Representative Charles Rangel (D – New York) introduced the Tax Extenders Act of 2009 (the “Bill”) on December 7, 2009. The Bill was intended to provide individuals and businesses with over $30 billion in tax relief by, as its name suggested, extending over forty different expiring tax provisions. Specific provisions include renewals of the research credit, new markets credit, the 15-year straight-line cost recovery period for qualified leasehold improvements, restaurant buildings and improvements, and retail improvements, the state and local sales tax deduction, as well as tax relief provisions that encourage charitable contributions, provide community development incentives, and support the deployment of alternative vehicles and alternative fuels. Other extenders target disaster recovery efforts in the Gulf region and New York City. To help pay for these provisions, the original bill proposed to offset its cost by, among other things, tightening enforcement on non-compliant taxpayers using foreign accounts and by taxing income from “carried interests” as ordinary income rather than as capital gains.
As is the case with many bills, the Bill has been through many revisions and iterations while working its way through both the Senate and the House.
The Senate’s original substitute amendment to the Bill (which renamed it the American Workers, State and Business Relief Act) was passed by the Senate in March 2010. Among some of the differences between Congressman Rangel’s original version and the Senate’s amended version are that the latter added longer term extensions of unemployment insurance benefits, subsidies to help displaced workers continue their employer-provided health insurance, and other provisions as well as removal of the provision aimed at tightening enforcement on non-compliant taxpayers using foreign accounts as those provisions were enacted into law on March 18, 2010 as “pay fors” in the Hiring Incentives to Restore Employment Act. The Senate’s version also deleted the “carried interest” provision.
The House responded with its own amendment (renaming it the American Jobs and Closing Tax Loopholes Act of 2010) and voted to pass the amendment in May 2010. The House was pressured to reduce drastically the size of the Bill and to cut billions of dollars in spending programs by eliminating a proposed extension of the 65% COBRA premium tax subsidy. It also added back a revised version of the carried interest provision, in a compromise approach, specifying a portion of income from a carried interest to be treated as ordinary income and another portion to be treated as capital gain.
In the past two months alone, in an attempt to push the Bill through the Senate, the Bill has been amended three more times, with each amended version aimed at reducing its cost. However, on June 24, 2010, the Senate was unable to get sufficient “aye” votes to prevent a filibuster and the Bill died. Its fate remains uncertain.