The House and Senate tax writing committees have approved different packages of revenue offsets to pay for a short-term extension of highway funding. Consideration by the full House and Senate is expected, as is an effort to reconcile the House and Senate versions by the end of July.

The House Ways and Means Committee used a voice vote on July 10 to approve a tax title from Chair Dave Camp, R-Mich., that would raise $6.4 billion by allowing sponsors of defined benefit retirement plans to revalue their pension funding liabilities by using higher interest rates. It would also extend customs user fees. The bill is meant to pay to extend highway spending through May 2015.

The Senate Finance Committee approved a package from Chair Ron Wyden, D-Ore., that would extend highway spending through May of 2015. The package includes a cut in pension funding obligations, but not as much as the version offered by Camp. It includes an identical extension of customs user fees and would also:

  • Cut the tax rate on liquefied natural gas from 24.3 cents a gallon to 14.1 cents
  • Cut the tax rate on liquefied petroleum gas (propane) from 18.3 cents per gallon to 13.4 cents
  • Require Form 1098 mortgage interest reports to include information on the unpaid balance, address of property, any refinance of the loan, the amount of real estate taxes paid and the loan origination date
  • Reverse the Supreme Court's finding in U.S. v. Home Concrete & Supply, LLC, 132 S. Ct. 1836 (2012) by providing that an overstatement of basis can be considered a substantial understatement of gross income for purposes of applying a six-year statute of limitations
  • Require preparers to meet due diligence requirements for the child tax credit
  • Allow the IRS to levy 100% of Medicare payments to providers with tax delinquencies
  • Expand the category of income that nonprofit ditch and irrigation companies may receive from nonmembers

Wyden had originally offered a package that would increase the heavy vehicle excise tax and tighten the rules for distributing inherited individual retirement accounts, but cut these provisions in order to gain Republican support. The Senate Finance Committee approved its version by voice vote. The House is expected to vote on the Ways and Means package by next week, while the Senate has not yet announced when it will vote on the Finance Committee bill.

Congress needs to agree on a funding extension by the end of the month or the federal government will begin reducing payouts to states for transportation projects. For now, tax writers appear more focused on a short-term funding extension than on the $90 billion revenue title needed for a six-year reauthorization of highway spending. However, Congress will continue to face pressure for a long-term solution for transportation funding. Lawmakers have proposed various options, including increases in the gas tax offset by tax cuts, or a repatriation holiday.

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