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New 'fiscal cliff' tax law packed with tax breaks for businesses

By Stephen Olemacher

Associated Press

LAST UPDATED: 05:40 a.m. HST, Jan 04, 2013

WASHINGTON » Tucked into the "fiscal cliff" tax package approved by Congress are billions of dollars in tax breaks that should make the new year a lot happier for businesses of many stripes, including film producers, race track owners and the makers of electric motorcycles.

In all, more than 50 temporary tax breaks were renewed through 2013, saving businesses and individuals about $76 billion. Congress routinely renews the tax package, attracting intense lobbying — and campaign donations — from businesses and trade groups that say the tax breaks help them prosper and create jobs.

Businesses have grown used to many of the longstanding tax breaks, but they also have had to get used to the uncertainty of whether they will be renewed each year. This time around the tax breaks were allowed to expire at the end of 2011 as lawmakers struggled to reach consensus on a wide range of tax issues.

The package passed by Congress this week and signed by President Barack Obama renews the tax breaks retroactively, so taxpayers can claim them on both their 2012 and 2013 tax returns.

The biggest of the bunch, a tax credit for research and development, helps U.S. manufacturers compete against foreign competition, according to the National Association of Manufacturers. Another provision helps restaurants and retailers expand by allowing them to more quickly write off the costs, according to the National Restaurant Association.

These provisions have widespread support in Congress; others are more obscure.

For example, there is a tax credit for producing electricity from wind mills, a tax credit for buying electric-powered motorcycles, and tax rebates to Puerto Rico and the Virgin Islands from a tax on rum imported into the United States.

Sen. John McCain, R-Ariz., said the package is filled with "special-interest handouts" that make it difficult for him to justify his vote in favor of it.

"It's hard to think of anything that could feed the cynicism of the American people more than larding up must-pass emergency legislation with giveaways to special interests and campaign contributors," McCain said.

Lawmakers are wary of making the tax breaks permanent because of the cost, even though they inevitably renew almost all of them each year. Annual angst over whether the tax breaks will be renewed also provides incentives for businesses to lobby key lawmakers.

"All these provisions have a lobbying arm behind them, for the most part," said Mark Luscombe, principal tax analyst for CCH, a consulting firm based in Riverwoods, Ill. "If they only extend them for a year or two then the lobbyists have to keep coming back and bestowing their favors on congressmen to get the thing extended again. If they made it permanent, then the lobbyists would go away."

Among the provisions in the new law are:

—A tax credit for research and development, benefiting a wide range of industries, including manufacturers, pharmaceutical companies and high tech companies. Cost: $14.3 billion.

—An exemption that allows banks, insurance companies and other financial firms to shield foreign profits from being taxed by the U.S. The tax break is important to major multinational banks and financial firms. Cost: $11.2 billion.

—A tax break that allows profitable companies to write off large capital expenditures immediately — rather than over time — giving some companies huge tax shelters. The tax break, known as bonus depreciation, benefits automakers, utilities and heavy equipment makers. Cost: $5 billion.

—A tax credit for the production of wind, solar and other renewable energy. Cost: $12.2 billion.

— A provision that allows restaurants and retail stores to more quickly write off the cost of improvements. Cost: $3.7 billion.

—Increased tax rebates to Puerto Rico and the Virgin Islands from a tax on rum imported into the United States. The U.S. imposes a $13.50 per proof-gallon tax on imported rum, and sends most of the proceeds to the two U.S. territories. Cost: $222 million.

—A 50 percent tax credit for expenses related to railroad track maintenance through 2013. Cost $331 million.

—A provision that allows motorsport race tracks to more quickly write off improvement costs. Cost: $78 million.

—Enhanced deductions for companies that donate food to the needy, books to public schools or computers to public libraries. Cost: $314 million.

—A tax break that allows TV and movie productions to more quickly write off expenses. Sexually explicit productions are ineligible. Cost: $248 million.

— A tax credit of up to $2,500 for buying electric-powered vehicles was expanded to include electric-powered motorcycles. Golf carts, however, were excluded. Cost: $7 million. Sen. Ron Wyden, D-Ore., took credit for this tax break, saying it would help Oregon-based Brammo, which manufactures electric motorcycles.

"The electric motorcycle industry is poised to create tens of thousands of U.S. jobs over the next five years, led by companies like Oregon's Brammo," Wyden said. "This amendment helps promote the development of a promising U.S. industry and support the transition to a low-carbon American economy."

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localguy wrote:
All these tax breaks for special interest groups "Pork" just goes to show for all their talk of fiscal responsibility, our elected bureaucrats just don't get it. Never have, never will. Best bureaucrats money can buy, no integrity, will lie to your face, fingers crossed behind their backs. How about 8-year term limit, take your 401k and go, never to work for government in any capacity. Like diapers, our bureaucrats are full of it, need changing often. Hold on to your wallets, their sticky fingers are coming.
on January 4,2013 | 05:29AM
ichiban wrote:
Remember this==For this Bill to be enacted into law (1) It had to pass the DEMOCRAT MAJORITY SENATE. (2) SIGNED BY A PRESIDENT THAT'S A DEMOCRAT. Don't blame the party (DEM/GOP). It's POLITICIAN AS USUAL.
on January 4,2013 | 06:29AM
HawaiiCheeseBall wrote:
I guess you forgot to mention that the House is the controlled by the GOP and that all budget bills are supposed to originate in the House.
on January 4,2013 | 10:28AM
Pacej001 wrote:
This isn't a budget bill.
on January 4,2013 | 03:49PM
Fred01 wrote:
"Tax breaks" and "Pork" are two very different things. You make no sense.
on January 4,2013 | 10:27AM
Highinthesierras wrote:
I bet these are a surprise to Barry. He has people to read things for him, like the health care bill. Unfortunately, they are lobbyists, the folks who donate money to campaigns. No conflicts under Washington rules. Sad.
on January 4,2013 | 06:12AM
grantos wrote:
your claims sound anecdotal at best
on January 4,2013 | 09:17AM
kainalu wrote:
It lines up with the Republican concept of "deregulation". No surprises here.
on January 4,2013 | 07:45AM
64hoo wrote:
to bad we don't have the rail now then we would not have to worry about paying for railroad track maintenance because they would already get a 50% tax credit which would be good. because they would'nt tax us for this maintenance work.
on January 4,2013 | 10:15AM
64hoo wrote:
electric motocycles creating tens of thousand job thats full of shibai the electric cars don't make that much money because majority of people don't want those electric type vehicles. did'nt a car company close its plant last year because nobody bought those electric vehicles they were making i think it was the chevy volt.
on January 4,2013 | 10:24AM
HawaiiCheeseBall wrote:
Its pork when someone else gets the money. When Senator Inouye brought home the bacon he was taking care of his home state. Nothing really new here.
on January 4,2013 | 10:31AM
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