The House Ways and Means Committee yesterday passed a tax bill containing $5.4 billion of tax-credit bonds, in addition to several other bond-related provisions, after Republicans failed to add a series of amendments.
The Energy and Tax Extenders Act of 2008, HR 6049, which was introduced Wednesday by committee chairman Charles Rangel, D-N.Y., was approved by the committee by a vote of 25 to 12.
In all, 15 amendments were proposed by lawmakers from both sides of the aisle, four of which attempted to extend relief from or fully repeal 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.
Republicans argued yesterday that AMT relief or elimination should be included in the bill without revenue-raising provisions to offset the losses. The committee's ranking minority member, Jim McCrery, R-La., contended that pay-go rules should not adhere to the AMT, since the ultimate goal is to lower taxes, not lower some taxes by raising others.
While Rangel has stated in the past that he is dedicated to patching the AMT again or even permanently repealing it, he and other Democrats said yesterday they would introduce separate AMT legislation that would include revenue raisers to offset the $62 billion cost.
"Assuredly, we will offer before this year is over a very good AMT bill that is fully paid for," concurred Rep. Richard Neal, D-Mass.
Apart from the amendments, the committee extensively debated the restructuring of tax law provisions that provide New York City and New York State with tax credits for expenditures made for transportation infrastructure projects connected with the New York Liberty Zone, which was established after the Sept. 11, 2001, terrorist attacks.
Republicans argued that the provision amounted to an earmark, and that it set a dangerous example of preferential tax treatment for certain employers, who under the provision would be able to take federal tax credits for certain expenditures.
"Is this the right precedent for this committee to make?" asked Rep. Paul Ryan, R-Wis.
Rangel responded by asserting that the terrorist attacks of Sept. 11 were so extraordinary that it would be incredibly unlikely for anyone to see the program as a precedent.
Rangel's bill, which is yet to be scheduled for general House consideration, 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. The so-called CREBs would be allocated in equal thirds for the projects of governments, electric cooperatives, and public power providers.
In addition, the bill would authorize state and local governments to issue $400 million of qualified zone academy bonds, which can be used for public schools located in certain designated areas. 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.
Special rules that allow veterans to qualify for state-operated tax-exempt mortgage revenue bond programs that provide lower-income individuals with access to mortgages at lower cost would be extended for one year through 2008 with an exemption from the first-time homebuyer requirement.
The bill would also expand the Gulf Opportunity Zone program to include two additional counties in Alabama. The program provides additional tax breaks to companies in GO Zones, which are areas affected by Hurricane Katrina.
A Senate extender bill containing many similar provisions was introduced last month by Finance Committee chairman Max Baucus, D-Mont., and is currently pending before his committee. That bill provides for a one-year AMT patch, but currently does not contain offsets, although they are expected to be added before the committee vote.
Also yesterday, the Senate approved the farm bill conference report by a vote of 81 to 15, a margin of more than two-thirds that ensures Congress will be able to override any veto from President Bush. The House passed the report by a vote of 318 to 106 on Wednesday and also extended the 2002 farm bill through May 23 to provide more time for enactment of the legislation.
The final bill, which will now be sent to Bush, who has threatened to veto it because of the costs, would authorize the issuance of up to $500 million of tax credit bonds for timber conservation and would expand the aggie bond program, which allows state and local governments to provide low interest loans to first-time ranchers and farmers.
The timber bonds, which could be issued by nonprofit organizations or states for the acquisition of forest and forest lands that allow public access and are subject to conservation restrictions, would be taxable and would provide taxpayers with an income tax credit in lieu of tax-exempt interest payments. In the first changes to the aggie bond program in 26 years, the bill would increase the loan limit for new farmers to $450,000 from $250,000, index it to inflation, and allow more farmers to use the program.