Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Chuck Grassley (R-Iowa) released a draft bill to address current economic conditions on February 11. The draft Hiring Incentives to Restore Employment (HIRE) Act includes tax, pension, unemployment insurance and health care provisions. Hours later, Senate Majority Leader Harry Reid (D-Nev.) offered a scaled-down version on the Senate floor the Senate will consider on February 22, following the week-long President's Day recess.
Senators Baucus and Grassley announced the Hiring Incentives to Restore Employment (HIRE) Act on Thursday, which includes a variety of tax, pension, unemployment insurance and health care provisions aimed to create economic activity. However, the downsized version Senator Reid put forth would only include four elements of the HIRE Act: (1) the Highway Trust Fund extension; (2) the Build America Bonds extension; (3) The Schumer-Hatch payroll tax exemption; and (4) the section 179 expensing extension. The Reid proposal would not include the collection of expired tax provisions, pension funding relief, unemployment insurance, or heath care provisions, although Senator Reid said that these provisions may be moved at a later date.
Provisions in the Reid proposal taken from HIRE Act include the following:
Highway Trust Fund. The provision would extend highway and transit programs through calendar year 2010, and transfers from the General Fund to the Highway Trust Fund $19.5 billion in interest foregone since 1998. Read more on the implications to the Highway Trust Fund in Action Needed to Fund Highway Programs.
Election to Convert Tax Credit Bonds to Build America Bonds. Under current law, Congress provided tax credit bonds to qualifying issuers for certain school and energy projects. Tax credit bonds provide the bond holder a federal tax credit in lieu of interest. Build America Bonds provide qualifying issuers a direct payment from the Treasury for a portion of the interest paid on the bond for government works projects. The provision would allow qualifying issuers of tax credit bonds the option of issuing tax credits bonds under current law, or utilizing the direct subsidy Build America Bond structure for bonds issued after the date of enactment. The federal subsidy would equal 45 percent of the borrowing cost (65 percent for qualifying small issuers).
Schumer-Hatch Jobs Payroll Tax Exemption. The provision would offer an exemption from Social Security payroll taxes for every worker hired in 2010 that has been unemployed for at least 60 days. The maximum value would be equal to 6.2 percent of wages up to the FICA wage cap ($106,800). There would also be an additional $1,000 income tax credit for every new employee retained for 52 weeks to be taken on the employer's 2011 income tax return.
Extension of Section 179 Expensing. The provision would extend 2008 and 2009 section 179 expensing thresholds so that taxpayers may elect to write-off up to $250,000 of certain capital expenditures (subject to a phase-out once expenditures exceed $800,000) in 2010 in lieu of depreciating those costs over time.
HIRE Act provisions not included in the pending Reid proposal are as follows:
Expiring Tax Provisions. The draft HIRE Act would extend several tax provisions that expired at the end of 2009. Included in these provisions is the 15-year shortened recovery period for leasehold, restaurant and retail improvements, and new restaurant construction.
Pension Funding Relief. The provision would provide funding relief for single- and multi-employer pension plans that experienced significant losses in asset value due to the market declines beginning in 2008. For multi-employer pension plans, the provision would allow plans to amortize 2008 loses over a 30-year period.
For more information, contact Karen Lapsevic at lapsevick@agc.org.