Senate Finance Panel Aims To Complete Tax Objectives

by Mike Godfrey, Tax-News.com, Washington

18 September 2008

The heads of the US Senate tax-writing panel announced on Tuesday that they have secured agreement from the Senate’s Democratic and Republican leadership to move legislation accomplishing the panel’s remaining tax goals for the year, including the tax 'extenders,' package, another alternative minimum tax (AMT) 'patch,' and clean energy initiatives.

Finance Committee Chairman Max Baucus and Ranking Member Grassley have now combined "key objectives" of a USD40 billion package of clean energy tax incentives, unveiled last week, with an agreement to update alternative minimum tax rules and continue tax cuts for college tuition, state and local sales taxes, and research and development for US businesses.

The clean energy tax breaks total USD17 billion, paid for by freezing the tax deduction for the domestic manufacturing activities of American oil and gas companies and by tightening the rules by which oil and gas companies pay taxes on income earned overseas.

To curtail the reach of the AMT, the legislation raises the income threshold at which the taxpayers become potentially liable for the tax, thus temporarily shielding 20 million taxpayers from the AMT burden. This is expected to cost USD64bn, but Baucus and Grassley do not expect the cost of the AMT “patch” to be offset.

Senators are expected to vote this week on amendments to replace the current text of energy tax legislation approved in the House of Representatives (H.R. 6049), earlier this year.

Commenting on the legislation, the Finance panel leaders argued that the need for Congress to approve this combined package of tax breaks was now more urgent than it ever was, considering the deteriorating health of the US economy.

He stated: "Protecting families from the alternative minimum tax and extending expiring tax cuts will put real money in the pockets of struggling families, and enable entrepreneurs to invest and innovate."

Grassley added: “This legislation will be a huge shot in the arm to the economy, and the timing couldn’t be better. The legislation will prevent tax increases on students, teachers and families, including 24 million taxpayers who will be protected from having to pay an average of USD2,000 of Alternative Minimum Tax on top of what they already owe. It also will extend tax incentives for renewable energy and strengthens America’s effort to build a more stable and sustainable energy supply."

The Iowa Senator stated that the legislation also contains USD7bn in tax relief to help householders and businesses recover from the this summer's floods and tornadoes which struck the mid-west.

The legislation also continues efforts to curtail tax shelters and close loopholes. The agreement includes the proposal to end tax abuse by hedge fund managers with respect to offshore deferred compensation plans, and it adopts a Grassley recommendation that eliminates the charitable loophole for these transactions.

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