Congress looks to play small ball on tax reform

An eye toward a total overhaul of the tax code did not stop Senate lawmakers from advancing 17 different tax bills Wednesday.

Top tax writers are adamant they still want to pursue a major reworking of the tax code, but with progress hard to come by for the last several years, the Senate Finance Committee agreed to easily pass several targeted tax tweaks in the meantime.

Sponsors described their bills, now heading to the Senate floor, as long overdue fixes to ignored tax provisions, some of which had languished as lawmakers pursued a broader overhaul of the code.

{mosads}Panel leaders maintained that the broader reform effort remains ongoing, and the ultimate goal is still to drastically simplify the tax code. But they added that that was no reason to not pursue more precise relief at the same time, advancing bills aimed at the alcohol industry, power plants, and agricultural research organizations, among others.

“The push for comprehensive tax reform is going to continue,” said Sen. Ron Wyden (Ore.), the top Democrat on the panel. “This legislation may not be a comprehensive overhaul, but it makes a number of targeted improvements that will benefit our economy, workers and families.”

Committee Chairman Orrin Hatch (R-Utah) said he hoped Wednesday’s markup, which lasted just over an hour, would serve as a “good template” for future legislative work at the committee. He noted that this sort of piecemeal tax work has eluded lawmakers tackling specific tax breaks as part of massive “extenders” packages at the end of the year. He also indicated the panel was just getting started.

“While this is the first markup of its kind, it shouldn’t be the last,” he said. “I believe we’ve blazed an important trail here.”

The bills were voice voted out of the committee en masse. The broad support makes sense, because Hatch said at the outset that these particular bills were only considered because they already had bipartisan backing, lacked major opposition, and were fully paid for.

And to be sure, the measures steered clear of any contentious issues, only focusing on extremely specific topics.

For example, one bill would require the Internal Revenue Service to notify a nonprofit ahead of time if it is in danger of losing its tax exemption for failing to file required paperwork. Under current law, if a tax-exempt group fails to file annual paperwork three years running, its tax-exempt status is automatically revoked, forcing the group to reapply.

And while lawmakers would like to streamline the code, tax writers Wednesday agreed to create several new tax perks.

Another bill would create a new credit for military spouses, allowing them to deduct the costs of transferring professional licenses when their partners are permanently moved to a base in another state.

And another would create a tax credit aimed at encouraging industries to take leftover heat and turn it into electricity.

There were also several bills aimed at the alcohol industry. One measure from Sen. Ben Cardin (D-Md.) would provide tax relief to brewers of craft beer, halving the tax rate on the first 60,000 barrels of beer made from $7 a barrel to $3.50.

Brewers that make less than 2 million barrels of beer would also receive a tax break, trimming the $18 per barrel levy to $16.

Another alcohol tax bill would let smaller brewers, winemakers and distillers pay their excise tax bill quarterly, rather than semi-monthly. And the smallest makers, those that expect to owe less than $1,000 in excise taxes, would have to pay just once a year.

A third bill would change excise tax law to accommodate the growing alcoholic cider industry.

The measure would expand the tax definition of cider — which is taxed differently than wine, beer and champagne — to include not just apple-based alcoholic beverages, but also drinks made primarily from “apple juice concentrate, pears, or pear juice concentrate.”

 Sen. Charles Schumer (D-N.Y.), a leading backer of the measure, said the bill would “update our cider definition to ensure the common carbonation and alcohol levels associated with traditional cider are reflected in the excise tax.”

“The Cider Act is moving,” he added. “How ’bout them apples?”