Congress Close To Deal On Tax Extenders

by Mike Godfrey, Tax-News.com, Washington

08 December 2006

Senate Finance Committee Chairman Chuck Grassley indicated yesterday that Congressional negotiators had reached a tentative deal on a bill that would renew expiring tax, trade and health provisions.

Grassley told reporters on Thursday that "there's mostly an agreement" among negotiators on the package of measures, which would cost $40 billion over ten years.

The legislation, introduced by Grassley and committee ranking Democrat Max Baucus on Wednesday includes, among other measures:

• The renewal of the R&D Tax Credit through 2006 at a cost of $16.5 billion;
• A two-year extension to the tuition expenses deduction, at a cost of $3.3 billion;
• A one-year extension to the New Market Tax Credit, which seeks to boost community development, at a cost of $1.3 billion;
• A one-year extension to the state and local sales tax deduction, at a cost of $5.5 billion; an extension of the Welfare-to-Work tax break through 2006 at a cost of $1 billion;
• An extension of the Earned Income Tax Credit for Combat Pay through 2007 at a cost of $330 million;
• Extension of the Qualified Zone Academy Bonds (QZABs), which provide an alternative to traditional tax-exempt bonds for school renovation funding, through 2007 at a cost of $330 million; and
• A two-year extension to the Teacher Classroom Expenses provision at a cost of $379 million.

“The tax extenders are no-brainers,” explained Grassley.

“They give continued tax relief to families paying for college, teachers buying classroom supplies, and producers of clean energy from sources such as wind," he added.

In addition, the bill includes a number of trade provisions, including:

• A one-year extension to the Generalized System of Preferences (GSP) program, which expires at the end of 2006, and offers developing countries duty-free access to the US market for certain exports;
• A one-year extension to the Andean Trade Preference Act (ATPA) program, which offers the four Andean countries – Colombia, Peru, Ecuador, and Bolivia – duty-free access to the US market for a variety of products.
• An extension to the African Growth Opportunity Act (AGOA) program offers sub-Saharan countries duty free access to the US market;
• A provision granting permanent normal trade relations (PNTR) status to Vietnam;
• A one-year extension to the miscellaneous tariff bill, which offers temporary duty reductions on a variety of items not manufactured in the United States;
• New rules of origin for duty-free apparel imports from Haiti;
• A suspension of duties on certain cotton fabrics and the establishment of a trust fund not to exceed $16,000,000 each fiscal year. Funds will be distributed among eligible yarn spinners and shirt manufacturers, and to a nationally recognized association; and
• Extension of the 15-day window for implementation of changes to the Harmonized Tariff Schedule of the United States (HTSUS) to 30 days, to help businesses incorporate tariff changes into their systems.

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