The House yesterday approved by a vote of 241 to 181 legislation that extends a number of expiring bond-related and other tax provisions, but it is unclear when or whether the Senate will approve similar legislation.
Senate taxwriters have not come out with an extenders package of their own yet, and Senate Finance Committee chairman Max Baucus, D-Mont., wants to complete health care reform before turning to extenders, sources said.
Senators could vote on the House package wholesale, but Rep. Kevin Brady, R-Tex., insisted yesterday that the House’s bill is “dead on arrival” in the Senate.
Specifically, Republicans made clear yesterday during debate on the bill that they staunchly oppose a revenue-raising provision that would force investment fund managers to pay taxes at income tax rates rather than capital gains rates on investment management services income received as carried interest.
Democratic senators will likely need some bipartisan support to clear procedural hurdles in passing a bill, according to sources.
The extenders bill would give New York City issuers another year to sell Liberty Bonds, a special type of private-activity bond created to help boost economic development in lower Manhattan following the Sept. 11, 2001, terrorist attacks.
The Liberty Development Corp. is currently putting together a $2.59 billion issue of the bonds that it plans to offer before the existing Dec. 31 deadline, and the New York City Industrial Development Agency still has $700 million of Liberty Bond authority that it would not be able to use by the end of the year.
The measure also would extend through 2010 the special depreciation allowance for certain New York Liberty Zone property. The Liberty Bond provisions are expected to cost $318 million over 10 years, according to a summary of the bill.
The legislation also includes a one-year extension of relaxed mortgage revenue bond limitations for federal disaster areas. That provision would allow issuers in designated disaster areas to issue tax-exempt housing bonds to finance the repair or reconstruction of homes or rental housing units that were damaged or destroyed by a federally declared disaster. It’s expected to cost $63 million over 10 years.
Another provision would extend through 2010 the ability of taxpayers to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction typically permitted for state and local income taxes. The provision would cost $1.846 billion over 10 years.
The bill also includes a one-year extension of tax incentives for so-called empowerment zones, which are economically distressed areas where businesses are eligible for tax incentives, including tax-exempt bonds, to spur development. It is expected to cost $381 million over 10 years.
Tax-exempt bonds can be issued in these areas to provide low-cost financing to private businesses, provided that at least 35% of the business’ employees are residents of the empowerment zone for the life of the bonds.
Another provision would require the Joint Committee on Taxation to conduct a study on the efficacy of tax provisions that need to be extended regularly.