Busy Tax Agenda Begins to Take Shape

House and Senate tax writing panels are working to deal with a number of outstanding tax issues facing Congress in 2010. First, despite each chamber having passed its own version of the annual "tax extenders" package that would extend for one year roughly $30 billion in tax provisions that expired on January 1, the House and Senate remain unable to reach an agreement on how to offset the cost of the legislation.  The tax extenders bill includes extensions of tax incentives useful to construction, including the 15-year shortened cost recovery period for restaurant improvements and new construction, leasehold and retail improvements, and a short-line rehabilitation tax credit. Second, the Senate Finance Committee is considering how to move forward on a small business tax relief and infrastructure bill the House passed in late March that includes, among other things, an extension of the successful Build America Bonds program into 2013.  In addition, the Senate may add an extension of 50 percent bonus depreciation from the Recovery Act, along with the an extension of enhanced section 179 expensing that is included in the House-passed bill.  Depending on whether sufficient offsets can be found, leadership in both chambers have expressed interest in resolving these two measures prior to Memorial Day. Finally, the House and Senate are working on ways to address the lapsed estate tax and the expiration of the 2001 and 2003 tax cuts at the end of 2010.  The House passed legislation in December that would have extended the 2009 estate tax rate of 45 percent with an exemption of up to $3.5 million per spouse.  However, a bipartisan group of Senators is trying to lower the rate to 35 percent and increase the exemption to $5 million per spouse and is seeking a vote this spring on their proposal.  If no action is taken in Congress, the estate tax will be reinstated at a 55 percent top rate and $1 million exemption level.  The Senate Budget Committee this week took initial steps towards continuing the 2001 and 2003 tax cuts for the middle classes.  In its fiscal year 2011 budget resolution, the committee included a permanent extension of current policy for couples with incomes below $250,000 and singles with incomes below $200,000.  The resolution calls for allowing the current 35 percent tax bracket to increase to 39.6 percent on January 1, 2011, and the 33 percent bracket to bump up to 36 percent.  The resolution also contains reconciliation instructions that could allow the Senate to pass tax legislation with a simple majority, rather than by overcoming a 60-vote threshold needed to end a filibuster.  AGC is monitoring developments on these important pieces of legislation.  AGC supports lowering the federal burden on individuals, construction companies, and other business as a means of promoting investment, business development and business expansion.