Oregon businesses pay attention as tax breaks get traction in Congress

Intel.jpg

Intel is among companies that would see significant savings under a research-and-development tax break. The tax break is among a package of tax provisions under consideration in Congress.

(Randy L. Rasmussen/The Oregonian)

Tax breaks being closely watched by businesses in Oregon are gaining traction in Congress and could pass this spring.

The business tax credits, called extenders, can mean real money. The popular research-and-development credit, for example, lowers Intel Corp.'s federal tax rate by 1.5 percentage points – saving Oregon's biggest private employer $189 million in a year.

Most extenders have been around for years, but must be renewed every year or two because Congress has never voted to make them permanent. The last package expired Dec. 31, which means Congress must act this year – or pass the extenders retroactively early next year -- for the tax breaks be in effect for 2014.

U.S. Sen. Ron Wyden, D-Ore., said after he took the reins of the Senate Finance Committee in February that renewing the tax breaks is a top priority. But he also made it clear that he wants this to be the last stopgap deal. He'd like Congress to work the provisions into a broader tax overhaul next year.

What are tax extenders?

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Wyden got a major boost this month when his committee unanimously approved an $86 billion bill to extend the breaks through 2015.

"We need this bill passed so that citizens and businesses alike have two years of greater certainty while we push ahead on an overhaul of the tax system," Wyden said via email last week. "I'm hopeful that we will see a floor vote soon."

In Oregon, an income tax credit for plug-in motorcycles could create as many as 10,000 jobs in the electric motorcycle industry and related businesses, according to an analysis by the Senate Finance Committee. And an extension of a railroad track maintenance credit would help fund projects such as the Port of Coos Bay's rehabilitation of the Coos Bay Rail Link.

On a national level, tax breaks in the package would benefit industries ranging from wind energy to car racing. The bill also extends a controversial provision that allows major multinationals such as General Electric to keep untaxed any income they earn from lending money abroad. Another measure would extend a measure dating from the 2009 stimulus bill that lets firms write off new capital spending, known as bonus depreciation.

In addition, individuals who reduce their mortgage debt – say, through refinancing or foreclosure – would not be subject to income tax on the debt, up to $2 million.

U.S. Rep. Earl Blumenauer, D-Ore., who sits on the House Ways and Means Committee, told The Oregonian last week that he's optimistic that Congress will reach agreement on the extenders.

"Almost all of these have very strong bipartisan support, and we now have activity in both the House and the Senate," he said. "Could some of these tax breaks get dropped? Sure. But I think we'll see a final deal in the next three months."

Some staffers and lobbyists agree that an extenders bill will clear both chambers but don't think it will happen until after the midterm elections Nov. 4

In recent years, Congress has tacked extenders onto broader bills, sometimes with retroactive effect, in last-minute fiscal showdowns. That could result in significant shifts in some of the tax breaks. Intel, for one, saw its rate swing from 26 percent in 2012 to 23.7 percent in 2013. It will rise to 27 percent this year if the credit isn't renewed

Blumenauer doesn't expect that to happen. "Nobody bets against R&D," he said.

Because extenders benefit so many industries across every state, they usually pass easily. Lawmakers swap support for each other's pet causes, even if that means accepting items they would otherwise reject.

Many liberals, for example, dislike a provision that lets multinationals lower their tax burden by booking profits offshore, while many conservatives oppose the production tax credit for the renewable energy industry -- a prize for wind farms. But both are included in the Senate bill.

-- Helen Fessenden

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