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Senate Leaders Continue Negotiating
over Small Business Tax Incentive Bill

Wednesday, July 3, 1996

OnLine

Negotiations over the joint Democratic and Republican amendment to the small business tax incentive bill continue this week as Senate leaders maneuver to place their stamp on the bill (HR 3448).

Under the bill, small business expensing limitations would be increased (from $17,500 to $25,000), the research and experimentation tax credit would be prospectively extended, the possessions tax credit (a tax break for American companies that set up manufacturing facilities in U.S.-owned possessions such as Puerto Rico) would be phased out, and the airline ticket tax would be reinstated.

The still-developing leadership amendment to the bill (which will be considered on the Senate floor July 8) would extend the research and development tax credit, the airline ticket tax, and the expired Section 127 education deduction (for employers that offer tuition assistance to their employees) further than contemplated by the Finance Committee’s version of the bill.

The amendment being discussed also contains additional miscellaneous pension simplification provisions, authorizes the Internal Revenue Service to use mathematical tests to verify dependency exemptions and filing status for certain tax returns, and provides a non-refundable 10 percent tax credit for education expenses incurred by small businesses.

The Senate will consider the bill beginning on July 8 when the tax portion of the measure will be debated and the leadership amendment will be offered. Then on July 9, the politically volatile minimum wage portion of the bill will be debated.

Ultimately the measure’s fate rests more on the minimum wage portion of the bill than on the tax incentive portion, and a probable amendment exempting small businesses from the wage hike most likely is "a deal killer," a congressional aide told .

Opposition also is expected from Sen. Don Nickles, R-Okla., who warned he would oppose the appointment of conferees on the proposal if Sen. Ted Kennedy, D-Mass., continues to oppose naming conferees on the health insurance reform bill (S. 1028), CongressDaily news service reported.

Kasich To Offer Bill Cutting Gas Tax: House Budget Committee Chairman John Kasich, R-Ohio, announced plans July 1 to introduce legislation to reduce the 14-cents-per-gallon federal gas tax to 2 cents per gallon and allow states the option of replacing the federal tax with a state tax.

The intent of the legislation is to end most federal involvement in highway construction and maintenance, Kasich said. Most revenue raised by the gas tax is deposited into the highway trust fund.

"What we’re doing is scrapping a 1950’s-style system in favor of one that will allow states to better serve the driving public as we head into the 21st century," Kasich said in a press release.

Treasury Remains Closed: The Treasury Department building remains closed after a fire that charred the building’s roof June 26. Though certain key personnel have returned to work, the bulk of the Department’s staff has not yet returned.