WASHINGTON - House lawmakers yesterday voted 263 to 160 to approve a bill containing $5.4 billion of tax-credit bonds, in addition to several other bond-related provisions, that now faces the threat of a veto by President Bush.
In a statement of policy released yesterday, the administration objected to several revenue-raising provisions included to offset costs of the Renewable Energy and Job Creation Act of 2008, previously known as the Energy and Tax Extenders Act of 2008, and echoed House Republican criticism that the bill does not include relief from the alternative minimum tax.
The AMT, which applies to interest earned on private-activity bonds and some governmental and 501(c)(3) bonds, is designed to prevent high-income households eligible for several tax breaks from paying little or no taxes. However, the AMT is not indexed to inflation, so more taxpayers become subject to it each year.
The White House pointed to the fact that lawmakers were barely able to pass a one-year "patch" of the AMT last year so that millions of additional Americans would not become subject to it.
"The delay in enacting the AMT relief last year made it difficult for individuals to undertake appropriate tax planning and created extraordinary administrative challenges for the Internal Revenue Service that should not be repeated," administration officials said in the policy statement.
House Ways and Means Committee chairman Charles Rangel, D-N.Y., the chief sponsor of the bill, had to fight off several attempts by Republican committee members last week to include amendments that would temporarily or permanently relieve taxpayers from the AMT. All the amendments were ultimately defeated along party lines and the bill was approved by the committee by 25 to 12.
Democrats plan to introduce a fully offset AMT bill later in the session. Republicans contend that a provision intended to lower taxes does not need to be paid for by provisions to raise taxes.
The focus on the House bill now shifts to the Senate, where Finance Committee chairman Max Baucus, D-Mont., has introduced a similar bill that is pending before his own committee.
Unlike the House version, Baucus' bill includes a one-year AMT patch, but does not contain revenue-raising offsets to cover the costs of the bill. The lack of offsets could prove problematic to the so-called Blue Dog Coalition, a group of moderate and conservative Democrats in the House, who are demanding that legislation adhere to strict pay-go rules.
Baucus said he would attempt to find offsets to his bill, but is facing opposition from 41 Republicans who sent him a letter last month asking him to ignore offsets.
Rangel's bill would create a new category of "qualified energy conservation bonds" to finance state and local initiatives to reduce greenhouse gas emissions. Up to $3 billion of the bonds would be allocated to states, localities, and tribal governments.
The bill would also authorize $2 billion of clean renewable energy bonds to finance facilities that would generate electricity from renewable resources.
In addition, the bill would authorize state and local governments to issue $400 million of qualified zone academy bonds, which can be used for certain public schools. The measure would also improve the marketability of QZABs by modifying current arbitrage restrictions.
All three of these proposals involve tax-credit bonds, which provide holders with an income tax credit in lieu of tax-exempt interest payments.
In other provisions, the bill would extend authority to issue qualified "green building" and "sustainable design project" bonds through the end of 2012. The authority for these bonds is currently set to expire on Sept. 30, 2009.
The measure also would restructure tax law provisions that provide New York City and New York State with tax credits for expenditures connected with the New York Liberty Zone, which was established after the Sept. 11, 2001, terrorist attacks.
Other provisions of the bill would expand the Gulf Opportunity Zone program, which provides additional tax breaks to companies in GO Zones, which are areas affected by Hurricane Katrina.
Meanwhile, Congress was poised to override a Bush veto of a $300 billion farm bill that includes $500 million of timber conservation tax-credit bonds, as well as several expansions to the "aggie bond" program, which helps first-time farmers purchase land. The president vetoed the bill yesterday, after saying it was too expensive. The measure passed both chambers last week by a veto-proof margin of more than two-thirds.