Baucus Announces Modified Chairman’s Mark of Highway Funding Legislation

MEMORANDUM

To: Reporters and Editors
From: The Communications Office of Senate Finance Committee Chairman Max Baucus (D-Mont.)
Re: Baucus Announces Modified Chairman’s Mark of The Highway Investment, Job Creation and Economic Growth Act of 2012

Senate Finance Committee Chairman Max Baucus (D-Mont.) today announced he will release a modified Chairman’s Mark of The Highway Investment, Job Creation and Economic Growth Act of 2012 ahead of the Committee’s consideration of the bill.  The modified mark will incorporate amendments and altered revenue proposals from both parties to build broad support.  A list of modifications follows below, and when applicable, amendment information is included in parentheses.  The Joint Committee on Taxation is currently finalizing revenue and cost estimates for these provisions, and once completed, those scores will appear here on the Finance Committee’s website.

Additional Transfer to the Highway Trust Fund of Proceeds on Certain Imported Tariffs.  The Chairman’s Modification would transfer additional tariff revenue to the Highway Trust Fund for such a period as necessary to fully fund the Highway Trust Fund.  This provision would transfer $2.618 billion to the Highway Trust Fund.

Require Distributions of Inherited IRAs within 5 years.  Under current law, holders of IRAs and 401(k)-type accounts are required to begin taking taxable distributions from those accounts once they reach age 70-1/2.  However, they can stretch those distributions over many years if they leave their account to a very young beneficiary.  When the account holder dies, the taxation of the account is then spread over the life of the beneficiary.  The Chairman’s Modification would require the retirement savings accounts to be treated, for tax purposes, as distributed within five years of the death of the account holder, unless the beneficiary is the account holder’s spouse, a disabled or chronically ill individual, a minor child or someone within 10 years of the account holder’s age.  This provision is estimated to raise $4.648 billion over ten years.

Reverse Morris Trust Transactions.  Under current law, taxes are generally imposed on parent corporations where they extract value in excess of basis from their subsidiaries prior to engaging in a tax-free spin-off transaction.  Therefore, if a subsidiary corporation distributes cash or other property to its parent in excess of the parent’s basis in the subsidiary or if a subsidiary corporation assumes parent debt in excess of the parent’s basis in the subsidiary the parent corporation will recognize gain.  However, taxes are not assessed if a subsidiary corporation distributes its own debt securities to a parent corporation prior to a spin-off transaction even where the value of these securities would exceed the parent corporation’s basis in its subsidiary.  The Chairman’s Modification would treat distributions of debt securities in a tax-free spin-off transaction in the same manner as distributions of cash or other property. Subject to a transition rule, the provision would apply to exchanges after the date of enactment. This provision is estimated to raise $244 million over ten years.

Modification to Provision to Close Black Liquor Loophole (portion of Crapo #1).  The Chairman’s Modification would allow taxpayers to claim and carry forward the Section 6426 50-cent per gallon credit but not the Section 40 $1.01 per gallon cellulosic tax credit for black liquor produced prior to January 1, 2010.  This provision is estimated to raise approximately $1.588 billion over ten years.

Clarify IRS Levy Authority for Funds in a Thrift Savings Plan Account (Hatch #2).  The Chairman’s Modification would provide that funds in Thrift Savings Plan accounts of federal employees would be subject to legal process by the Internal Revenue Service for payments of delinquent taxes.   This provision is estimated to raise $25 million over ten years.

Parity for Exclusion from Income for Employer-Provided Mass Transit and Parking Benefits (Schumer, Menendez, Carper, Cardin #1).  The Chairman’s Modification would extend through 2012 the increase in the monthly exclusion for employer-provided transit and vanpool benefits to that of the exclusion for employer-provided parking benefits.   This provision is estimated to cost $139 million over ten years.

Bank Qualified Bonds (portion of Bingaman #2).  The Chairman’s Modification includes a modified version of an amendment that would expand the ability of small issuers to sell bank-qualified bonds from $10 million to $30 million for bonds issued after the date of enactment and before January 1, 2013.  This provision is estimated to cost $356 million over ten years. 

AMT Relief on Private Activity Bonds (Kerry, Menendez #2).  The Chairman’s Modification would provide alternative minimum tax (AMT) relief to investors in private activity bonds that are issued after the date of enactment and before January 1, 2013.  This provision is estimated to cost $215 million over ten years.

Transportation and Regional Infrastructure Bonds (TRIPs) (Wyden #1).  The Chairman’s Modification would create placeholder language that would amend Title 23 of the United States Code to allow state infrastructure banks to issue TRIP bonds, 100 percent of the proceeds of which must be spent on qualifying transportation projects and the term of the bond cannot exceed thirty years.  The provision would also allow state infrastructure banks to create TRIP bond accounts, which is where proceeds from TRIPs would be deposited.  The provision does not have a revenue effect.

A full list of amendments filed by committee members is currently available, and a description of the Modified Chairman’s Mark will be posted on the Finance Committee’s legislation website here.

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