WASHINGTON — Senate Finance Committee chairman Ron Wyden has proposed a bill to extend roughly 47 expired and expiring tax provisions, including four related to bonds, governments, and Puerto Rico. Sens. Wyden and Orrin Hatch, the top Republican on the committee, have scheduled a vote on the proposed extender legislation for Thursday.
The so-called extenders, 45 of which expired last year and two which are to expire this year, would result in revenue losses of $22.86 billion in fiscal 2014, which ends on Sept. 30 and $108.54 in FY-2015, according to the Joint Committee on Taxation. Revenue losses that would result over a ten year period, fiscal years 2014-2024, would total $67.40 billion, JCT said.
Wyden is proposing to extend the traditional tax-credit qualified zone academy bond program at $400 million per year in each of FY-2014 and -2015, but the bonds could not be used in a direct-pay mode. In other words, investors would get tax credits but the issuer would not receive federal subsidy payments.
QZABs can be used when all of the bond proceeds are used to finance renovation of, as well as provision of equipment and development of course materials for schools in a "qualified zone academy." In addition, private entities must contribute property or services equal to at least 10% of the bond proceeds.
A qualified zone academy is a public school that meets several requirements, including that it provides education and training below the college level and reasonably expects at least 35% of its students will be eligible for free or reduced-cost lunches.
Generally, Congress has authorized issuance of $400 million of these bonds in each calendar year since 1998, with the exception of $1.4 million in 2009 and 2010. During 2010, the bonds could be issued as direct-pay bonds. The Treasury Department sets the credit rate on the traditional tax-credit bonds to allow issuance of the bonds without discount and without interest costs to the issuer.
JCT estimates the two-year extension would result in revenue losses of $3.0 million in FY-2015 and $251 million over ten years.
Wyden is also proposing to extend for two years, through 2015, the ability of taxpayers to elect to deduct state and local sales taxes instead of income taxes. The proposal would benefit residents of six states that do not have an income tax - Alaska, Florida, Nevada, South Dakota, Texas, and Washington. JCT estimated this extender would result in revenue losses of $3.38 billion in FY-2015 and $6.49 billion over 10 years.
Wyden's bill also includes two proposed tax breaks relating to Puerto Rico.
The first involves a deduction allowable for income attributable to domestic production activities in the territory. The proposal would extend special domestic production activities rules for Puerto Rico to apply for the first ten taxable years of a taxpayer between Dec. 31, 2005 and Jan. 1, 2016. It would be effective for taxable years after Dec. 31, 2013. JCT estimated revenue losses at $36 million in FY-2014, $110 million in FY-2015 and $222 million over 10 years.
The second one deals with rum excise taxes for Puerto Rico. The federal tax code provides for payment of $10.50 per proof gallon ($13.25 before Jan. 1, 2014) to Puerto Rico and the Virgin Islands of the excise tax imposed on rum brought into the U.S., without regard to the country of origin. Wyden would suspend the $10.50 per proof gallon, and extend the $13.25 per proof gallon, for rum brought into the U.S. between Dec. 31, 2013 and before Jan. 1, 2016. The amount would revert back to $10.50 after the end of 2015. JCT estimates revenue losses would be $142 million for FY-2014, $168 million for FY-2015 and $336 million over ten years.
