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Tax-Related Amendments to Small Business Tax Incentive Bill Due Today

Wednesday, June 26, 1996

Deloitte & Touche OnLine

GOP Democratic and Republican Senators had until noon Wednesday to present to their respective leaders lists of items they wish to have included in the block of amendments to be offered to the Small Business Tax Incentive bill (HR 3448) when it is debated on the Senate floor, congressional leaders said.

Under the unanimous consent agreement reached Tuesday, both parties will be allowed to offer one amendment each when the bill is considered on the Senate floor July 8.

Senate Majority Leader Trent Lott, R-Miss., is considering adding an estate and gift tax reforms and additional language to clarify the treatment of independent contractors, while Senate Minority Leader Tom Daschle, D-S.D., is looking at pension reform provisions, congressional sources indicated.

Regardless of the proposals’ precise details, both parties want to keep the amendments non-controversial and inexpensive in order to increase the chances of passing the bill, the sources said.

Another item that several Senators are working on is a proposal to extend retroactively the research and experimentation tax credit, which is extended only prospectively under the current bill, an aide to a Ways and Means Committee member said.

The problem with extending the credit retroactively is that the revenue loss would be concentrated in the early years of the bill and under the budget rules a revenue loss’s corresponding revenue offset must be within the same time frame.

If an offset such as extending the airline ticket tax for longer than contemplated in the bill is used, the budgetary effect of retroactively extending the tax could be neutral, but the timing of the expense and offset would not match. To compensate, legislators are looking at altering the structure of the credit so that it would be available retroactively, but have a prospective effect on the budget. Thus, the footprint of revenues raised and lost would be the same.

Child Tax Credit To Be Considered Later This Year: GOP congressional leaders decided to keep the $500 child tax credit off the soon-to-be considered fiscal 1997 Medicaid and welfare budget reconciliation bill, and instead will offer the cut on the miscellaneous revenue bill to be offered later in the year, according to published reports.

The decision means that the tax cut probably will not be considered at least until Sept. 18, when the miscellaneous revenue reconciliation bill is expected to be considered.

Both bills are part of the budget reconciliation process, under which legislators implement policy decisions that are included in the budget resolution.

GOP Legislators Unveil Tax Credit Proposal: House Budget Committee Chairman John Kasich, R-Ohio, and Sen. Dan Coats, R-Ind., unveiled their Project For American Renewal, which is designed to shift resources from centralized Washington-based programs to locally and individually controlled tax credits, vouchers and other items.

"The most visible challenge facing Republicans in the next legislative year is this: can we match our skepticism about government with a bold, new definition of public compassion? ... The good news is that the answer is yes, and the blueprint is the Project For American Renewal," Coats said.

The centerpiece of the plan is the charity tax credit, which provides a tax credit for contributions up to $1,000 for married couples and $500 for individuals to charitable organizations. The credit is phased in over five years.

The cost to the government is made up by diverting a small portion of federal welfare spending and by cutting corporate welfare by over $3 billion annually.

In addition, the legislators want to create a $500 tax credit to individuals who provide home care for individuals in need including: the homeless, battered women, and hospice care patients.