WASHINGTON (AP) — 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
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
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
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
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.
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
—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.