WASHINGTON — A two-year tax extenders bill that includes bond and Puerto Rico provisions and is slated to be voted on Tuesday by the Senate Finance Committee would result in revenue losses of $95.6 billion from fiscal 2016 to 2025.
The revenue estimates were made by the Joint Committee on Taxation on the bill, which was released on Friday by finance committee chairman Sen. Orrin Hatch, R-Utah, and ranking minority member Ron Wyden, D-Ore. The bill would extend through 2016 tax provisions that expired at the end of 2014. The finance committee is taking a different approach to extenders than the House, which has voted to make some of the provisions permanent, including the state and local sales tax deduction.
"This is the first time in 20 years where a new Congress has started with extenders legislation having already expired, and given that these provisions are meant to be incentives, we need to advance a package as soon as possible," Hatch said in a news release.
In April of last year, the finance committee approved a two-year extenders bill called the Expiring Provisions Improvement and Reform Efficiency (EXPIRE) Act , but it stalled in the full Senate. Congress ended up passing a bill in December that only retroactively extended the extenders through the end of last year.
The bill set to be voted on Tuesday would provide a $400 million national volume limitation for qualified zone academy bonds for each of 2015 and 2016. These bonds are tax-credit bonds whose proceeds can be used to finance renovations, equipment, course materials and teacher training at public schools or in academic programs that meet certain requirements. The volume cap is allocated to states, which can carry forward unused capacity under the limitation for up to two years.
Authorizing the QZAB volume is estimated to lead to federal revenue losses of $221 million from fiscal 2016 to fiscal 2025, the JCT said.
The $400 million volume cap would be the same as the caps for each year from 2011 to 2014 and less than the caps of $1.4 billion for each of 2009 and 2010. As is the case with QZABs from allocations of the caps for 2011 and later, the QZABs from allocations of the 2015 and 2016 caps could not be issued as direct-pay bonds.
The legislation also would extend empowerment zone designations through the end of 2016, which the JCT estimates will cost the federal government $624 million over ten years. By extending the designations, certain distressed communities would remain eligible for tax incentives. The incentives include enterprise zone facility bonds, though issuers would only be able to issue the bonds if the empowerment zones have remaining volume cap. Additionally, public schools in empowerment zones could be eligible to have projects financed with QZAB proceeds.
The bill would allow taxpayers in their 2015 and 2016 tax years to deduct state and local general sales taxes instead of state and local income taxes. This is particularly beneficial for taxpayers in states without income taxes for individuals, including Texas, Florida and Washington.
The JCT estimates that extending the sales tax deduction for two years will cost about $6.7 billion from fiscal 2016 to fiscal 2025.
In addition, the bill would extend through the end of 2016 two Puerto Rico-related tax provisions.
One provision 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 JCT estimates that extending this provision would lead to federal outlays of $336 million over ten years.
The other provision would allow a domestic production activities deduction to be applied to activities in Puerto Rico. Under current law, special domestic production activities rules for the commonwealth apply for the first nine years of a taxpayer beginning after Dec. 31, 2005 and before Jan. 1, 2015. Under the bill, the rules would apply for the first eleven years of a taxpayer beginning after Dec. 31, 2005 and before Jan. 1, 2017.
Extending this provision would cost $234 million over ten years, the JCT estimates.
Several other bills concerning the muni-related extenders have been introduced in the Senate earlier this year. Sen. Sherrod Brown, D-Ohio, introduced a bill that would make the QZAB program permanent with annual volume caps of $1.4 billion. Sen. Dean Heller, R-Nev., introduced a bill that would make the state and local sales tax deduction permanent. And Sens. Debbie Stabenow, D-Mich., and Roy Blunt, R-Mo., introduced a bill that would extend empowerment zone designations through the end of 2016 and make it easier for empowerment zone bonds to be issued.
