Lawmakers Weigh $1.15T Omnibus Bill, $621B Tax Measure

WASHINGTON — Lawmakers are considering a $1.15 trillion omnibus spending bill for fiscal year 2016 that does not extend bankruptcy protection to Puerto Rico, and a more than $621 billion tax bill that would make permanent or extend expired tax provisions, including a few that are bond- and Puerto Rico-related.

The two bipartisan bills came together late Tuesday night. House leaders negotiated the omnibus bill and the tax bill was proposed by the Republican chairs of the House and Senate tax-writing committees as well as Sen. Ron Wyden from Oregon, the top Democrat on the Senate Finance Committee.

Some Democrats are already complaining about the two measures, particularly the tax bill. "I will oppose an unpaid-for tax extenders package like this, should it come to the floor," said House Democratic Whip Steny Hoyer, D-Md.

But the Obama administration said it supports the omnibus spending bill in a Statement of Administration Policy issued by the Office of Management and Budget on Wednesday night.

Congress is expected to pass another continuing resolution through Tuesday, Dec. 22, so that lawmakers can vote on the bills. Under a House rule, legislation must sit before members for three days before a vote is taken.

The omnibus bill, which appropriates government spending through Sept. 30, 2016, would freeze funding for the Internal Revenue Service at the 2015 level of $10.9 billion, $1.7 billion below President Obama's request for the agency. But that overall level would include $290 million targeted solely for taxpayer services and to improve fraud detection and prevention as well as cybersecurity.

Seven former commissioners complained about the $10.9 billion level last month, noting it is $1.2 billion, or 10%, below the level appropriated in 2010.

The spending bill would provide $1.6 billion for the Securities and Exchange Commission, $117 million below the president's request.

That amount would include $68 million for the SEC's division of economic and risk analysis to improve the use of economic analysis in the rulemaking process. The bill would rescind $25 million from a "reserve fund," called "a slush fund with no congressional oversight" by a summary document.

The omnibus bill would provide $42.36 billion from the Highway Trust Fund for road and bridge projects and $11.8 billion for public transit, reflecting the fiscal 2016 allocations in the recently enacted, five-year Fixing America's Surface Transportation Act (PL 114-94). The appropriation measure would increase highway funding by $2.1 billion from fiscal 2015 and transit funding by $780 million.

The bill would retain the Transportation Investment Generating Economic Recovery, or TIGER, grant program for road, rail, port and transit projects at the $500 million provided in fiscal 2015, restoring a cut to $100 million that was included in the appropriations bill, HR 2577, adopted by the House in June.

There were 629 applications from state and local governments totaling $10.1 billion for the $500 million available in the 2015 TIGER funding round.

The 2016 measure also would include $16.3 billion for the Federal Aviation Administration, up more than $500 million from fiscal 2015 and $445 million more than requested by President Obama. The appropriations bill would keep the federal airport passenger facility fee at $4.50 per trip segment rather than raise it to $8 as proposed by the president to compensate for reduced FAA airport grants.

Rail programs, including Amtrak, would receive $1.7 billion in fiscal 2016. The appropriations bill would continue a ban on federal funding for high-speed rail projects.

The tax bill, which the Joint Committee on Taxation estimated would cost $621.95 billion from 2016-2025, would make permanent or extend tax provisions that expired at the end of 2014.

The bill would make permanent a provision that allows taxpayers to claim an itemized deduction for state and local general sales taxes in lieu of one for state and local income taxes.

That's particularly important for the seven states with no income taxes: Alaska, Florida, Nevada, South Dakota, Texas, Washington State and Wyoming.

The tax measure also includes a provision that would authorize the issuance of $400 million of qualified zone academy bonds during 2016.

The proceeds can be used for school renovations, equipment, teacher training, and course materials at a qualified zone academy, provided that private entities have promised to donate certain property and services with a value equal to least 10% of the bond proceeds.

The measure would also extend through 2016 tax benefits, including tax-exempt bonds, for certain businesses and employers operating in empowerment zones.

Beginning in 2016, an employee would meet the enterprise zone facility bond employment requirement if they are residents of the empowerment zone, an enterprise community, or a qualified low-income community within an applicable nominating jurisdiction.

Two tax provisions for Puerto Rico would be extended through 2016. One would temporarily increase the limit on the amount of excise taxes on rum that are covered over to Puerto Rico and the U.S. Virgin Islands.

Under the bill, the territories would be able to receive $13.25 rather than $10.50 per-proof gallon. The other would allow the extension of a deduction with respect to income attributable to domestic production activities in Puerto Rico.

A section of the tax bill on IRS reforms includes a provision that would require the IRS to create procedures under which a 501(c) organization facing an adverse determination challenging its nonprofit status could request an administrative appeal to the IRS Office of Appeals. There have been some instances in the muni market where a 501(c)(3) group was faced with the the loss of tax exemption for itself and its bonds.

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