform for the long-term, reaching a permanent agreement on expiring tax cuts right away must be our top priority,” Sen. Max BaucusMax BaucusFive reasons why Tillerson is likely to get through Business groups express support for Branstad nomination The mysterious sealed opioid report fuels speculation MORE (D-Mont.), the chairman of the Senate Finance Committee, said in a statement late last year.
A Hill aide added that a major goal in both extending expiring provisions and reforming the tax code was giving more certainty to businesses and individual taxpayers.
“Given that it's January and that Congress’s session is just getting under way, it's likely Congress will continue pushing toward that goal,” the aide said.
With the unemployment rate still at 8.5 percent, one business advocate also said that he thought it was in President Obama’s interest to see an extenders package passed, to give an extra jolt to the economy.
“I would think the president would want the momentum going forward,” said the advocate, who is nonetheless far from certain that the expiring provisions will be re-upped any time soon. “These extenders will have an economic benefit, and he’s going to need that over the next couple of months.”
McGuire of NAM, for instance, noted that the U.S. share of the world’s research and development has fallen in recent years, making the extension of the research credit even more important.
But other analysts aren’t so sure that the extenders package would have all that much impact on the economy.
“I’ve never talked to a CEO or CFO who has ever said that the research credit has changed the amount of research they do,” said Gleckman of the nonpartisan Tax Policy Center. “If you’re a drug company, you have to do research, or you die.”
Gleckman also said the way Congress deals with the extenders right now is the worst of all worlds: the year-by-year approach hides the true budget impact of extending those provisions, and doesn’t give businesses certainty to plan.
“It doesn’t allow companies to do what they really want to do which is long-term planning,” he said.