Washington Insider -- Tuesday

Tax Extenders Fight Likely

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Ethanol Backers Hail E15 Move, But Also Focus on Refiner Waivers

While ag groups backing ethanol were thanking the Trump administration for moving ahead on finalizing the plan to allow sales of E15 year-round, they also used the opportunity to call on the administration to address the issue of small refiner waivers via the Renewable Fuel Standard (RFS).

"The ethanol industry thanks President Trump for personally championing this critical regulatory reform that will enhance competition, bolster the rural economy, and provide greater consumer access to cleaner, more affordable fuel options," said Renewable Fuel Association (RFA) President and CEO Geoff Cooper. "We have always agreed with the President’s assertion that the outdated summertime prohibition on E15 was 'unnecessary' and 'ridiculous.'"

Despite that praise, Cooper said the Small Refiner Exemptions (SREs) could mean those benefits of expanded ethanol use "could be undermined if EPA continues its unprecedented assault on the RFS with indiscriminate small refinery hardship waivers."

The National Corn Growers Association (NCGA) also welcomed the E15 action by EPA, but President Lynn Chrisp warned the SREs have "taken a toll on farmers by undercutting the RFS and reducing corn demand."

Attention Remains on Potential Farmer Aid for Prevent Plant Acres

The Trump administration's Market Facilitation Program 2 will be calculated on how many acres of crops a farmer plants this year — which means any cutbacks in planting due to floods or rain will hurt farmers even more, by reducing eligibility for the government assistance.

That is unless the formula is changed, a possibility USDA Secretary Sonny Perdue is not ruling out, or in.

The American Farm Bureau Federation is urging USDA to alter the way it sets the assistance payments. The farm group wants acres that can’t be planted to count toward a farmer’s eligibility for federal assistance.

Plus speculation continues over the potential for the $19.1 billion disaster bill to play a role in the situation with provisions contained in that legislation. One that will impact includes that those farmers with over $900,000 in adjusted gross income (AGI) can qualify for the payments if more than 75% of their income is derived from farming.

Washington Insider: Tax Extenders Fight Likely

Bloomberg is reporting this week that an effort to consider a “slimmed down” package of expired tax breaks is under consideration. That approach is seen as “having appeal in the House, where extending temporary tax breaks typically has had less support than in the Senate.” However, it remains to be seen whether Ways and Means Chairman Richard Neal, D-Mass., will succeed in “thinning the extenders package,” Bloomberg says.

A number of tax “perks” expired at the end of 2017 including a credit for biodiesel backed by Senate heavyweights like Finance Committee Chairman Chuck Grassley, R-Iowa, and a credit for short-line railroad track maintenance that lawmakers have sought to make permanent in previous piecemeal bills.

The extenders issue has been hanging over the tax-writing committees since the last Congress and finding a way to deal with it would mean lawmakers could move to other issues – like debating technical corrections to the 2017 tax overhaul, Bloomberg thinks.

By floating a list of extenders that shouldn’t be renewed, Neal is attempting to gauge whether any of them lack vocal or strong enough constituencies to “push back.” That exercise could enable the committees to shape a package that might work in both chambers and prepare for an opportunity to hitch the remaining perks to a must-pass bill.

Rep. Mike Thompson, D-Calif., chairman of the Ways and Means Select Revenue Measures Subcommittee, said recently that he expects the committee to discuss which of the breaks can be ditched. At least for now, the Senate is making similar noises, Bloomberg said.

“Are they still needed? Are there reforms since they were enacted that we should be putting in place because the purpose has evolved? Should they be phased out?” Mark Warren, chief tax counsel for Senate Finance Republicans, asked a Washington conference May 30.

Still, the House and the Senate are going to have different paths in getting to agreement on a package, Dean Zerbe, a former Republican senior staffer on Senate Finance said.

“The ‘scrubbing’ is expected to involve a hard look the provisions proposed and allow supporters to re-justify the extension,” Zerbe said. “In the past, I’ve seen tax extenders get dropped or altered in these exercises.”

In February, Grassley and Sen. Ron Wyden, D-Ore., the top Democrat on the Finance Committee, introduced their own standalone extenders legislation as a signal to the House of their urgent interest in passage an extenders package.

If the House passes a pared down package of extenders with fewer than the 29 items proposed in the Senate’s bill, Grassley would see that as a basis for discussion, a GOP Senate aide told Bloomberg.”

Although it is always painful to get rid of the breaks, it might be possible to find some that can be phased out, a former top Democratic Ways and Means staffer said. But influential beneficiaries want to make them permanent and continue to press the issue with lawmakers. Such fights can be brutal, and both the House and Senate would like to avoid them.

An example of a provision that has strong support is the tax code Section 45G maintenance credit. A number of lawmakers have been trying to make it permanent for some time. Ways and Means member Earl Blumenauer, D-Ore., introduced a bill in January that now has more than 200 House cosponsors. Companion legislation in the Senate, introduced by Finance member Mike Crapo, R-Idaho, has more than 40 cosponsors.

Several Ways and Means Democrats, including Rep. Lloyd Doggett, D-Texas, are supporting an effort to have the extenders paid for and are continuing to negotiate what offsets they will propose. One initial draft on the House side pays for the extenders through 2019 by putting an early end to the 2017 tax law’s expanded estate tax exemption.

Still, some legislators and others consider efforts to renew the tax extenders as “a circus,” with very vocal critics. Marc Goldwein, senior vice president and senior policy director at the Committee for a Responsible Federal Budget, said “the right way to scrub them out at this point is to let them stay dead. The extenders expired almost 18 months ago now, that was by design.”

The longer extenders remain expired, the more likely they are not to come back, Goldwein said. Still, he said he could see an extenders package being attached to must-pass legislation later in the year.

CRFB was among the groups that wrote to congressional leaders in May asking them to let the tax breaks stay dead. The diverse organizations that signed on to the letter included the Tax March, which calls for heavier taxes on the wealthy along with the Koch brothers-backed Americans for Prosperity.

Extending tax breaks for favored programs has long been an approach to channeling support for struggling programs but it has received increased scrutiny from budget hawks in recent years. This is a debate producers should watch closely as it emerges, Washington Insider believes.

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