TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, September 10, 2010

CRS Report on Tax Extenders

BNA has made available yesterday's Congressional Research Service report, Certain Temporary Tax Provisions Scheduled to Expire in 2009 (“Extenders”) (RL32367), by James M. Bickley. Here is the Summary:

Numerous temporary tax provisions expired on December 31, 2009. Often referred to as “extenders,” these provisions were originally enacted with expiration dates that have subsequently been extended, in some cases numerous times. The temporary nature of extenders can be considered useful as it allows policymakers to evaluate the effectiveness of the provisions on a regular basis. If an extender is found to be ineffective, its scheduled expiration allows several policymaking options, including allowing the provision to expire or redesigning the provision to improve its use as a policy tool. However, policymakers have, for the most part, considered the extenders as a group during the enactment process, and have not reviewed the unique strengths and weaknesses of specific provisions.

In the 111th Congress, a provision for the extension of certain expiring provisions was included in the House and Senate Budget Resolution (S.Con.Res. 13). The conference report for S.Con.Res. 13 was passed by both chambers on April 29, 2009. The House passed a package of expiring provisions, the Tax Extenders Act of 2009 (H.R. 4213) on December 9, 2009. On March 1, 2010, the Senate officially began consideration of H.R. 4213. A Senate proposal, offered as a substitute amendment by Senate Finance Committee Chair Max Baucus and Senate Majority Leader Harry Reid, offered substitute text for H.R. 4213 that would be Title I, Extension of Expiring Provisions, in the proposed American Workers, State, and Business Relief Act of 2010. On March 10, 2010, the Senate passed H.R. 4213, which added several relatively low-cost tax extenders to the House-passed H.R. 4213. On May 28, 2010, the House voted 215 to 204 to pass a revised H.R. 4213 titled the American Jobs and Closing Tax Loopholes Act. The Joint Committee on Taxation estimates that the extension of 62 expiring provisions will cost $31.619 billion from FY2010 to FY2020. On June 24, 2010, Senator Reid was unable to invoke closure after three votes; consequently, he tabled the bill. In September, Congress is expected to reconsider the package of tax extenders.

This report’s analysis of extenders considers the degrees to which extenders are actually temporary tax provisions and the tax benefits of an extender; the analysis examines efficiency, equity, and simplicity features.

Some tax extenders, which expired on December 31, 2009, are examined in this report. These extenders include the following tax credits: the tax credit for holders of qualified zone academy bonds, the tax credit for first-time homebuyers in the District of Columbia, the tax credits for research and experimentation expenses, the New Markets Tax Credit, the possession tax credit with respect to American Samoa, and a credit for certain expenditures for maintaining railroad tracks. The extenders include the following deductions: expenses for elementary and secondary school teachers; tuition expenses; corporate charitable contributions of computer technology, food inventory, and books; contributions of capital gain real property made for conservation; and state and local sales taxes. Also depreciation allowances are included for qualified leasehold and restaurant improvements, for property on Indian reservations, and a seven-year recovery period for motor sports entertainment complexes. Other temporary tax provisions include tax incentives for investment in the District of Columbia, an increased “cover over” of tax on distilled spirits from Puerto Rico and the U.S. Virgin Islands, penalty-free withdrawals from individual retirement plans (IRAs) for individuals called to active duty or for charitable giving, and mortgage revenue bonds for veterans.

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