WASHINGTON - Congress left town for the holidays after passing a bill that will extend expired bond-related and other tax provisions retroactively through 2014, as well as a $1.01 trillion omnibus spending bill that will fund most government agencies through the end of fiscal 2015 and cut some grant programs.
The Senate passed the $41.6 billion package of temporary tax breaks, called extenders, night by a vote of 76 to 16 on Tuesday. President Obama is expected to sight the bill this week. But Senate Finance Committee chairman Ron Wyden, R-Ore., opposed the measure, saying it "proves once again that the tax code is utterly broken."
"Congress has the power to enshrine tax provisions in law for any length of time it chooses," Wyden said." What Congress cannot do is travel back through time."
The bill will extend more than 40 tax law provisions through 2014, which will affect 2014 tax filings and programs that have carry over provisions.
The bill will provide a $400 million national volume limitation for qualified zone academy bonds in 2014. These are tax-credit bonds whose proceeds can be used to finance renovations, equipment, course materials and teacher training at public schools or academic programs in them that meet certain requirements. The volume cap is allocated to states, which can carry forward unused capacity under the limitation for up to two years.
It will also extend empowerment zone designations through the end of 2014. By extending the designations, certain distressed communities would remain eligible for tax incentives. The incentives include empowerment zone facility bonds, though issuers would only be able to issue the bonds if the empowerment zones have remaining volume cap. Additionally, public schools in empowerment zones can be eligible to have projects financed with QZAB proceeds.
Also taxpayers will be allowed to deduct state and local general sales taxes instead of state and local income taxes on their 2014 tax filings. This is particularly beneficial for taxpayers in states without income taxes for individuals, including Texas, Florida and Washington.
In addition, the bill will extend through the end of the year two Puerto Rico-related tax provisions. One will temporarily increase in the limit on the payment of rum excise tax revenues to Puerto Rico and the U.S. Virgin Islands. The territories will be able to receive $13.25 per proof gallon, rather than $10.50 per proof gallon. The other will allow domestic gross receipts from the commonwealth to be eligible for the domestic production deduction.
Meanwhile, Obama signed the Consolidated and Further Continuing Appropriations Act (H.R. 83) into law on Tuesday, even though it imposes major funding cuts for the Internal Revenue Service and reverses a Dodd-Frank Act provision aimed at reducing taxpayer exposure to derivatives.
Treasury Secretary Jacob Lew issued a statement acknowledging the funding measure "is far from perfect" and contains provisions the administration opposes, but noted it "is the result of a bipartisan effort to reach a compromise and it meets a host of other objectives."
The new law, among other things, will reduce funding for some bond-related popular grant programs. It would reduce by $100 million from the fiscal 2014 level, the funds for the Transportation Investment Generating Economic Recovery, or TIGER, program, which provides grants for state and local transportation projects. The Community Development Block Grant, or CDBG, program, which provides grants that can be used for affordable housing, economic development and social services, would receive $30 million below the enacted level for the previous year.
