The annual battle in the U.S. Congress over renewing scores of temporary tax breaks, including the corporate research tax credit and individual deductions for teachers' supplies and college tuition costs, got under way on Tuesday.
In the Senate, the new chairman of the tax-writing Finance Committee unveiled legislation that would modestly trim the list of about 55 laws known as the "tax extenders" because they expire every year or two and need to be regularly extended.
Oregon Democratic Senator Ron Wyden, who recently took over the committee, scheduled a review-and-amendment session for Thursday on the bipartisan bill that he is offering along with Utah's Orrin Hatch, the committee's top Republican member.
"This pared-back bill demonstrates to the American people that Congress can and will make the tough decisions needed to help clean up our broken tax code," Hatch said in a statement.
Whether Congress can do that remains to be seen. Analysts expect no conclusive action on tax extenders until after the November mid-term congressional elections, with the likelihood of comprehensive tax reform even more remote.
Most of the tax extenders technically expired at the end of 2013, leaving companies that depend on them in limbo. But this happens regularly and the provisions are routinely approved on a retroactive basis, a situation Wyden wants to end.
"I am determined this will be the last extenders bill on my watch," he said in a statement.
70 PERCENT CHANCE SEEN
The extenders list is chock-full of special tax breaks for businesses. Fighting to preserve them keeps hundreds of corporate tax lobbyists busy across Washington, D.C.
Chris Krueger, a policy analyst at Guggenheim Partners, forecast a 70 percent probability of the tax extenders being renewed retroactively later this year, most likely in December.
A study by a left-leaning tax activist group on Monday said that General Electric Corp alone employed 48 lobbyists from January 2011 through September 2013 to work on the tax extenders, in general, and one of them in particular - a provision that lets multinationals shelter offshore financial income from U.S. corporate income tax.
Citigroup employed 29 lobbyists over the same period for the same purposes, said the report from Americans for Tax Fairness, which is backed by unions and progressive groups.
A GE spokesman said on Monday the Americans for Tax Fairness report distorted the facts and was "politically motivated."
The Wyden-Hatch legislation preserves the tax law known as the active financing exception that so keenly concerns GE, Citigroup and many other financial institutions, but the bill drops a handful of other provisions.
Among these are tax breaks for wind energy production and auto racing tracks, as well as the so-called look-through rule of 2006, which corporations use to avoid corporate income tax on transfers of capital between offshore units.
The lack of those provisions may make the Wyden-Hatch bill look bold but the tax breaks could all be added back in through the amendment process, which is set to being on Thursday.
Within hours of Wyden unveiling the bill, wind power advocates were responding.
Colorado Democratic Senator Mark Udall said in a statement he was "concerned" that Wyden-Hatch left out the production tax credit for wind energy.
"I will keep fighting in Congress to ensure we keep the wind at the backs of wind-energy companies in Colorado and across our nation," Udall said.
With regards to the federal budget, deficit hawks complained that Wyden-Hatch would cost $70 billion in lost government revenues in 2014-2015 with no accompanying initiative to raise an offsetting amount of new revenues.
"If Congress continues this irresponsible habit of extending these tax cuts without offsets, they would add almost $850 billion, with interest, to our debt over the next decade," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, an anti-deficit activist group.
(Editing by Andrew Hay and Meredith Mazzilli)