Legislation to extend several dozen expired or soon-to-expire tax breaks, including a credit for R&D activities and incentives for the production of alternative transportation fuels, has cleared the first hurdle—approval by the Senate Finance Committee.
Historically, the provisions have been extended with little fanfare. But Congress is unlikely to sign off on this package anytime soon, because lawmakers in both parties want to use the tax breaks as bargaining chips in upcoming battles over the looming across-the-board spending cuts, the Bush-era tax cuts, and possibly another debt-limit fight.
The Finance Committee endorsed the $205 billion package of so-called tax extenders by a vote of 19-5 on Aug. 2. Sen. Max Baucus (D-Mont.), committee chairman, said businesses need certainty to hire, invest, and grow. “This bipartisan work is just what all members of Congress will need to do with the fiscal cliff looming and tax reform on the horizon,” he remarked after the vote.
Baucus was referring to the feud between Democrats and Republicans in both the House of Representatives and the Senate over how to avoid the sequester, or $109 billion in automatic, across-the-board spending cuts that are scheduled to take effect on Jan. 2, 2013. Those potential spending cuts came about because a bipartisan committee failed to agree last year on a decade-long plan to reduce the federal budget deficit by $1.2 trillion.
Baucus said he hopes the full Senate will vote on the tax extenders package soon. But lawmakers are on a month-long summer vacation and won’t return to the nation’s capital until Sept. 10. Meanwhile, Rep. Patrick J. Tiberi (R-Ohio), who is spearheading the House effort to extend the tax breaks, has said that his legislation will not be ready until after the November elections.
The R&D tax credit, which expired at the end of 2011, has allowed companies that perform technological research in the U.S. to take a 14% tax break on the costs of wages and materials. The draft Senate measure would retroactively renew the research credit through 2013.
The Biotechnology Industry Organization “strongly supports the provisions of the package which would extend the valuable R&D tax credit for two years,” says James C. Greenwood, CEO of the trade association that represents biotech companies around the world.
The Senate proposal also includes a production credit for wind energy, as well as tax breaks for a variety of alternative fuels and associated infrastructure, including biodiesel, cellulosic biofuels, vehicles fueled by compressed or liquefied natural gas, and electric vehicles.