The Texas Office of State Federal Relations published the following update on the recent American Workers, State, and Business Relief Act:

On March 10, the Senate passed The American Workers, State, and Business Relief Act (HR 4213) by a vote of 62 to 36.  Sens. John Cornyn and Kay Bailey Hutchison voted “no” on the package.  The bill passed by the Senate is a substitute amendment to a bill that the House passed on December 9.  Authored by Senate Finance Chairman Max Baucus (D-MT), the $149.3 billion Senate proposal is a catch-all that extends a number of tax provisions.

The bill’s energy provisions include:

•            Alternative motor vehicle credits for hybrid cars;

•            Biodiesel and renewable energy credits;

•            Open-loop biomass facility credit;

•            Refined coal credit;

•            Low-sulfur diesel fuel credit;

•            Credit for producing fuel from coke or coke gas;

•            New energy efficient home credit ;

•            Alternative fuel and alternative fuel mixtures excise tax credit;

•            Special rule for qualified electric utilities; and,

•            Percentage depletion for oil and gas from marginal wells.

Other highlights of the bill include:

•            An extension (through December 31, 2010) of the sales tax deduction;

•            A deduction for teachers’ out-of-pocket expenses;

•            A extension of the deduction for qualified higher-education expenses;

•            A one-year extension of the research and development credit;

•            Extension of tax breaks for people affected by natural disasters;

•            Favorable tax treatment for farm equipment; and,

•            Tax incentives for investment in economically distressed areas.


The bill contains four offsets that the Senate Finance Committee claims will total $47.4 billion over 10 years. These offsets include:

•            Changes to the alternative fuel mixture tax credit affecting so-called “black liquor” and excluding certain unprocessed fuels from qualification for the cellulosic biofuel producer credit (estimated to

            raise $24 billion over the next 10 years);

•            Tightening the reporting requirements to receive the Homebuyer Tax Credit (no revenue estimate was provided);

•            Codifying the Economic Substance Doctrine, which denies tax benefits for transactions that lack “economic substance” independent of tax considerations (estimated to raise $5 billion over 10 years)’


•            Reduction in the Medicare Improvement Fund for FY 2014 – allocating $8 billion less for FY 2014 for the improvements to the fee-for-service program under Medicare Parts A and B.


Baucus’ bill would extend unemployment insurance, COBRA, flood insurance and small-business provisions through December 31.   The Unemployment Insurance provisions would extend emergency benefits (EUC) through December 31, 2010 (with no benefits payable after May 31, 2011), extended benefits would be 100% federally financed through December 31, 2010 (with no benefits payable after June 30, 2011), and the $25 additional benefit would be extended through December 31, 2010 (with no benefits payable after June 30, 2011).  This extension is made retroactive to the passage of the FY 2010 Department of Defense Appropriations Act, which was signed into law on December 19, 2009.

The Medicare “Doc Fix,” which prevents a mandated 21% percent cut in reimbursements to doctors, would be extended through September 30.  States would get a six-month increase in federal payments for Medicaid (the stimulus bill’s FMAP extension would be extended through June 30, 2011, costing $25 billion over ten years).

HR 4213 now goes back to the House, where the newly-installed chairman of the Way and Means Committee, Rep. Sander Levin (D-MI), has voiced concern about the Senate’s offsets.  Sen. Baucus’ bill relies on codification of the “economic substance” doctrine on tax-motivated transactions and a curb on paper manufacturers’ ability to claim a tax credit for “black liquor.” These offsets have already been set aside to pay for the proposed health care reform package, and using them to partially pay for HR 4213 would inflate the total cost of health care, complicating efforts to negotiate a final health care bill.