September 23,2008

Senate Passes Baucus-Grassley Clean Energy Incentives, Extensions of Expiring Tax Cuts, Disaster Tax Relief and Protection from AMT

Fiscally responsible tax package jump starts energy independence, garners bipartisan support to address top tax issues for 110th Congress

Washington, DC – Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Chuck Grassley (R-Iowa) today won Senate passage, by an overwhelming vote of 93-2,of legislation to carry out the remaining Finance Committee objectives for the year, including passage of clean energy tax incentives, protection of millions of Americans from the alternative minimum tax (AMT), and extensions of expiring family and business tax cuts. Today’s votereplaced the current text of H.R. 6049, energy tax legislation approved in the House of Representatives earlier this year. The Finance leaders combined key provisions of a bipartisan energy bill they introduced at the beginning of the month 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 U.S. businesses.

“These tax measures represent real support for the American families, workers, and businesses that need a break now. Businesses need provisions like the R&D tax credit toinnovate and grow, and families need the college tuition deduction and protection from the AMT just to get by. This bill’s energy tax incentives will spark clean, homegrown sources of power and thousands of good-paying jobs here at home, too,”
Baucus said. “These tax cuts for jobs, energy and families are coming not a moment too soon. I commend my colleagues on their action today to pass this bill.”

“This is must-do legislation,” Grassley said. “The AMT relief prevents 24 million families from facing an average tax increase of at least $2,000 each. We’re extending tax benefits for middle-income taxpayers, including deductions for out-of-pocket expenses for teachers, sales tax, and college tuition. Millions of taxpaying families would face an unexpected tax increase if we don’t act. Businesses need continued job-creating incentives, like the research and development tax credit. Congress should send a clear signal in support of alternative energy and conservation. And we need to help the Midwest and the Gulf Coast with disaster recovery, the sooner, the better.”

The bipartisan Senate agreement includes the following elements:

  • Clean energy tax incentives totaling approximately $18 billion, fully paid for by several offset provisions including a delay of the tax deduction for domestic manufacturing activities of major American oil and gas companies. Another offset provision tightens the rules by which oil and gas companies pay taxes on income earned overseas, and makes general fund monies available with increased payments into the oil spill liability trust fund as new drilling is considered. The incentives are also funded in part by a one year extension of the Federal Unemployment Tax Act surtax at the current level, and by increasing reporting requirements for brokers on sales of stock.
  • An increase in the income threshold at which Americans become subject to the higher alternative minimum tax. This measure would protect more than 21 million taxpayers from higher taxes at a cost of $64 billion. The cost of the AMT “patch” is not offset.
  • Extensions of expiring family and business tax cuts and other policies – including an expansion of the child tax credit, legislation providing parity for mental health treatment in the U.S. health care system, and tax relief for victims of natural disasters. Extensions of expiring tax cuts are partially offset by requiring hedge fund managers and others toaccount for deferred compensation – income held in offshore accounts and other corporate structures – as it accrues, rather than avoiding appropriate and timely income taxes.

Detailed summaries of both amendments can be found in the printer-friendly version of this release.