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Nov. 25 — Congressional negotiations to revive dozens of expired tax credits and deductions are keeping hope alive that some provisions will be made permanent in the tax code, but a deal doesn't appear to be at hand, lobbyists and congressional staff members told Bloomberg BNA.
With possible staff-level meetings during the weekend after Thanksgiving and Congress due to reconvene the week of Nov. 30, talks have become more feverish. Congress is then scheduled to adjourn as soon as Dec. 11, leaving little time for the House, Senate and White House to craft a deal any more complicated than a straight extension of the tax provisions.
Most of the provisions expired in December 2014.
Negotiators are still pursuing a permanent credit for research and experimentation and a permanent earned income tax credit that could include measures to combat fraud—a priority for Republicans skeptical about making such refundable tax credits permanent.
Other provisions could phase out the wind production tax credit, for instance, and address the “Cadillac” tax that the Affordable Care Act imposes on high-cost health plans, which lawmakers in both parties have sought to delay or repeal.
Another top priority among Republicans and businesses, the expensing provisions in Section 179 of the tax code, is on the agenda for permanency or possibly a long-term extension while other items are renewed for a year or two.
“Nothing is final and negotiations continue,” Senate Democratic staffers told lobbyists in an e-mail Nov. 25 following several pre-Thanksgiving meetings. In the e-mail, staffers said they were writing to quell rumors about a deal unfolding.
A Senate leadership aide told Bloomberg BNA Nov. 25 that a tentative deal hasn't taken shape yet and that all elements of the discussion are subject to change.
“There are several issues outstanding and the resolution of those could affect anything else in the package. Nothing is agreed to until everything is agreed to,” the aide said.
Quest for Common Ground
Generally, lawmakers are looking for common ground between the Senate Finance Committee, which passed a two-year tax extenders bill earlier this year, and the House Ways and Means Committee, which approved permanent provisions for the research credit, bonus depreciation, business expensing in Section 179 of the tax code, and tax benefits related to certain charitable deductions.
In the background is the Obama administration, which hasn't been willing to accept permanent extenders for businesses without enhancements to tax credits for lower-income households, for instance.
Business groups have pushed hard for months for a permanent research credit, a concept that has bipartisan support but splits Democrats who want budget offsets to make up the forgone revenue, and Republicans who are willing to go without them. A lobbyist for one major business group told Bloomberg BNA that businesses are optimistic that a permanent credit can emerge from talks.
If past negotiations on tax extenders are any indication, smaller tax issues such as permanent parity for mass transit tax benefits—a high priority for Sen. Charles E. Schumer (D-N.Y.), a senior member of the Finance Committee and the third-ranking Democrat in the Senate—and enhanced tax breaks for victims of natural disasters have the potential to be wrapped into any deal.
Schumer and Sen. Rob Portman (R-Ohio) have also been looking for ways to advance elements of their work on revamping international tax policy to encourage companies to keep more profits in the U.S. rather than shift them to lower-tax countries.
The scope of additional issues depends on lawmakers' willingness to take on policies that aren't tax extenders, and on their eagerness to change policies outside of a broad tax overhaul. Such an overhaul isn't likely during the remainder of the Obama administration, lobbyists and Republican lawmakers say.
White House More Engaged?
All the talks, meetings, conference calls and rumoring is reminiscent of a year ago when a similar deal was taking shape before ultimately falling apart.
This year's efforts include no substantial changes in dialogue, according to one of the lobbyists. But there does appear to be more engagement on the part of the White House this year, perhaps because administration officials know their time is limited to cement permanent extensions of the renewable tax credits due to expire in 2017, the lobbyist said.
The question is whether President Barack Obama would accept congressional Republicans' anti-fraud demands such as requiring Social Security numbers for those claiming refundable tax credits tied to the 2009 economic stimulus, such as the EITC.
Issues around immigration are as volatile this year as they were last year, albeit for different reasons, including current rhetoric from Republican presidential candidates and concerns about Syrian refugees filtering through the public consciousness. Last year, an Obama executive action on immigrants sparked outcry among Republican lawmakers who said undocumented immigrants might take advantage of tax benefits, which helped sink a deal.
If the president again declines to acquiesce on Republicans' anti-tax-credit abuse proposals, a one-year deal to renew extenders for only this year could develop to preserve a chance for administration officials to take one more shot next year, Obama's last in office.
Not coincidentally, last year's renewal was a one-year deal, reviving extenders retroactively for 2014.
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