Capitol Hill

On Feb. 13, Craig Silvertooth, the Center for Environmental Innovation in Roofing's executive director, and I attended the White House signing ceremony for H.R. 5140, the Recovery Rebates and Economic Stimulus for the American People Act of 2008. The signing was in the East Room where the president was surrounded by congressional leaders of both political parties.

Of particular importance to NRCA members are the bill's generous increase in the expensing allowance for small businesses to $250,000 for this year and 50 percent bonus depreciation for items subject to a 20-year or less depreciation schedule. Perhaps equally important is this is likely the last time both parties will agree on major tax legislation until after the Nov. 4 election.

This scenario is playing out as Democrats attempt to pass a federal budget for fiscal year 2009, which begins Oct. 1, and struggle for a cohesive approach to "reconciliation" and "pay-as-you-go" (or "PAYGO") rules.

PAYGO rules

When items that impact federal tax revenue are added to the budget, it becomes a budget reconciliation bill. The benefit of adding such items during budget consideration is that, under Senate rules, budget bills are protected from filibuster (unlimited debate), which takes 60 votes to stop. Therefore, only a simple majority of senators is needed to pass a reconciliation bill. With that in mind, many congressional Democrats would like to use the budget process to rein in the alternative minimum tax (AMT) for another year and pass a package containing renewable-energy tax breaks.

However, to fulfill part of their 2006 campaign platform to reduce the federal budget deficit, congressional Democrats imposed PAYGO rules that require tax cuts and new spending to be offset with tax increases and spending cuts elsewhere in the budget. This has caused rifts not only with Republicans, who view PAYGO rules as an excuse to raise taxes, but also among House and Senate Democrats.

The first disagreement among Democrats regarding PAYGO rules occurred when Democrats waited until the end of 2007 to take up an AMT exemption, or AMT "patch," to protect about 20 million taxpayers from being subjected to the AMT on April 15. House Democrats wanted to raise $50 billion in taxes from others to offset the cost to the U.S. Treasury, but Senate Democrats balked. The bill passed without offsets.

House Democrats' fiscal year 2009 budget bill calls for offsets to the next AMT patch, but Senate Democrats have little interest in adding the AMT to the budget reconciliation process.

The second disagreement has come with the passage of H.R. 5140. House Democrats sensed the political imperative to move quickly to forestall a recession and acceded to demands that the bill not be subject to PAYGO rules. The Senate's fiscal year 2009 budget bill includes a second $35 billion stimulus package for things such as infrastructure and does not have offsets.

Renewable-energy tax breaks

On Feb. 27, the House passed H.R. 5351, the Renewable Energy and Energy Conservation Tax Act of 2008. This tax package, which was stripped from the energy bill signed into law in 2007, includes an extension of the commercial building tax deduction and the investment tax credit for installing solar energy-producing equipment. However, this resurrected energy tax bill would again increase taxes on the oil and gas industries to pay for most of its $18.1 billion cost, which doomed it in the Senate in 2007.

House Democrats are eager to use budget reconciliation to gain Senate passage without needing 60 votes, but Senate Democrats have been lukewarm to the idea. Sen. Mary Landrieu (D-La.) opposes offsetting tax breaks by raising taxes on oil and gas and does not want the bill included as a reconciliation item.

No consensus

Congressional consensus on major tax legislation likely will not occur this year. This transcends partisan politics, with Democrats often disagreeing among themselves. Consequently, important bills for the roofing industry, such as the renewable-energy tax package, are experiencing difficulty being passed.

Craig S. Brightup is NRCA's vice president of government relations.