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80–206 2012

FRAMEWORK FOR EVALUATING CERTAIN 

EXPIRING TAX PROVISIONS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

June 8, 2012 

Serial No. 112–SRM07 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan, Chairman 

WALLY HERGER, California 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

RICK BERG, North Dakota 

DIANE BLACK, Tennessee 

TOM REED, New York 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

JENNIFER SAFAVIAN, Staff Director 

JANICE MAYS, Minority Chief Cousel 

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

PATRICK J. TIBERI, Ohio, Chairman 

PETER J. ROSKAM, Illinois 

ERIK PAULSEN, Minnesota 

RICK BERG, North Dakota 

CHARLES W. BOUSTANY, JR., Louisiana 

KENNY MARCHANT, Texas 

JIM GERLACH, Pennsylvania 

RICHARD E. NEAL, Massachusetts 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

SHELLEY BERKLEY, Nevada 


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C O N T E N T S 

Page 

Advisory of June 8, 2012 announcing the hearing ................................................ 2 

WITNESS LIST 

Dr. Jim White, Director, Tax Issues, Government Accountability Office ........... 11 

Dr. Donald B. Marron, Director, Tax Policy Center, The Urban Institute ......... 32 

Mr. Alex Brill, Research Fellow, American Enterprise Institute ........................ 42 

Mr. Aaron Gornstein, Undersecretary for Housing and Community Development, Department of Housing and Community Development, Commonwealth of Massachusetts ...................................................................................... 52 

SUBMISSIONS FOR THE RECORD 

Honorable Richard Neal .......................................................................................... 6 

Honorable Doc Hastings .......................................................................................... 82 

ABM Energy ............................................................................................................. 84 

Alliance to Save Energy .......................................................................................... 86 

American Cleaning Institute .................................................................................. 88 

American Council for an Energy Efficient Economy ............................................ 90 

American Farm Bureau Federation ....................................................................... 93 

American Public Transportation Association ........................................................ 97 

Business Council for Sustainable Energy .............................................................. 99 

Center for Fiscal Equity .......................................................................................... 101 

City of Cleveland Department of Law ................................................................... 104 

ClearStack LLC ....................................................................................................... 107 

Efficiency First ......................................................................................................... 109 

Feeding America ...................................................................................................... 111 

Financial Executives International ........................................................................ 115 

Food Donation Connection LLC ............................................................................. 119 

Fuel Cell and Hydrogen Energy Association ......................................................... 125 

National Association of Manufacturers .................................................................. 129 

National Biodiesel Board ........................................................................................ 134 

National Education Association .............................................................................. 139 

National Governors Association ............................................................................. 142 

National Preservation Working Group .................................................................. 144 

National Restaurant Association ............................................................................ 146 

Ohio Grantmakers Forum ....................................................................................... 154 

One Voice .................................................................................................................. 156

R and D Credit Coalition ........................................................................................ 160 

Radian ....................................................................................................................... 165 

Rebuild America’s Schools ...................................................................................... 170 

Residential Energy Efficient Tax Credit Industry Coalition ................................ 173 

Sustainable Energy and Environment Coalition (Congressional Coalition) ....... 180 

The Council on Foundations ................................................................................... 185 

The Jewish Federations of North America ............................................................ 192 

True Blue .................................................................................................................. 201


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Framework for Evaluating Certain 

Expiring Tax Provisions 

FRIDAY, JUNE 8, 2012 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON SELECT REVENUE MEASURES, 

Washington, DC. 

The subcommittee met, pursuant to call, at 9:30 a.m., in Room 

1100, Longworth House Office Building, Hon. Pat Tiberi [chairman 

of the subcommittee] presiding. 

[The advisory of the hearing follows:] 


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Hearing Advisory 

FROM THE COMMITTEE ON WAYS AND MEANS 

Chairman Tiberi Announces Hearing on 

Framework for Evaluating Certain 

Expiring Tax Provisions 

Friday, June 8, 2012 

Congressman Pat Tiberi (R–OH), Chairman of the Subcommittee on Select Revenue Measures, today announced that the Subcommittee will hold a hearing on how 

Congress should evaluate certain tax provisions that either expired in 2011 or will 

expire in 2012 (also known as ‘‘tax extenders’’). The hearing will take place on 

Friday, June 8, 2012, in Room 1100 of the Longworth House Office Building 

at 9:30 A.M. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. A 

list of invited witnesses will follow. 

BACKGROUND: 

On September 22, 2011, the Subcommittee held a joint hearing with the Subcommittee on Oversight on the topic of the intersection of energy policy and tax policy. At that hearing, witnesses testified on the effectiveness of a number of energyrelated tax extenders. On April 26, 2012, the Subcommittee held a hearing on Member proposals related to tax extenders, at which Members of Congress testified both 

in favor of and in opposition to numerous tax extenders. 

As with the Subcommittee’s April 26, 2012 hearing, for purposes of this hearing, 

a ‘‘tax extender’’ is any tax provision: 

1. Extended in Title VII of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Public Law No. 111–312; ‘‘TRUIRJCA’’), or 

2. Expiring between the end of calendar year 2011 and the end of calendar year 

2012, other than any provision: 

• Addressed in Titles I through VI of TRUIRJCA, or 

• Related to a transportation trust fund. 

In announcing the hearing, Chairman Tiberi said, ‘‘As part of the Ways and 

Means Committee’s ongoing effort to review dozens of tax provisions that 

either expired last year or expire this year, we need to consider carefully 

the principles that we should use to evaluate the merits of these policies. 

Having recently heard from our House colleagues about their views on 

many of these extenders, it is time for the Subcommittee Members to roll 

up their sleeves and see how the provisions stack up against what experts 

consider the principles of sound tax policy.’’ 

FOCUS OF THE HEARING: 

The hearing will explore ideas on the framework that Congress should use to 

evaluate tax extenders, the principles of good tax policy that Congress should apply 

during this evaluation, and the specific metrics against which Congress should test 

the merits of particular provisions. While the hearing is not intended to focus on 

specific tax extenders, individual provisions may be discussed for the purpose of illustrating how to use such principles and metrics. 


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DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit written comments for the hearing record must follow the appropriate link on the hearing page 

of the Committee website and complete the informational forms. From the Committee homepage, http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you would like to submit, and click on the link entitled, ‘‘Click here 

to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance with the formatting requirements listed below, by the close 

of business on Friday, June 22, 2012. Finally, please note that due to the change 

in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries 

to all House Office Buildings. For questions, or if you encounter technical problems, 

please call (202) 225–3625 or (202) 225–2610. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word format and MUST 

NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised 

that the Committee relies on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

The Committee seeks to make its facilities accessible to people with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://www.waysandmeans.house.gov

f 

/. 

Chairman TIBERI. This hearing will come to order. Good morning. Thank you for joining us today for another in a series of hearings on what are commonly referred to as tax extenders. 

As most of you know, during member day hearing in April, we 

had the opportunity to hear from a number of our colleagues about 

the merits of extending or in some cases not extending many of 

these tax policies. By all accounts, it was a productive exercise, and 

I commend our chairman of the full committee, Chairman Dave 

Camp, for his leadership in providing the opportunity then and 

now and in the future to examine these tax provisions. 

His leadership in setting forth a transparent process for reviewing the tax extenders is what the American people expect from 

their congressional representatives. I think that it is likely accurate to say that the days of simply rubber stamping and extending 

an entire package of extenders is now behind us, and today we 


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pivot to exploring what we hopefully will hear, and that is ideas 

to providing a framework that Congress should use in evaluating 

these tax extenders. 

Our witnesses today will share their views on principles of good 

tax policy and the specific merits and metrics against which Congress should test the merits of particular provisions. 

I look forward to their testimony and the ensuing conversation. 

Before we begin, I would like to take a moment to thank Congressman Mike Thompson from California for serving as our ranking member today. Unfortunately, Congressman Richie Neal 

couldn’t be with us today because he is attending a funeral in 

Springfield for a fallen police officer. 

I now yield to Mr. Thompson for his opening statement. 

Mr. THOMPSON. Thank you, Mr. Chairman. And I think I can 

speak for everyone when we say that our thoughts and prayers are 

with the family of those in Mr. Neal’s district who lost a police officer today, and I know as a father of a detective, I know that is 

something that all of us care a great deal about, and we are mindful of just how dangerous those public servants’ jobs are. 

And I thank the chairman for convening this hearing today. We 

appreciate that the subcommittee has decided to begin consideration of certain expired and expiring tax provisions as this consideration is long overdue. Businesses have been desperate for certainty in the tax law when attempting to make decisions that can 

help to grow the economy. 

However, many may view today’s hearing as actually increasing 

uncertainty for businesses and for individuals that use these tax 

benefits. 

As we learned in our last hearing, so many of these benefits 

enjoy broad, bipartisan support. Their extension should not be difficult. As we learned from the recent jobs report, our economy is 

struggling and job creation is still too slow in coming. Unfortunately, proven job creation programs have not received adequate 

consideration in this Congress. 

Press reports indicate that the highway conference may be 

stalled and possibly gridlocked and provisions on the President’s todo list to create jobs have not made it to a vote. The public is losing 

faith in Congress’ ability to act and act quickly to turn this economy around. Frankly, I don’t blame them. 

We have had a hard time finding an agreement on a lot of 

things, but it is important to remember that there are things we 

can do in this committee that can help alleviate some of the pressures people are feeling and the uncertainties facing businesses. 

As we learned from the last subcommittee hearing, so many expired provisions that are under consideration today enjoy broad, bipartisan support. In fact, many of us are lead sponsors of important job-creation provisions, including the new markets tax credit, 

the R&D tax credit, the conservation easement credit, and the list 

goes on. 

We have all worked well together on these provisions, and we 

should now work to get them across the finish line. 

I appreciate the testimony from the witnesses today. Evaluation 

of temporary provisions is as important as evaluating all provisions 

in the Tax Code. There are a number of loopholes that can be 


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closed or provisions that provide windfalls to certain industries 

that should be examined particularly close. 

The temporary nature of provisions should not automatically 

make it more eligible for termination than some of the provisions 

in the Tax Code that are permanent. Many of these provisions were 

enacted on a temporary basis due to budgetary constraints. That 

does not automatically detract from the merit of the provisions 

themselves. 

But today, we are talking about provisions that have already expired. Businesses, large and small, rely on these provisions when 

making investment decisions. We have allowed almost 18 months 

of the 112th Congress to pass without doing our job to move legislation providing extension of these provisions. I mentioned in detail 

at the last hearing—the last time we had a tax extender hearing 

a few weeks ago just how important some of these extenders are 

to my district and to my constituents. I won’t go into detail again 

but will mention that Mr. Gerlach and I have a bill to make permanent the enhanced conservation easement incentive. It is one of the 

most successful tools we have to support preservation of open space 

and family farms, which protects our watershed and ensures food 

security. Today, it has 308 cosponsors, including the chairman, 

which I appreciate very much, and wish that we were marking that 

bill up today or, better yet, had it on the suspension calendar. 

I couldn’t agree more with our chairman that this committee has 

a duty to ensure that the Tax Code is working to create jobs and 

grow our economy. It is an exercise that is necessary and takes 

time. But so much of the rest of Congress is gridlocked. This committee can act quickly and do so in a bipartisan way to extend expired provisions that need to be extended and help kick start our 

job creation and get the economy going. 

I believe that such legislation should include not only job creating provisions that expired in 2011, but also proven job creating 

provisions that were allowed to expire in 2010, such as the Build 

America bonds and the 48(c) Advanced Manufacturing Investment 

Tax Credit. 

The committee should engage in proper oversight and review of 

all of the tax provisions to identify those that are meritorious based 

on their economic performance and find ways to strengthen them 

and make them permanent. But this oversight should not come at 

the cost of inaction on important job-creating provisions. 

I hope that the subcommittee and the full committee can get to 

doing our work and get these in front of the full House for a vote 

and in front of the President for his signature so we can help to 

improve the economy. 

I thank the chairman for allowing me to read this testimony. 

Chairman TIBERI. Thank you, Mr. Thompson. All that and no 

mention of grapes or vineyards. Inside joke. 

Mr. THOMPSON. Could I get unanimous consent? 

Chairman TIBERI. Speaking of unanimous consent, can I have 

unanimous consent to allow for the reading or the submission of 

Mr. Neal’s opening statement? 

Without objection. 

[The prepared statement of Mr. Neal follows:] 


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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.001

Opening Statl'menl of Rl'p. Ritb~rd E. Neal 

H~nking Memb~r. SRM Subl'ummilll'e 

HC:lring on Ellellder~ 

.lIme8, 20 12 

Thank you, Mr. Chairman . I first want to commend 

you on the quality of the hearings you've held in our 

subcommittee this Congress. And today's hearing is no 

exception - I'm very pleased that we're focusing today on 

the tax extenders. That being said, I think the time has 

come with respect to the tax extenders to move beyond the 

bearings and analysis and start making some decisions. 

We need to extend these important provisions as soon as 

possible . 

Last week's disappointing jobs numbers once again 

demonstrated the need for Congress to take action and 

promote economic growth and job creation. And the tax 

extenders is a jobs issue. The New Markets Tax Credit 

(NMTC) program has led to the creation or retention of 

about '300,000 jobs in some of our most financiallytroubled communities. In Western Massachusetts, the 

Massachusetts Green High Performance Computing Center 

is being built thanks in large part to the NMTC - and this 

project is creating about 600 construction jobs. 
7 

f 


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Chairman TIBERI. Well, next it is my pleasure to introduce the 

witnesses here today, and we have an excellent panel of witnesses 

seated before us. 

Today’s witnesses bring both tax policy and oversight experience 

to us. Today’s witnesses begin with from my left to the right, we 

would like to welcome back Dr. Jim White from the General Accounting Office, where he is the Director for Tax Issues. Dr. White 

is responsible for GAO’s work pertaining to the IRS tax administration and tax policy. Thank you for being here, sir. 

Second, we welcome back Dr. Donald Marron, the Director of Tax 

Policy Center at the Urban Institute here in Washington, DC. Dr. 

Marron’s research at the Tax Policy Center has focused on tax reform as he has previously served as the Acting Director of the Congressional Budget Office and as a member of the President’s Council of Economic Advisers. Thank you for being here today, sir. 

Third, we will hear from Mr. Alex Brill, a Research Fellow at the 

American Enterprise Institute here in Washington, DC. Mr. Brill 

is an alum of the Ways and Means Committee staff, and he has 

also served on the President’s Council on Economic Advisers and 

has served as an adviser to the President’s Fiscal Commission in 

2010. Welcome back to the room, sir. Glad to have you here. 

Finally, we will hear from Alex Gornstein, the Under Secretary 

for Housing and Community Development for the Commonwealth 

of Massachusetts. Go, Celtics. And being from Ohio, there is even 

an added little emphasis on that. 

Thank you for being here today, folks. The subcommittee has received from each of you written statements, and they will be made 

part of the formal hearing record, as you know. 

Each of you will be recognized for 5 minutes for oral testimony, 

and then we will have questions. 

With that, Dr. White, the floor is yours. 

STATEMENT OF DR. JAMES R. WHITE, DIRECTOR, TAX ISSUES, 

GOVERNMENT ACCOUNTABILITY OFFICE 

Dr. WHITE. Thank you. Mr. Chairman, acting ranking member, 

and members of the subcommittee, I am pleased to be here to discuss how to evaluate the expiring tax provisions, sometimes called 

tax extenders. Most are tax expenditures, so I will focus on those. 

However, the evaluation principles I discuss do apply more broadly. 

Tax expenditures are special credits, deductions, deferrals, and 

so on, that reduce a taxpayer’s tax liability from what it would 

have been under a normal tax—under a ‘‘normal tax.’’ 

Tax expenditures often have policy goals similar to those of 

spending programs. They may promote economic development, energy efficiency, or research and development. Because tax revenue 

is foregone, such provisions may, in effect, be viewed as spending 

channeled through the tax system. Like decisions about spending, 

decisions on whether and how to extend tax provisions involve 

tradeoffs between policy goals and costs. My written statement 

summarizes factors commonly used to evaluate government policy, 

including tax policies such as the expiring provisions. 

First is the effect of extending the provisions on revenue. Tax expenditures shrink the tax base. They either reduce funding available for other Federal activities or require higher tax rates to raise 


joloto on DSK67XMDP1PROD with HEARING
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the same amount of revenue from the smaller base. Put another 

way, revenue the government would have collected absent the tax 

expenditure could have been used to fund other programs, deficit 

reduction, or tax rate reductions. 

Second is the effect on equity, the economy, and taxpayers’ compliance burden. Equity or fairness is a subjective judgment, but 

asking questions about who benefits from a provision and how ability to pay tax is affected can help policymakers reach conclusions 

about it. 

The effect on the economy is what my statement calls economic 

efficiency; lightly taxing one activity shifts resources to it and away 

from less tax favored activities. The overall effect depends on 

whether the favored activity provides greater benefits than the less 

favored activity. 

The effect on taxpayers’ cost to comply with the provision depends on its simplicity and transparency. Can taxpayers understand the provision? What kinds of records will they need to keep? 

And, of course, simplicity and transparency affect IRS’s ability to 

administer and enforce a provision. 

A third factor to consider when evaluating the expiring provisions is whether the tax system is the best way to deliver the benefit or whether some other tool of government, such as spending, 

a loan or a loan guarantee, could provide the same benefit at lower 

costs. 

Tax expenditures may have a cost advantage when benefits are 

means tested. 

One goal is to prevent fragmentation, overlap or duplication 

among programs, not just to save money, but also to avoid confusing the public. Also important is the choice of tax policy tool. 

The choice of a credit versus a deduction, for example, affects incentives and the distribution of the benefits. 

A final factor is measurement. Too often programs are implemented with little attention to how we will measure the results. In 

the case of tax provisions measuring results is complicated because 

IRS administers the provisions, but it is not the agency with functional responsibility for energy efficiency or community development or any of the other goals of the expiring provisions. Thus, decisions are needed about what agency should evaluate tax provisions, who should collect necessary data, and so on. 

Now, I want to briefly illustrate how GAO has applied these factors in our reports. 

Regarding the credit for ethanol, we found that while the credit 

helped create the industry during its formative years, having both 

a tax credit and a renewable fuel standard now is duplicative. 

Thus, we suggested that Congress consider modifying or phasing 

out the credit. Our reports on higher education tax assistance 

raised transparency questions. There are multiple such complex 

provisions, and we found many eligible taxpayers either failed to 

claim anything or claimed one that did not maximize their financial benefit. 

We looked at the efficiency of the research credit. While economists tend to support a subsidy for research because the social returns exceed the private returns to firms, we found the current design introduces inefficiency because incentives are distributed unVerDate Mar 15 2010 08:41 Apr 19, 2013 Jkt 080206 PO 00000 Frm 00013 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\80206.XXX 80206

joloto on DSK67XMDP1PROD with HEARING
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evenly across firms and estimated that more than half of the regular credit is a windfall for research that would have been done 

anyway. We suggested changes to improve the bang per buck of the 

credit. 

We also looked at whether the new markets tax credits succeeded in moving resources as intended. The credit did appear to 

increase investment in low income communities. However, we also 

reported that its complexity makes it difficult to complete smaller 

projects and results in less money flowing through to low-income 

community businesses than might be possible with alternative designs. We suggested that Congress consider offering grants instead 

of tax credits with one option being a side-by-side test of the two 

approaches. 

Mr. Chairman, acting ranking member and other members, we 

have done a number of other such assessments all intended to provide Congress with factual information about the evaluation factors 

I outlined up front. How to use the information and make tradeoffs 

between the factors is up to policymakers. 

I would be happy to answer questions. 

[The prepared statement of Mr. White follows:] 


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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.003

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and Means, House of Representatives 

TAX POLICY 

Factors for Evaluating 

Expiring Tax Provisions 

Slatement of James R. While, Director Stralegic Issues 
12 


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"""""",",ta>.~" A...,.~ .... l ....... .--y ... __ _ .w~. __ by __ ...,_I1111~"" ... "O""" _1I'IrI_A ___ lI'IrIrnIom\oI!iMlD_1U 

~"'.~_ID_"'_II'IrI"""",,",,", 

GAO'. __ """'_~ ___ QII"'_ 

1D __ IRI_Io_~"'--""," F .. -.pIoI. 

G-'O_lIIM'" -.:II ~ _ .. ---,.~ ~......, **""""wiII'> ...... __ 

__ _ 

IIlrwaY ,._""_.tIonoI~_GAO~ 

rf'oOdi¥no or p/IMIng""" IN "-_""'~0I1I'IoI_1UIII 

~~'1l1I\t ~of""""tdetYtg _1&1< . .pMIIil .... ''''''Ia to _ POky _. GAO', won. OIl niI!"*~ tao e>.pe""","" __ 

~y 

_ 

\a""'~) 

Ia\ o:o;penll,Mee 

can ,HUll'" 

thai ... 

IIUP8'f8"I 

..0. 1rW>tp<lren1 

makiolg _11>01"" 

(I. • •• Col""'" Do ~ 

"'" mouWrhe 

~ 

""'" 11>: __ IIiI_'IIo_IhIIl_" '-"aDoul""~1 

01 ed\oca_ tecIor~ gran ... , Ioono • ..,g I ... e. pendrMal .. jIIomotirrg .:.rtairt 0IUIMtII _. -. .. ccIogoe iI1II1\danoIL ~ O"r* ...., lie 

due..1rt 

1nII_~oI 

___ 

PM.lDo.III 0iIIic\rI",_and ~~ 

... \atr~_~ . ........ __ 

diIr~ d'\arIgIII- ~ 

~--------------- " __ 'f_ 
13 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.005

Chairman Tibell, Ran~illQ Member Neal, aod Mernbl!r!l oOhe 

SubC:ommiU .... ' 

I 8m pleased to I)e nere to di~cusa ~ e><len!lion of tax prOYisloos, 

.someti""", ""UItd ta~ extenders. which either ""pOred In 201 t or "re 

sdKIdule<llo e>cpOre at lMr eM 01 20t 2_ TIIeSe ptOIIls.k>na _ 8 II>!! subjat.'I 

of an April hearing bGforu \his aubcommiU ...... lor which the Joint 

Comm~lee on Taxation (JCT) prepared" docUment. detailing 64 e>cpiring 

",o.,.oms.' Masl of the 64 ... xpinl1\l prollis""", Or" !ax expend~u'so;­

"I!IucIions ir> a federat t""payer, tal< l"'llilit)' Iha! resull from special 

credits. daduclons, ",x""'pliant and uclusOons from ta>C8hon, dBforrai 01 

that 

la~ IiaDMy, 

are o)«:9p!ions 

and preferenUal 

to too ' n<:mI3l 

tax rat8ll

s\rudure

.' Ta~ 

' 

... 

01 

,pendilure.s 

the indivldtJ

a re 

al a

~ 

nd 

COrpot8i.e fncome taJe . Other provisIorts trnI1 redOCOl lax U8biti t~ . such as 

many deducholls for tlImi"""s ""pen""". a ,,, cooskle 'ed to be pari of the 

""""al t8ll atnJctu(e and ar ... nO! consicIered ta>c expenditures' 

Tax ... lqJefV:IllUIH are oft8t1 aimed at policy 90"'$ """iar to II1OS.e of 

slIIInding prog rams. such ". enoour3g'lIQ IIC:OIlOmic devBlopm8t11 in 

di .... d~antaged ate"". promotlllQ _rg~ etrrciGn<:y, or slimulating 

""' .... _01,.....,-..,g ~ ... . ___ .. ..,y ... """'""'" 

._., .. V1 I"' .... T .. ~_,~I".....-.ooR~ ..... _ 

~"""oI~ala

_ ... _oI_)'O.,:roll 

p ... l No. 11 1..)12

....... 

, 12.StM

..,.oI_y 

~(o.c.l7

... '2CI2,_IMrr""\" 

1010~ .. ~ 

~_.,_""""""V1 "'_ l .... "!..)'2 .. _",. _ ..... ,Iur>l f ..- .... of ... 64 •• ~"'""""""' _Jornt~on 

T_ L"fI<'WIwr~oI_FodatoJr ,_~"'al'ft 

.,1(1"",2012 JCX.JII.-\21W~ D.c. ~ U,20l2t __ ....... 0164 ..........,...-.""'_"1 ___ ... __ ,..-_""" ~~VlI'Iee_Grw<I~_l.,;_II __ l>D.oI200' PI,t"l."" 

___ 

'01·'~ . '15 S\ol, l&(_1 200' ~( )"_"""_,-""",,,,,*...-1rIt l .. ~O'\'IrIt.-_G<tM'IIrT ... ~I>D.a! 

2OOl

""_,,"""'I'Iorees_"'~_

. PL>I>,~ "". ,oa-21, III SIal. 1Sl (1411 .21, =. 000i0Iy..-r.,..20111>f"'" (3). ~01_ ~ 

'''''_,u.-...,.,.......'''''''"''''''' __ .... JoII~''''''oI20'O _ 

LNo.111 -312. 1201S1<or.3M([looo, 17,20'O~"'t lpo-~", _ _ • 

-" 'E_a!"'''"'''"' __ .. r<II,...~_!IIOH~trIO _oolll'_ ... __ IO ____ 26IJ.S.C 

~'O:J(~~lOlaNI'_ .... __ ., ... _""'of_ .. _ ... _ -'_po-OVI __ 26U.S.C 60109 

'Tho""""""<rIa,.~ .. __ .... """",,,, .... ',,_'" 

.... , "" __ 01_ oud'r ... -.. .. ... 

.... ' 

Insert 80206A.006joloto on DSK67XMDP1PROD with HEARING

i 

!I 1;,1 

h:1 ,Iu!', Hila 

t'" 

iWII' • 

11[11;IIIIi IIII!;! _!w 

........ 

.. ",m - • ,,!!G1 .... 0 '.-

" .::i:jil . 

l! 

d".H "I"a. o. HI! •• 

• 

".'-'" iP "'-W' i-' .0;1 .,,, _ .. 2.. ...- I '!il'lll 

• I; 1!111 I .0 

IHHjil hl'Ho&, 

... '1" i'lo'-

f.,,""!i'- !hili'! 

!:"I'!" I.,'! -,. r",.6';! it "! ·<'1 

o <,{" i .. -

'"lUi I 

-. 
15 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.007

Faclors lo Consider 

When Evaluating 

Expiring Tax 

Provisions 

a.cta~ commonly used to 9Valuato lrut policy in !iI'""",1 can be IIpplled 

to oecislon$ 01 whether and ~ to e~teM ~piring ta~ provlSiollS, 

,nc/u<l,,'11 tax D.penmlura prO""';""'9. The faCtors.lisled in table 1 lind 

di!tC\lssed below, may ~so be re ~vanl to evaluating 0Iher policy tool,. 

Sucl13S ,pend''1lI programs 01 f9IIu lat !ons ~ 

lobi. I : Foc'-IO Conoidor _" holUll!ing bplring To. Pro.llIon. 

1. Rovenue Elf.., .... Ta. e.".,lldituras may. in lIII"ed, be viewed as 

spending I)I<)granlS charmeled through !/Ie ~ $ystam. Ta~ e~panditures 

can De V.ew&d this way because tl>ey grant Sj)6Cia1 ta~ reHel for certain 

inds 01 behavior by a taxpayer or lot taxpayers In !>peCia1 CllcumSlarICEIS 

Revenues tOlllgOOO ~rough tax e'plnd~u es either redUOllluool1"\g 

avai!!lbie. for mhor ~1 adivilies or rt>QUir<l hi;Jhe-r lax 'otB$ \0 nn..e a 

IIl\Ien ortlOUr1t 01 rewmue Li~e dedsions abOUt &peflCllng. cI&cIcIlfIg 

whalhe< 10 o<tend an expiring!alC axpenditur" ,,,,,otvor; oonsiOO-rjng 

whet"'" the benefit or the intended outcome il worth the offect DO IlihEU 

abSen

pIOglillll$ 

t a ta

or 

x IIlCpenO

tax ",tllll. 

ltUfll 

Rtwenue 

could ~ave 

the lIO"ernmen1 

De&rI used lot 

WOUld 

other 

hll

ledetBl 

Vft ~ 

priontlM. 

~ficjt reduction , or tax rata reductions. 

Thtllong·term fISCa l dlallllnge '''''''9 the Unltoo Stale$- makes n ~ the 

,.-.ora Imporumtto ensure all major federal Spl1lding af)d talC programs 

and pojici9s-----indud,"!l lax o.-penditums----<JrD off",",nt and ",levanL 

AKhOYgh lIl& e~piring ' '''' e. pendlluf'DI being dl5cUssed lOday rept"VSeI1! 

O/"I!y ~ portion of a!1 1iI~ Ill(penditures, on "'" whole. tax ilXpenditures 

represenl a subslanUatleOera1 commltment Agg~a e revenue tosses 

'.' 
16 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.008

wert! en estimated $ 1 t,inion '" Jlsca l year2011,1 For the past ~'ee 

aecades,lInnual ,e""noo IoSSIlS from 1111 talC oxpaooilu"," hllVe been 

•• mlla. to the amount of d,scretionary spending each yea., As such, 

eVllluating tax ""pendilUrt!5. mdud'ng 100 ""piring provisions being 

CO/lsiOtlrea 1Oday, ca~ Iltlp poIicyfl'a ke~ assess !\ow to alleviate tl>8 

rapidly 00;1<11"9 fiscal pressu,es facing "". nat,ooal government 

2, Criteria for Good Tn Policy, Three long-standing crijterla tYFIICIIKy 

used to 8'laluate true po4lcy--equity: economic effk:ier>ey: al\O a 

combinaboo of simplicity. lranspareocy, and adm ~islrab~;ty--<:an be 

IIppl""=! to the ""piring la)t expenditures,' Tile crileriB may sometimes 

conllid wlll1 0Jl8 allOt"." and some are subjective As a ",,"uh, lI1ere afe 

"waHy trade-offs 10 oemside. be\'Wf!en the criteria wroen ImIluoling 

partiWla, tax expeJ1(lrtu[e5 or OI!>er IiJX provisions, 

Equity. There Is 0 wide range of OPln\on~ regarding the aima~ or 

equity of tax prov,sions Ntlllenheless, <:e,";n prir>eiples. such as H 

tal<PSye~1 ability 10 pay laKeS and the e!(loot to which II WIpII)'8f 

bel'Bf,ts Ifon! a PfO"is>on, are useful lot WnkJng atloot equity, 

Simila,ly, HMlytical tool!!, such as dist,jml!iOMI HJ\8ly!!is, can provida 

information eboUI who pay5 or benefits that may inform vlllue 

JUdgments llbout the equity effects 0/11111 expuifl9 tax expDfI<j,Jures 

Economtc e fficlllncw_ Thell.piting la. prOll"'IOfl. g(lf'lllf'8lly 9re 

efforts to redirect !iOCiel(s re5OU'OO$ to iiChleYe a ariety of eoonom1c 

or SOCIat !iloals_ UUhtly taxing s.ome activities targel9d by the e.poring 

prov'sloos s/>ins resources 10 t""m and sway from 1fls·18~· ra l'OJed 

a<:U\lrt~ , FOf e~3f\'1p1e , me ,_ arch tax crea~ Is designed to fIlete"!! 

1M OV8,."U level of resourt;eS that the p .... ale sector invests in 

rese~rch, but t~1s comes at tM cost of fewer resources deVOted to 

ollie, a<:tivij;"s, To the extent thaI a lax provi~ion shifts relKlurcU 10 

an ltCI;v,ty that provides gf9.1ter economic DDflefrts to society at! a 

whole than IIIe "''''3tesedor would provide 00 irs (}'Wo , the,e is 0 .... 1 

'SUm~_Ioo' 

___ 

___ ""'_"""""'"""-__ 

",_bo .. _ot .. __ ", __ .. _ 

"'.....,.. on 1/Ic-' 01 .. ___ ~ . ............ __ ............. "'" oIIecr 

d_ 

__ .. ' ..-"" __ """_ ........... oIh1~ ... o ..... p. _ .. <Io ..... _~ot ___ , .... __ 

_ .. _ ........... <10 ...... 

'w.o.os-!OII9$f' 

GAO-II-''''-' 
17 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.009

g!tln lllat IS saId to ImpnMI ec;o/>OI\IIC elfodef>cy. Tt>ese galns lm?rove 

peoples' welt·belng In (I ~arie ty 01 ways, iroclUding illC18Cl5O/d Income 

ana c.onsumpllon opporM,it;es. 

E5~""' ing oflicionocy gains and losses can be challenging. Sludie5 

may be "",ited by whal ca~ be quantjfied: fore' ample, stvdle6 mar 

examine dol ... ", spe<1t 00 1I",,1if0l!<l .esearch Of \he number of 

ecooomk: delll'klpmeni projects bUIM, r81her Il>an whelher the ~se 01 

fundS for It>ese activities oons~tute .. better u.e of ~rces 

SimpliCity, transparency, and admlnistrabll!ty, A !ax el<f)ef1dlMo's 

design can .. TIed IIlree rela!9d aM de$lrable features 01 tax PfOYisi00-5: simplicity> ltilnl;l)alenocy, and edmlniSlrabllity. Slm!lie taJC 

ellpenailulH Impose ~ t .... paye. compliance ~u'CIeI' . such as 

keeping racords. ~ming ebout te. rules, fijiflg tax retums. and othel 

o:cmptiance 8cti\ootles. Traospartlnl \all provis+ons a,.. _r t<! 

~/lde(Sland . Ihal ll. liI.pa)'ef'S C8i1 graSlllhe logic behind them. 

AdminfslralJ!e tax B'JIpend'lu'H nave lower actmlnisttatiYe costs to, 

bolt> the Interml Revenue Service (IRS) and third panies. 1i-UcIl as 

banks or ewplo)'etS reqUIred \0 subm1t InforINIllor'I 00 taxpayeO'S' 

Income and transactions to IRS. Administration iooudn prOCBSlting 

f91ums. programmirog fnlorn1alion systems, ans""8tlrlg laxpayer 

Ques~ons, and enforcemenl actl.llies. SimpHcity, lransparorocy, Mel 

adm1nistrabilily l\r11 r1OIlt\e same I)Uf are 1f1\erre!ated. For example. 

W,hIOSion, 0I8.p~lng 101. code prGVisioos, sometimes r..IlOac1rvety. 

can 80d comptiance Durdon. ,O/duoe tal(p.1yen: ufl(lerstanclr>g or Ine 

tax laloW. and 1mp0&8 additional COSIS on IRS. suet. as more phone 

calls from ~payers I 

3. R.I~llon.h p to OIh .. r Policy Too13_ Ta)(e'paoo'lulflS arB one policy 

1001 out oJ sewral--ioouding spend'ng. 9,ants, loa". aoo loan 

guaflinleer, and reg<dalioos-Ihal poIicymaJ(e~ can u'oII to actlle.-" publIC 

~IS, TIle chOICe of Wll&lhe, 10 use lax a.pend;tu,es. spending. or other 

tools depenllS 00 whoch approach bI!~9< moots !he goal at me Iow-est 

=, 

O<lla,a"1 policy tools may 00 mOlB etfectj.-B tha" othllO'S In achieving a 

partk:U~' PQli,,-y auttomll. W~h ta~ axpendilu'6!l. OlIrtaln actMlifls m .. ~ 

be cheaper IlI1d "mpler 10 SUllSor:Itze trvoogh thG 111. 00<111 uecaUS(! 

'GAO, 201. r .. F""ri """'"~ GBN;'" r"'lMyoflo.-r.",., Coo.Io'So........,.., ~y_-'_700t., 00'.0-12.mr ~D(;' o.c t~ 20' t) 

••• 
18 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.010

IRS nas me adm't!i5lral'-e inl'8StrUCI~re tocolled!tlld rem'l money Ie> 

millions oItaXP<lt't!f5, For ilMamllle. the Il'lCffiI'I'IoInlai edmjnlsltBIiv<; 3nd 

compf ... nce CO&l5 10 delPiet lne \al< Cle<I~ lot eNid ana dependenr care 

expenses may be felirtiVflI~ low compa,8(j 10 IIWI COSlsofsaning up 3 

5e9atate system lor processing child ca'1t applic3tiO(lS and set1dIM 

~oucIleflllO Ihose eligible,· 

How a lax axpenaitu.e fs- de&igned can alf9d Its rewnue eff8ct& ana 

how ~ relall!slO the t:riIotria lor B!)CIOd lax syslem. FOIlIlIamp!e, 

d~lng OIllll<!ir design , la.Y.e_pendjtures can reau~ m taxpaytl!S 

,e", .. ving ber.e~ls 101 acbooS t~ey woukl vel3~en absetlilhe la x 

8I<p(!nd~ur8. Also.. Gad! type. 01 tal expenditure cra.ates 13~ sav"'ll" In 

tilfteren! wa)'S 800, ce>n"""""nUy, rea""". ledeml ,even""" In 

(ljffereo\ <lays 11!1<1 may have dlfIerenl dislflbut>e>naJ effecls, Trt\! 

amooN 01 \ax ,elief pet dolla, that a !,upayer receiws using 8n 

eJCcIuSIM, exemption, a deduction dependS on ItIe \axpayen 

""" glnallax rate. Generally. I!>e ~'IIh'" a taxpayers n""glnal tax ,ate, 

!he greater the \ax ~vings Irom these tax ""pefldirurn types, Ta. ",edits rOOuce tax liability dolta,-Ior-dollilf, so too value of a <:fOOlt is 

the same fQQar~ 01 a la.Y.payer'slTIiirQ",al \all rate. 

The Government Pe<Iorman<:e 81>0 Results Act (GPRA) 

ModemiuUOf'l Act of 2010 (GPRAM.A.)" can !"!elp In .... aluatil"l9 tn "l<pOnd~U'8S m that ~ 8SliIblishesa ff.rnewor1<. 101 providing a more 

uosscutting anll integrated aPJl(oach 10 locusiog OIl ,esults and 

ImproVIng government perfOrm3I1C8_ GPRAMA rmI~es t:!oar thai tax 

~"""nd'lUfes "r" to 1>8 locluded in identily.ng tilt! f1Ifl{IfI 01 ladeI3l 

agencies and lIc1i'iitfes that ccrnlribule 10 crosscutting goaJs. MO'Iing 

Iotward, GPRAMA Implemootalion can help inform toog~ choices In 

selling prorities as poIicymal«!'" address the rapidty bUilding fiocaf 

pressures lacing our national govemmllflT. 

II nOl Willi desfgned or erroctilo.,.y Implemented, iii. expendilun." ClIO 

contribute to miuion fragmentation anll program OVtIr1ap, thus 

"'eal'ng the poI""t'~1 for dup'icaiion with other po!<:y tools All fet!eraJ 

spending anlliax POlicy too!s. inc.luding lax ""poodnure' . .$hould 1>8 

'G~O, __ ~_,.mA<:cooW_ .~ __ Io III'_r ,_... ""","_~' ,~ 

(VI"""'I1""', D.C, SolO, n, 2IiOS1. 

_ ~ No ·3~ ,2. Stoi. 3aIl&(J.., " ~II) 
19 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.011

,wl<am,r>e<I kI """"re "'al "'I!~ are aduelllr.g lhei< Inlended purposes 

and 8'" oo.igoed ill thto fT<>S1 elfOCl8nI and 1IQu<labla manna.-

•. MenuremenlCha lleng-es. Unavaltablo or l ... u/fociel,t dala con hInder 

policymak~' abiliry kI coroslder how thto facto<!; desct1bed lObo_o. """Ie. to 

PIIrticul8r tu eXpendiMK. A key challer>ge is IMI U318 "&cena"y to 

assess r.ow an<! by whQlTl a I"" expeoo,lu", is used gellllrally ere 001 

coIl..::1ed on tal( f"9\Ums unless IRS oee<Is Iho. inlorma1loo 10 ..,.,..,,.. tar. 

CQI11~f\G!I or is Iegt$l.l1lve!y mandated to col~ or rePO<1t11e 

1I'lbmallOfl. In some """"', IRS may combOne rePOt1ing requ~"""'nl" to 

.... nim ze~. _1QaII a<KI tax""\",, Dlin1en. and as II m""~. tile 

Inlom,atlon COII&Cted may nOllclenl~y s peo!ic 1lefIIIIicIa.fes, or acl,.mo.s 

largeled by a lax a~pemf~u,a . Also. lhe innuance of OIhaf economic arid 

social lactorlI can wnfoun<! eIIorU 10 mea"""''' tax e~pondil"""s effects 

on err""en.:y 8<"1(1 equily We and 11\8 Off,.,., of Managemelll arid Bud<]eI 

(OMB) have noted lhall.he des"rt1ld CNlcomefI ofa 1a~ o.xpendilu",or 

OIttar IIOIIC)' 1001 a", oI'I&n !he oombinatior> 01 ellacls 01 the program and 

al<l8mal faclots. " 

II poJicym ~enJ eonclude thai additiQnalda18 wovkI facn<lata reexamining 

a Pl'rticula' lax e. JIeIldilu .... ~ions would be mquif"l)(t on """at UOla 

al"& nee.ded. wno Sl>OOid prollide tile dala . who should cot~ tile 1!8I.a, 

how to collect lhe data, whalll would cost to collect the dala. and whel'-

lhe tlenelils 01 co6iJc1ir.g aIkIibonal dala wDmlnl the cost 01 do4ng st>. 

I\r1QI1\ef facto' 10 CQrI$<OO' i$ IIOW to laci4i\ale 0818 l.I,p,inll an(! 

coUaboral...-o eVllllual<m efforts 8monllsl tede<l.Iagenciss . 

.... , 
20 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.012

Illustrating These 

lr'S Using 

Examples !'rom GAO's 

Pasl Work 

0", prio< 'BllOrI$ on Ia>t IIOpenc:l,Mes ~l oAltaIfJ row lI>ese fadOfI can be 

usad \0 l\ek:I .... aIu8le wM\hel and how 10 .. lend IIXpmng Ip ~ 

Domestic Eth enol P,odU(:Uon. Ou, pa~1 W<lII< relaled IOdornonlle 

elh nol prochlclion highlights tne impot1BOO& of ~ng _ r.. a . penditu'" relate 10 ~I">e< IlOIk:y loots 'I eor'9' •• II:" IUworttKl 

dOmestic &II1anOi prodLodion Ih'~ two potq toc*: (tl' IaJI cred~. Ih6 ""'0' __ $ion 01 whOch o. pired a!l&r o-r<ber 31 . 20 1 I.IK1d (2) " 

renewable-fuel slandBid !ha, I;IBM"'H ~ reQui,es Itan~rion fI.o'" in lhe 

Un~ea Slit" \0 cont;t\fl...rlaon _oM.<mw 01 bdue-If,. IUd1IK e1I!aool ln 

2009. we "'I"'Md !hiM the LP cr8(l~ was omportanl ln IIeIporog 10 <7&111<1 " 

j)fof"" Oill com Slarch _ industry wilen the industry II"", \0 lUnd 

OlVfIS_nt in _ 'aciIiIle&. bull5 '"' fTlIXNI,n, now lor _~ Ihe 

iMusuy ~ most of \tie c.pol9l ~ lias 8/tudy _ made 

IIIfOugII 

We b.Ifld a Ia. thal 

aedd 

eongteH_ ...-....."-1 ·. 01lottl1O .uPfMX1 $I~ ob"nB5Iie.tl"lanol 

_0 d\fPiaItiYe~ . The 

full! slandara is ........... leveling/! enough 10 .-e 1hat a "",,1IBI1or 

dorTIIKIic: elhallol prodUdlan raisIIln 1M -.-0I1he .u.anoI1al! 

creaIl fU, s.ucII. _lIU(/gIISted tmot CorlIJr ____ modifYir1g1llB 

cr_ Of pI\iOSIn:g • DUI ~ allowed the CtlldIlIO ,op" allhII91111 d 

201 I. JC1 Old not indude ... "_ of !he budgelsoIy eIIed d 

IIXlending IIlBc.redJIlhrough Oec:ember 31 . 2013, in b March 2012 

II5IirnaIes, ... !he PfMiIIenI <lid not ptOpOM 10 UIfInd "" DtOt .. 

Higher Eduu lion. Our P"'" wort on NgI>et-.ducatoon IB.>I .. !lOII>d""' .... 

1IuWid .... '-\alr expenoJil>Jr85 lII8t .-e noIlraMpafenI (I.e • C8M01 boo 

BMiIy u...:lef$l_ Dy , .. ...,....) C8n _In \a>:~" maIolng dB<:iI.oonI 

"W.O ___ 2!lI'Rowr.SI_ ",_r_ .. _~ 

~_ _-" _n..-._C_Rl_ GoIoQ..'~~ 

(W~

~"""", 

C 

__ 

Olo". Z012

r .. 

).~"' 

__ E_Ro_ __ .(.lAO.ll-3l ~~ eSl' 

IW_.CC. II!.- t . 2011l ___ *_ItIIl~'" 

"-/UIIM_" ___ -. . DC . 1'wg Z', 

-, ConwnoIo .. "" T .. _£_~E_I"'II>IRo_"Pro_ 

____ 

c...t_ .. II>I_·.f_Y_:I!l" .... ~ JCT ......... _ .t .. _...-.~ __ "'_ ....... 

F" ..... ,...JCT _I~ __ .... ,O'_~~._ -

_ ....... . _-""""'----- -- GAO-....... , 
21 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.013

Ihal do nol maximize thoi. IaJC benefils. ,. The Iwl;"" and '-ded""';"", 

whlet> a>puw after Decemtle< 31, 2011 . nelped $tutSents and IhIW 

families pay I", hlghol< "",,,,,,,lIOn by alk7wng lhem 10 deduc:I q..al;r""" 

edUCIIUO!\ expen5lOS from _11'0>11 WOIMd olherwiSe be ta.otabIe. I" 

200!1. _100M mal1ID< rd(l's dod no! 1IM1I1)'11 cla,m ~,g!>!I._uc:aboo tax 

IIXperodll~S. iuch as the luijloo &rid lees dedUCIoon. lh<al m<aximo.ze lI1eir 

potOOllaltax benerola. po\erIIially beC<iu!;e 0( me complexrty 01 hogne,· 

eelucallon I"x pr<N19ioos. " Furthelll1\lllys~ <and atf'llPlificelion of lhe la. 

",,,,,,,,,ocns 1to""',eeI couIa ",,!entialty roe""" tlllnsp,,'ency In the 5Y.""". 

JeT IISI"""('" me budgetary aired of BXlend ill9 lhis pmVJSIon Ihrough 

Oac.ember 31, 2013. WO\IkI be.about $1 .5 bi"ion'" l~1 years 2012· 

"". 

HIOhe< ""'...:ation tax expenditu,,,,, also IUUSUIIIII how "",a...,,,,,,,,,,,1 and 

methodological cnellenges cen ~ evalUating tt>wIt IItrllC\l\leneu. In 

2005. _ ftlpo<1ed !!lal ~tIIe Is koown abOul tMIIIIII9CINtit1eSS of 

lIducatiofHeialeel f!ld!lral grants, Io8n1. and la. eXl>Bf1d,iu.es'n pror!\Cli"ll 

stucl!!nt outGomes Ind..::ling college a!l9n<ianm, SIUden15' chok:o among 

<DIftgIIs. and the li1<eiihood Inal Sludllnlll w~1 conC",,,,, lhe~ 00UcatJ0n We 

also Ioond that .esea.ch g ops may be doo. in pan, 10 dllia and 

met/1odoIogkal cl\ll1Ie~ as difficu~~ l~ the b\>ha'<ic>ral elf.,,, of lhe lax", pena,!"." unoe. $t""y Irom otnllf chaligllS-'J>a1 have 

prcYlll1 d,l!icuh ,,, " ...... CCIOII. 

Resea.ch Tn CredlL Qu. pasl ...... k O!\ 1l1li """,arch !rut creelll PlOY""", 

Insights Into tv;,01 lmproylng the dnlgon of a iii. e.pendJM" couIa fmllfOV'! 

5 economIC (lfficiency aon<I utduce '''''''''UG costs. " Econom" 15 _Iy 

agree thai some ijOV8fTI""'rr! suDSloy IOf rH&ilrch IS jUtlilie(l Dec8UW m" 

.coal ''''~m 5 Imm "."",nch exceed !he povalll relurns 1Ila11n ..... k>rs 

"GAO I1If1NtE<lo_.II/utIolIeHrfIIW_ T .. _o..or.~ 

lot _Nl r ... _I0_ __ COIiI»-.. ~11rr-~W."""'. D,C .. '-loy t , lOOII). ~r,.._ ~_"""'f:_"" 

~_oI T ..... "'_Sl __ ~_"""'Y'T .... IVsr._..IW_ 

r •• .~II<I O,c. J .... n.l0051 

... . __ ,tI»I't. ....... ~ouo_ ... ""IN~."'''' .. _ ..... _ ..... -""""""""--_ ... _. "Go\O-"-.:lI'SP.GAO. r...-FI>O<y"",_ r •• ~~o...g,. __ ... "", e.,,90 """""'" GAO-IG-'J&(WnNI>gIoo, DC, _ G. 1OOi)" t ... PbIOy. _ 

_ """"'_~ T...-~ GAOfT~·'el {W"""",,,",. D_e, !.Iojo 10 ,~, 

'.' 
22 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.014

race."", Since 1981 , the r9iOl8rc1l ta~ Cl'edit has pro'Aded sigflfficant 

sobsk""& (an .. GhmalOO $G billion lor r.scai year 20t t) 10 IIIloourago 

b~,neu!O iIlvest in research arK! clevalopme .... . TI>e most recent VII<'5iot\ 

01 the cr!Id~ e_J)lrIId after Deoember 31, 2<lt I , o....pote \he witIes~ 

$OJlPOfl .",tho OOf\Cepl 01 a cred~ fOIlncf!l8S'rIlI resaardl actillit;es, 

canoe,"" have been raised abOut the IlOsl-<lffe<;tiverutSS oI.ho deBl9n of 

lhe cuI"",l Cledit alld i\$ admlnis\riltiva alld oomJ>liance COSIO. We foulld 

lhat the res&arch t8!C creoi\, as CUI'.ntl~ deSigned, dis[fibutes Incentives 

unevenly acros. talIpa~ .... alld p"",<l95 man~ fllCjpOenlS with windfall 

beP'lefits. eamed lor lesearclllhat they would have done anyway, for 

a~.l'I'Iple, .... o fOUIld that lor tllOSe claiming the regular cred~, mora l!\Ion 

halloflhe cred.t such d8lmams .... ,ood was II wind'all TIM! dispa<ilills it, 

inGeot,ves can load 10 an loeIfrcieot allocation 01 iovestment '8SOOJIC&II 

acro!;S bus-', lind tJ>e willdla~ benefits rep<Blienllor!lgone ta. 

revan"" noat ooes flO! contribute 10 the credit's obleCIova Aooord'ng~. we Sll9ga.led that eo..gress nKXffly lhe ",,,,,,,rclt Ia. Cllldit 10 redlJee 

ecor>omlc irreIfIcienc:ies and 'm:e",iv .. ""',,"00 0051 • . JCT B$~males the 

brJOgetary erred 01 tile PreskJotIt's PfOIlOS3I to enNonoe ai>d make 

p&rmOneol thIS provis.,n wool<! bII aboot 599 1>11100 10 frSC1lt )"lars 2012· 

"'" 

O\l, past WOIk 00 the mse8rCM ",. O'edit also p<ovid<!& insight ;'110 J10W 

Ia' expenditure design can arred tranwaref\CY and lKf,"inistf9bll~y . In 

2009. we r"po<ted that lhIIfe are numerDUS areas of d"agrooment 

be1_nIRS arod Ut~payen OOnC~tln;rIlI whal types 01 spending Qoalily iOf 

the ",,,,,arch cradit beCau ... of isSUM SI.'Ch as the deftn,bOns used te 

determine ",11g",bUir)/ and the d<)C1JlTII!I1talkin needed Ie suppartlh<l daIm. 

TI'Ifte disputes raise the cost 01 the cred~ to trot/'ll3Xpayaf'S'M IRS and 

diminish the Cladil's inoorttiv .. elfoo by m3~irllllllB ultimate be""r~ to 

ta.psYllf'S less ceriain. We made sevenol "'oonH' .... nd8I!onS- to thl! 

Departmenl cI the Tre351Jry nreasury) to reduce It>e uncerlll1nly thai 

SQITIII laxpa)"l'" ha"" abool the" abOlity to l13,n crad its lor their rllSll3,d> 

adMties, To data. Treasury has flCll full'l ,mplemeoled these 

,ecommendalOons. 

New Markets Tn C,gdil (NMTC). OUI pasl work "" the NIATC provi<le~ 

8lI<KflPin hoghlighliog iesullS cI simplicity and the need to consider l3X 
23 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.015

el<jlend~ules '" ligMt Of OIha, POlIcy 10015. I, Coogress &nllCled tha NMTC 

on 2000 as pari of a n ongoing effort 1<I revMl1ZB 1ow..iocorJle communities 

TrGa!;ury awardli laX CttKIits 10 Community De""q>ment Enti1im (CDE). 

Which 68" me credits 10 lIWestots to raise fl.lrlds, JeT estirN1eS me 

budgeta ry ell..ct olll>e s PfOJlO'Iat extending and mod,fying It!e 

NMTC WOIikI De IIt>OlII $3.5 billion in fiscat years 2012-2022." 

In 2007, WO lepor\e(l 1MI me NMTC apj)83fBd 10 increa se 1nvMlment in 

Iow....-.come commun~ies '· HOWiI'VlIf, in 2010 we repOCted IMt!he 

complelUt)' of NMTC transaction slructum. appealed to ~a tt diffl<;utt to 

coml)4e1e li/t1alle< llrojectl; arid often l&5ull' in "'51 0I1I>e money ,"""stGR 

~ltiallY put into 1M p<ojec1 erlding up in Iow-if\come community 

busi.....,;!Ie5-ltle be""rldaoes ofNMTC financing---{han I¥OUkI De the 

C3MI d the program wo,ellmpliflad, We 'ugge91ed CongI"llllS conslde-, 

ollenr>g grants 10 Cots IMI wouir:J provkl8 I<HI furods to Iow·income 

c.ommunlty b</s1nt!SSIIS and assess !he "OIent to wIlich the llmnt p"'llmm 

wootd Increase me amount of feaerai subsidy proyidPd to Iow-Iocome 

commun.ty D<lsin!l$SllS com~ 10 me NMTC, Or!e opIiofI would be Io! 

Coogla"" to sot as"", a por\Jon oflunds to be U5IId as grants and a 

por1ion 10 be used 1IlI ta ~ cred~s \H"Ider me IlIJrmnl NMTC program 10 

IXlrMle a comparison 01 tile two Pf09famS. 

Rev ~llza tion Prog" m" Our I)8$t work 00 r"vl1alllatloo programs, 

incIu<I'I\Q me EmpowermenlZ()118 (EZ), Ente'l"lw Comm"nMy (EG). and 

Reo..wat Communj1~ (RC) progl3mll, pro"""'" lin """",pl6 01 

"GN)" ' -3'8SI>, GI.O, _M_ t .... c-, I1Nr CtftIII,.....F<»ICI. 1'_"''' ~"'l"" _~(JojI~8ot~ GA().,<J.U4 (W~, 

D.C _ . :/I!, 2(1101· 

''f ... _·.~V_20 ~~_.'''''~'''''_ .... 1IV<><Ig/120.~ .... " __ .... _ .. -.2012_201J, r"" __ .. oo 

mr>ddjoll>Om.1rc"'_ ........ _ ... ~ 

"'~~buI~

'GIlD, r.,""""Y"""'_' t ... er-~, _ ... ""-"-O!'_ E!<JoI "' __ , 

GAoOl·n!lIW_D.C. _ 31 , 2007) 

,_" 
24 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.016

measU<ement c.ha 11 enll"" _ 8V~luat i"ll la~ expend~urm, '" CongfSSS 

eslabilslled!/le EZ. EC, and RC programs to reduce unemployment er"KI 

g&l'II!IWolQ i!COOomlC ijrowthln seledftd Comsus lfaClS. Urban ana ""801 

communitie. designated as Els. Eel. 0/ Re. ,em,ved grants. laX 

expenditures. 0/ a comtJinatkln 01 both to st'mulale community 

Gevlllopment &nCI bus>ooss BcIIviIy. Taxl>fO\lislor!s for 1IITl~rm<lf11 

z...- and IhI! Di1Itric1 01 Cotumbla (OC) enle,prise zone (including lhe 

firsHimEI homabuyel Cfftd~ lor the Distric1 of Cotumboa) el!Pi<ed aile, 

Oecamber 31. 2011. JCT .... timates lhat Ih8 bUclg4!lary etlecl 01 8)(1&ndl"ll 

IhBStl prOlftslonslhrough Oeoombe, 31 . 2013. woukl De 5585 mm"", I,,,,,, 

fiscal years 2012·2022. 

001 prior wo,k "" found Imp'Q'iomenls in ee,,,,,n measures 01 

community de¥9lopment In E2 commun~ieI. Il<I1 data and mothOdoloQoc.al 

ch.allonge$ make II difficult to IIStabiish CIIuSillllnils. In tI'H! case of the El. 

EC. aM RC programs, me 10 01 ta" bener~ dela I""~eu the abdity 01 tN! 

Oep3l1menl 01 Housing and Urban o.,.eIoQment (HUO) and I!lll 

0e~1 '" AgrlcukuIII to e~alualtl thl> o""ra~ mix 01 gran! and laX 

ptDgltIms 10 ''''''takl .. seIecled ufbar! and 'ural oommu~l\ies. tn response 

10 our recommeodations. HUD lind tI'H! IRS collaborated to share data 00 

some program ta>: cr<!d'~. How(War, I/Ie IRS data did not IkI tI'H! program 

lax ;ncentrves to s.pecIff/l oesogroale<l commuMi.eS. fT\!I~ iog ij ditr~1t to 

asseSS 

~ 

tile effecl of the tax banel,ts, We have prevK>Usly fepot\ed thaI W 

aulhorizllS ",",tar Pffl'draJTll; thai lely ttea...;ty on faX 

e.pe()d,lu' .. , In ma More. ~ would be pruOenl for federal ag&!'>CIOS 

,e'l>Df'SibJs fO/ admlr1istering Iha P"'IIra"", to coiled inlormauon 

_ry lor cleta<ml,"~ whethe< the laX benefi1S !lfll6ffeclMlIn 

adl"'WIIIllfog,am goals ' 

NonbuslnlHl s Energy P,operty C,edit. Oorwotl< on me IlO/\oos,nllSs 

er>ergy prOPerly c,ed;1 higtllign1s I"" importance 01 consicleting re~enl.Ml 

"GA.O-"03II1SI',

~ .. __ 

GAO IIe_~ 

~,GoO,O.'&-i6oIfI(W"""',,"

~_~ 

DC .... 12. 

:IO,gj,E_ZDt.._~~"'- __ .... CI<cwnIo' 

"~""'I""E_oI"..Ptt>qnomI.o_ .... G.\O-OI-l?'!~ C __ 12 200IIt ~ _ _ Rovlal_ """,",,-"-~ 

__ DM ..... fI>ou..oI7 .... _ ..... _!WUhrogIDo, 

o C __ S, 20001_ 

'GI\O .~~-.--.. __ '"'",.u... .. Jd~oI 

'"'~ .... CauI<I80~lIItoofIIoetwvo_'l<t""' G40-!l~2 

(W_DC ~ob 2C'l . 

G",,,,,.. .. , 
25 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.017

''''''II'''''' and In" crileria!or IJOOd 1alC pclK:y wheo delen"m'<l9 whethe. 

and toow to "t8l1<l speci!lc taK proyisIoni n E/Jact&d as part of the Ene'gY 

Policy Iv;1 of 2005, Ine nonl;ru1inpss eJllJrg~ 1IfOOBf\~ (;fQdlt WIIS intended 

to PJl(;fe8S6 1\omeoWrr&t$' IfI\IlISlI»lrnt in 8fl8Ill~.oooseMng rmprav<tm&flts, 

~ur.h as ;""ulat"", s~st""'s . eA1fmor .... ndows. and met~1 roohI. b~ 

reduoing l~' e~f)f·tax costs. The credit mcpirQd on Dooamba< 31 . ZOII . 

JeT estlmalliS me I)IJ(Ig8Ia<y effect althe Presidanl'l propo$lll a~~nojno 

a nd modifylog ,"i's prllYis"", throogn December 31 . 2013. would be abouI 

$2.4 boIIion In fisca l years 2012·2022, 

The oo.ign of lhe credit aff_ its 8COnOn1le !!IflCllmCy ;md rev8n 'IIJ costs 

The cred~ IXIfJIbines lealures of bo!h oosl-baSll'Cl and perfoomanca-l>a5ed 

Cle<liIs. COSf.t'8W<1 cre<1i).S prow:le \nc;IIn1lvelllhal ill" usuan~ a r"a<! 

percentage of '1r.aI;r.ed Sl)8ndLllg, _,aas performam;e.baHd cred~" 

pnMde incont;ves- 11>;11 are bod to spedflc """,sur"" 01 """'V\I saYings 

aoo tmtre!om may '\lqUlf'1l b910N! and "tier _'Y~ audlt$. Tha 

noob\lsirIMS _ .gy properly CTedjI s cost.tJased in mat lhe amount of 

credit claimed i. dl.8dIV lIfOPDflional toa taxpaye<'8 '1ualir..:l spendIng. It 

is perfonna ......... basoo in IIlat only tAlftain lIua1ifyiflg pu.co"""" M" 

eligible. In 2012, we repof1ed Ihal bolh tile perfonnance-based end costbased aedilS h ...... ad~ otag"" a nd disadvantages W~h neither d8lligo 

OOlng unamblgoous1v the berulr opIJon bfl98d on ClJrr"lIl ",!ormal"'" F...-

"emple. a performaoee-based credil is mora likely 10 effectlwly reduce 

energv use aod cart>ort dioxKle emissions lleC8use ~ lewilldS energy 

""""llIs I,om the InYe&lment .Dlhe. than the cosl.lJase<l CfOO~ 5 .ewanlonll 

01 spending l&gardle-ss of whelhe.lhIs Sl)8nd.'l9 ItrlUIts In 8<1&f'11Y 

uvlngs. Howevef. the perlonnarlC&-tlaSll'Cl crec!Jl may MlMlllignfficant up. 

fronl COSIS!or 808Igy audits, not .aqYlm<! b11fm cosl-based cmdil, whid> 

could reduo:e Ib alfwli\lene57 by d<scouraglng investment 

Too cred~'5 dMign also can aflecl:ts aam.nostrnbillly and aqully. For 

tallpate~ 10 1>0 do ..... e<;t. Ih9s6 up-I""'I costs ma~ me"" that II 

p&r/OIllIaf'Oll-b3sed cred~ may ha .... signifantly higher ta)Cpa)'ef 

oomptiaflO8 and IRS administrative cosls "''''' a 0051.tJased cred , V ........ 

on What is II tair dlstnbUllon oIthe CflKI<f$ DOSts and benefi ts can differ 

drAmatically acr056 indIViduals. However, WMlevet one's v~ws of 

"",,"'MM' 
26 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.018

laime$S, an a nalysIS 0I1he dislribulion 01 cosl. and beoolils b~ sum 

l3Clors as income level can be useful. 

Indian Reservation o.precl.tion. Our wM\ on ls """",ion i5 another 

e<ample 01 how mea-su'amenl challenges COIn hirldet evalualior1 01 tu 

lor 

e~pendl!U,,". 

depmcialion 

U The 

from 

PfO'Ilsoon 

INOr business 

alloW¥ 

incomo 

I8l<paye~ 

earl"'r 

kllal\e 

Ihan 

IiIrgtl, 

lhey o

~ 

therwi"" 

would be .. _ for cenain propert)I on Ind ian ros&fVallOrnl", FOf lhe 

deod..ction, taXj)3)'1l1S are nor requIred 10 idenllty the r8B(lf1131iorl on..nicll 

IIle ooprecialed properly IS Iocaloo, PI"vanlinIl3""'"""",'" ...,king 

Invesrm<>nllO economic Wldlcators on ~IC ("""rvalians. W" 

StJ:9QeSle<:l Congress oonsklel" r9QUlnng IRS 10 collect I"',. informatlOq. bul 

we notI!<l 1~ 1 Gangr"'" would need 10 W<l'igh !he assOC.l8iad costs 01 

oojlect""" a nd a nalyzing the Information a s well as IIle efleets- on IRS's 

Oltlel priomles. TI18 C/etlil e'pl'&<! on December 31 . 2011 JeT eSlimalEt$ 

IIle tludgeta<y "If...::t of XIII~ this PlOVlsion Ihrough Decemblll 31, 

201J.. would be $1 00 mlJllon in Iise8I yoon; 2012-2022.. 

In cIosjl'lll. CO<'Iside~ng tho various flK:lor~ I haVII lai{j out toc!.av can halp 

Wh&n deK:idJng whether and how to eKlend a~pi~ng l8>, provr.;ioo!I. 

Imp!OVlng WI .. """""rtu,e deS",n may " nable individual tax IIXF"'fId'Iur...-

10 achoew better !flSults lor !he ""'119 revenue !oss Of tne same ,,,suits 

WIth less I1!Vf!IlUII K1H. Alr.o, rll<iUdions III '-'V&r1uelosses from 

eltmlfl3l;"g inelfecr.1>.-e Of redllndant laX expendillJ!1)!l 00IJ1d be subStafl~~ 

o""""dlng 00 tho siztl of the e lilnina ll,d pro"'"""""' As we h""" .ratoo in 

""'" "'ports,"" we belieV8 lila! ta ~ ~nd il u", perfornurnm Is- a n ar .... 

lhal would be"'~1 In" " en lIrlCed COIl!¥8SSionlli scrutiny as Coog,asa 

conslders wa~s 10 address Ille "811",1'& long-term bcaillnbalano&, 

Cha 'm ~ TIberi, Ranking Membl!l Neal. and Mernoo,," 01 !he 

tIoommi"etI . t.hi~ r:orMpletllS my prep"rBd Slat""",n!- I would bot haWY 

10 'espond to 1 qUIISllOf'IS rou ano Members of !he Subcommiltee may 

1'Ia\le at ItII5 ~me. 

"(00.0, 1 .. £>-_.., ~._OIlIImlt>_ ,,,000l0,_,,.,. VNoOO ~d __ ~_,QA0.03.73ttWa~.P.C. Juoe2!5, -. 

~""" GI>O r"'PI>Ii<)"r •• n_lJI'i4o...,..., __ S<MIoI ~ 

ClAOtGGOIA'MP-lM ,'li ~ P.C •. "'"""'] t"'~ 

"-" 
27 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.019

Conta(.1S and Staff 

Acknowledgments 

,-

For furtl>er informalion regarding ltl'" teslimony, plea ... oonlad James R 

Whit<!, o.n.ccor, Slratej}ic l~~, 8t (202) 512·91 10 or I'otoilej@googoy, 

Co<1\ad points lor 00' Offices of Coo$lrsulonal Relations 8tlO Putllic 

AltaI'" may be found 00 lhe last pall" of IhJs fitalemem I""",.duals 

making k\) ~ oonllib\llions to \hIs $l.iIlement IJIdvcIa Jelt Arf<lf>, AS5isl.ilnt 

Dit~ Shanroon FllVIIIg8n: Melanie Papasian: MaryLynn SergElllt: A ...... 

Stevens; a nd Sabrina Slreagle. 1(""", Oal~, Tom G,lt!ert, Susan J. irving, 

T~ McCabe, Timolhy MInelli, Ed Nanll8Mom, Midlaef O'N<!iU, and 

JIm Wozny also prol'ided tecI\t1lC8l support, 
28 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.020

Tholl 10. ""'" 01 tho U,S. __ ...:I . ... """'"'" 10 copyrignI ~ .. tho l.>MdSioln .,..._ort>du<:l"lO'l .. ___ ....... _ -.!U\tIott_It<>mGA<) _ ... -.oM _"""_ ~."... ... _..-<oI.~ftom"'*~_....,.be 

_urtffOl'_IO~_,.,.,.,...~. 
29 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.021
30 

Chairman TIBERI. Thank you, Dr. White. 

Dr. Marron, you have 5 minutes. 

STATEMENT OF DR. DONALD B. MARRON, DIRECTOR, TAX 

POLICY CENTER, THE URBAN INSTITUTE 

Mr. MARRON. Great. Thank you. 

Chairman Tiberi, Ranking Member Thompson, and members of 

the subcommittee, thank you for inviting me to appear today to discuss the perennial challenge of the tax extenders which might be 

better called the tax expirers. 

As you know, the United States faces a sharp fiscal cliff at year 

end when numerous policy changes occur. If all these changes happen, they will reduce the fiscal 2013 deficit by about $500 billion, 

according to the Congressional Budget Office, before taking into account any negative feedback from a weaker economy. About oneeighth of that cliff, $65 billion, comes from the expiring and expired 

tax cuts that are the focus of today’s hearing. 

In deciding their fate, you should consider the larger problems 

facing our tax system. That system is needlessly complex, economically harmful, and widely perceived as unfair. It is increasingly unpredictable, and it fails at its most basic task—raising enough 

money to pay our bills. 

The expirers often worsen these problems. They create uncertainty, complicate compliance, and cost needed revenue. Some 

make the Tax Code less fair, some more fair. Some weaken our 

economy while others strengthen it. Fundamental tax reform 

would, of course, be the best way to address these concerns, but 

such reform isn’t likely soon, so you must again grapple with the 

expirers. 

As a starting point, let me note that they come in three flavors. 

The first are tax cuts that were enacted to address a temporary 

challenge such as a recession, the housing meltdown, or regional 

disasters. 

The second are tax cuts that have reached a sunset review. Prolonged economic weakness and recent omnibus extensions mean 

that there aren’t that many of these at the moment, but they do 

exist. 

And third, there are tax cuts that expire to game budget rules. 

These appear to be the most common. Supporters intend these provisions to be long-lived or permanent, but they haven’t found the 

budget resources to do so. 

To determine which of these policies should be extended and 

which not, you should consider several factors: Does the provision 

address a compelling need for government intervention? Does it accomplish its goal effectively and at reasonable cost? Does it make 

the Tax Code more or less fair? Do its potential benefits justify the 

revenue loss or the need for higher taxes elsewhere in the economy? 

In short, you should subject these provisions to the same standards you apply to other policy choices, and in this case you should 

keep in mind, as Jim said, that most of the so-called tax extenders 

are effectively spending through the Tax Code. You should thus 

hold them to the same standards as equivalent spending programs. 


joloto on DSK67XMDP1PROD with HEARING
31 

You should also reform the way you review expiring tax provisions. First, I think you ought to flip the burden of proof. Today’s 

standing presumption is that most of these provisions will ultimately be extended. That is why they are called the extenders even 

after they have expired. Ultimately, though, we should move to a 

system in which the presumption, rebuttable to be sure, is that expiring provisions will expire unless supporters can justify their continuation. In short, they should be the expirers. 

Second, you should divide them up. Like musk oxen, the beneficiaries of these provisions have realized that there is safety in 

numbers. They must do their best to coalesce as a single herd, the 

extenders, and try to migrate across the annual legislative tundra 

with as little individual attention as possible. You should break up 

the herd. Reviewing each provision in detail may not be practical 

in a single year given how many there are, but you can identify 

specific groups for careful review. 

For example, you can separate out the stimulus provisions, the 

charity provisions, the energy provisions, and so on. You should 

also try to spread scheduled expirations out over time. If few are 

expiring in any given year, you will be able to give each one more 

attention. 

Third, I think you ought to change budget rules for temporary 

tax cuts. Pay-as-you-go budgeting creates crucial discipline but has 

an unfortunate side effect. Long-term tax policies often get chopped 

into 1-year segments. In addition, 10 years of offsets can be used 

to pay for a single year extension. To combat this, you could require that any temporary tax provision be assumed to last no less 

than 5 years in the official budget baseline. Proponents would then 

have to round up enough budget offsets to pay for those 5 years. 

In addition, you could require that offsets happen over the same 

span of years as an extension. That would eliminate situations in 

which 10 years of offsets pay for 1 year of extension. 

Thank you for inviting for me to appear today. I look forward to 

your questions. 

[The prepared statement of Mr. Marron follows:] 


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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.022

The "Tax EXllirers" 

Donald B. Marron· 

Director, 

Urban-Brookings Tax Policy Center 

Www,tuxooliQ'ccnterori 

Testimony before the Subcommittee on Select Revenue Measures 

of the COmmittee on Ways and Means, 

United States House of Representatives 

June B, 2012 

Chairman Tiberi, Ranking Member Neal. and Members orlhe Subcommittee, thank 

you for inviting me to appear today to discuss the perennial challenge of the "tax 

extenders: which could I:'qually well be called the "tax expirers." 

As you know, the United States faces a sharp "fiscal cliff' atyear elld when 

numerous tax cuts expire, automatiC spending cuts take effect, temporary spending 

programs expire, and new ta.xes begin. If aU the~e changes happen, they will reduce 

the fiscal 2013 deficit by about $450 billion (Congressiona l Budget. Office 2012a). 

That figure includes $500 billion in direct deficit reduction from the policy changes, 

offset by $50 billion in deficit increases from the near· term s hock to the economy.] 

Expiring (and expired) tax provisions make up most orthe direct deficit reduction: 

• $221 billion for the income, estale, and gift tax ut~ originally set in motion ill 

2001 and 2003, plus the expired "patch" to the Ahernative Minimum Tax; 

• $95 billion for the 2 percentage point cut in employee payroll taxes; and 

• $65 billion for the dozens of other temporary provisions that are the focus 01 

loday's hearing. (For a list of these items, s{'e eBO 20 12h.) 

• The views ('~pressed here are my ow,,: th~y do not neressarily refle-c!!.he views o(!.he Urban 

InsOlule. lIS trustees, or its f"ndel15. Howard Cleckn,nn.lim Nu,ms. Kin, Rueben, Eric Tuder, and 

Robertoo WUl!am~ provlde.t help/ill commtnt.<, but aU "rror~ are my OWn . 

' eso (2UIZa) prnleclJ; thai th~~ ch~ngl"i WQuid push Ihe econnmyintQ r""l'Ssi(>rll" Ihe first halfM 

calendar 2(11 3 unless Ihl:)' an. offset by othtr tax cuts or spending l"cre~ses. 
33 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.023

Like the AMT p<ltch. most of these other tempor<lry provisions expired at the end of 

2011. but much of their revenue impact won't occur until flscai2013. 

In deciding the fate oft.hese "tax expirers,~ Congress should consider the larger 

problems facing our tax system. That system is needlessly complex, economically 

hannful, <lnd widely perceived <IS unfair. Bec<luse of a plethor<l oftempor..lry tax 

cuts, it's increasingly unpredictable. And it fails at its most basic task, raising enough 

money to pay our govern nlent's bills. 

The "expirers" worsen at le<lst three of those problems, Their temporary nature 

<ldds to policy uncertainty, m<lking it harder for businesses <lnd f<lmilics to plan 

ahead. Innovative companies can't be sure whether future research expenses will 

qualify for the research and experimentation (R&E) credit, for example, and families 

considering adoption don't know whether a federal credit will offset some of their 

costs. That uncertainty undermines any incentives created by those credits. 

Temporary provisions <llso <ldd complexity to compliance and administration, 

particularly when they are renewed retroactively, a particularly pernicious featu re 

of recellt tax policy. And they reduce federal revenues at a time of persistent, large 

deficits. 

The expiring provisions have mixed effects on the fairness of the tax code. Some, 

such as the one for NASCAR venues, add to the perception that the tax code is 

riddled with special interest giveaways, Others arguably make the system falrer. 

The tax break for mass tr3nsit benefits, for example, reduces the federal tax 

disparity that would otherwise exist between people who lise mass transit-and 

those who drive, 

These provisions similarly have mixed effects on the health of 011 1' economy. Severol 

have attempted to provide near·term economic stimulus. Others attempt to 

encourage clean energy, but fall short or the economic ideal (Marron 2011aj. And 

some worsen existing economic dist01tions. The deductibility of mortgilge insurance 

premiums, for example, furth er <llllplifies the tax code's bias in favor ofhOllsing debt 

over other uses of capital. 

Fundamental tax reform would lie the best way to address all these concerns. 

Congress (an and should create a tax code that is simpler, fairer, and more 

conducive to economic prosperity while r<lising adequate revenue and eliminating 

pointless expir..ltions ortax provisions that deserve longer lives. Such reform could 

involve several components, such as greater reliance on consumption and pollution 

taxes. The most likely path, however, involves broadening the tax base by reducing 

2 
34 


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tax preferences- and llsing the resulting savings to reduce deficits, lower rates, or 

both. That approach has been endorsed by several reform efforts, including the 

Bowles-Simpson commission and the Domenici-RJvlin task force lNational 

Commission on Fiscal Responsibility and Reform 20J 0; Bipartisan Polit)' Center 

Debt Reduction Task Force 20 J 0; I was a member of the latter}. 

Such refOITI1 is not likely this year, however, so J;!wmakers must again g[(l.pple with 

the '·expirers." As a first step. they should differentiate among three types of 

expiring provisions: 

• Tax cuts enacted to address a temporary chal/enoe. Some. temporary rax 

provisions were enacted because of national or region;!] emergencies. Partial 

expensfng. for example, was intended to encourage and accelerate 

investment in a weak economy. Excluding mortgage forgiveness from taxable 

income was intended to help homeowners and encourage principal 

red uctions in the aftermath of the housing crash. Tax benefits fo r New York 

City following 9/ 11 , the Gulf Coast (allowing Hunicane Katrina, and areas 

damaged by Hurricane Ike and the 2008 Midwestern storms were intended 

to help those areas recover from disasters. 

Each of these provisions should expire unless the temporary need still exists 

and the provision·s performance justifies extending it. 

• Tax cuts that have reached a sill/set review. Some temporary tax provisions 

address ongoing policy concerns but have finite lives in order to force 

periodic congressional review. When Congress first enacted the R&E credit in 

198 I, for example, it included a sunset to force a review at the end of 1985 

(joint Committee on Taxation 2012). Prolonged economic weakness and the 

growing tendency for Congress to enact omnibus short-term extensions 

make it difficult to identifY provisions subject to sunset reviews today. 

However, JCT (2012) does identify a few expiring provisions that were last 

enacted before the economic downturn. These include the credit for 

production of [mJian coal and the refundability of credits for prior year 

minimum tax liability. 

These provisions deserve special scrutiny because they have received no 

review since their original enactment or last sunset review. 

• Tax cuts that expire every year or twa to game budget rules. Many expiring 

provisions are io this category. Their supporters intend them to be 

3 
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permanent or long-lived, but they haven't been able to find the budgetary 

resources to extend them for a prolonged period. Examples include 

numerous energy incentives, the deduction for schoolteacher expenses, the 

R&E credit, and the subpart F treatment of active financing (ncome. 

Some of these provisions are good policy and ought to be renewed for a 

prolonged period or made permanent. Others should be allowed to expire 

once and for all. 

To determine which policies are which, policymakers should consider several 

factors: 

• Rationale forDovemme'll intervention. Does the provision address a 

compelling need for government intervention? For example, does it address 

an important externality from private activity (e.g., by reducing negative 

spillovers or increasing positive spillovers)? Does it improve the income 

distribution or otherwise make society more equitable? Does it correct a flaw 

in the tax code? 

• Efficiency. Does tbe provision accomplish Its goal effectively and at 

reasonable cost? Could the government achieve the same result at lower cost 

through other means? 

• Fairness. Does the provision make the tax code more or less fair? Does it level 

the playing field among different activities or ti lt the playing field further (an 

issue of both fairness and effiCiency)? 

• Revenue. Do the potential benefits, if any, justify the loss of reVl'nue at a time 

of large and persistent deficits? (Equ ivalently, for members who wallt to 

maintain current revenue levels, do the potential benefits of the provision 

justify levying higher ta>:es elsewhere in the economy?) 

• Duratio/!. Does it make sense ror the prollision to be enacted n year or two at 

a time? Or does that undermine its potential benefit? Should it be a 

permanent part of the tax code or, at least, extended for a prolonged period 

before its next sunset? 

In making such ellaluations, poJicymakers should keep in mind that Illost of the socalled "tax extenders" are effectively spending programs run through the tax COde. 

4 
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R;!ther than "letting people keep their own money," these provisions give money to 

people :md businesses if they do things the government wants, whether it be 

investing in wind energy, adopting a child, giving supplies to school children. 

making certlin types of charitable donations. or undertaking new research. Those 

im:entives could, in principle, be structured as spending programs instead. The 

logistics and political optics would be different-the program would be re<:orded as 

spending and different committees would exercise congressional oversight- but the 

economic, social, and budget consequences would be the same. Lawmakers should 

thus hold these provisions to the same standards they apply to equivalent spending 

programs. They should also keep in mind that cutting back on these subsidies. when 

appropriate, would make the government smaller even though tax revenues, as 

conventionally measured, would increase.1 

Lawmakers should also reform the way they review expiring tax provisions. I have 

three suggestions: 

• Flip the burden oj proof Todays standing presumption is that most or all of 

these provisions will ultimately be extended. That's why they are called thl.' 

extenders;" even ;.Jfter they have expired. Th;!t presumption pl;.Jces the 

burden of proof on those who believe a provision should expire (and stay 

expired), rather than on its s upporters. Lawmakers could reverse that 

bllrden by expecting temporary pr(lvisions to expire unle:ss supporters can 

demonstrate sufficient merit. Such provisions would rightly be known as "the 

expirers."J 

• Divide to conquer. Musk oxen form into a tight cilx:le when wolves appear on 

the arctic tundra. They know that the key to survival is to stick together. The 

wolves, meanwhile, try to separate a single one from the herd so they have a 

chance to feed thE'ir pups. 

The same is true with expiring tax provisions. The benel1ciaries of each 

provision have no desire to stand out, lest that draw scrutiny. Their goal is to 

coalesce as a singh.- herd- "the extenders· -and migrate a<:TOSS the annual 

legislative tundra with as little attention as possible. 

21'0r an extended discussio n of these poinl<. see Mnrron (2C1l lb) and M~rron,,"d Toder (20 t2). 

l This ~pprwch would make partirular sense afl~rCungress rwlews all the 1'.~pi inG provlsiuns ~ncl 

m~kes worthy un.'s permanent or IU!lg -lived; the remaln!ng · expi .... rs· would tben be either sI ncerely 

wmpn .. ny orsubjt'Ct \ 1> a pcrlmlk Lln s~t. 

5 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.027

Por lawmakers to engage in serious oversight, they need to break up the 

herd. In principle, that would mean reviewing each provision on its merits 

every time it faces expiration. In practice, though, demanding annual review 

of dozens of provisions could well deliver careful review of none. 

One way to address this challenge is for policymakers to distinguish and 

review groups of expiring provisions rather than approach them as an 

undifferentiated mass. Cr;mdall-Hollick (20 12) orrers one pos~ible taxonomy, 

categorizing provisions as individual. business. charity, energy, community, 

and dis<lster. The provisions (otlld also be further drstinguished as 

intentionally short-lived, subject to periodic sunset review, or pretending to 

be temporary for budget reasons. Lawmakers could then focus on each of 

these smaller groups rather than all the provisions together.· 

Another strategy would be to spread scheduled expirations out over time. If 

fewer pl'ovlslons expired each year, Congress would be able to give each one 

greater attentiun. To do so, however, wuuld likely require new budget rules. 

• ChanOI! budget rules jQr temporary tax culS. Pay-as-you-go budgeting places 

crucial discipline on new legislation, bUI il has an unfortunate side effect; 

long-term tax policies often get chopped up into one-year segments. Por 

example, lawmakers often find it easier to pay for' a one·year extension of the 

R&E credit than a five- or seven·year extenSion. The short extension reduces 

the apparent price tag of the provision, even though everyone knows it will 

need to be extended again the next ye~r.lt so allows lawmakers [0 use 10 

years of offsets to pay for a single-year extension, further lowering the 

apparent price tag. Such short-sighted budgeting is a key reason the number 

of expiring provisions has blossomed in recent years, 

One potential solution would be to change the budget rules lhal apply to 

temporary tax provisions. Congress could require that any temporalY tax 

provision be assumed tu last no less than, say, five yea r~ in the official budget 

baseline. Proponents would then have [0 round up enough budget offsets to 

pay for five years of the proVision. in return, they wouldn't have to come back 

to legislators for another five years. Over time. this approach wotlld spread 

~ An examplei$ Ihe 11~"rlnll thIs Subo;(lmmllteo! hdd l(lSt fall \>Il t;U,el' ~nd ~!I~r&Y poUcy (M~r!'\ll\ 

20th)_ 

6 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.028

tax provisions out in time and allow Congress to devote more attention to 

each when it periodically comes up for review.s 

Another possibility would be to require that a one-year exten~ioo be p~id for 

With offsets in the same ar or, more generally, th~t offsets happen over the 

same years covered by the extension. That would eliminate situations in 

which 10 years of offsets pay for a single-year extension. 

If CQogress enacts such budget process reforms. it may want to allow a safety 

valve for special cases. One option would be to ;dlow an emergency 

designation. similar to that for discretionary spending. for tax cuts that 

should truly last Just a year or two or should not be immedIately offset (e.g .. 

stimulus). Such emergency measures could then be exempt from either or 

both ofthe5e requiremen:s_ 

Thank you again for inviting me to appear tnday. I look forward to your questions. 

References 

Bipartisan Policy Center Debt Reduction Task Force. 2010. Rn(Q[jng d meeien): 

Fuw re' Reviving the Ecouomy; C!lttirza $oer/drag vlld Debe gnd Creating P Simple Pro· 

Growth Tox Sysccm_ Washington, DC: Bipartisan Policy Center. 

Congressional Budget Office. 2012a. Economic Effects QfRedudnq rile FiscQI ResO'aj!!t 

That Is Scheduled tq Ot.·cur in 2Q13. Washington, DC: Congressional Budget-Office. 

---. 20 12b. Exnjrina TaX PrqI';5joOS'/qOqocv2Q12 BaseUI!(', Washington, DC; 

Congressional Budget Office. 

Crandall-Hollick, Margot L. 2012 AI! Dvery;ew prIM Proyigons MQlrfrlg III 2012 

{CBS Rennet 424851. Washington DC: Congression31 Resean:h ServIce. 

Joint Committee on Taxation. 2012_ l.egjs/otjve Bgckground orsC/ected f etiero/ TaX 

Provisions Scbeduled to Exoire in 2011 or 2012. jCX-39-12. WashIngton, DC: Joint 

Committee on Taxation. 

5 Lawmakers to uld go twe~ furtner. of (uurs~. and "''luire Ihal lemporM)' la~ tuts be assume(! 10 

persist [<lr lhe entire te"'y~ar budget window. as urr~tltl y hapl"'ns wfth mandalory sl>endin.g 

programs. 

7 
39 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.029

MOlrron, DonOlld B. 201101. "Enew PolitY and Tax Reform," Testimony before the 

Subcommittee on Select Revenue Measures and the Subcommittee on Oversight of 

the House Commiuee on Ways and Means. United SUites House of Representatives, 

September 22. 

--~. 2011b. "SDendtng in DjS2I1 jse." Nuriono/ Affoirs Number 8. Summer, pp. 20· 

34. 

MOlrron, DonOlld B., and Eric Toder. 2012. ",[ow Big Is tbe Federal Coyern ment?" 

Washington, DC: Urban-Brookings Tax Polity Center. 

National Commission on Fiscal Responsibility and Reform. 2010. The Moment of 

IaLUJ.. Washington, DC: National Commission on Fiscal ResponsibHity and Reform. 

u 
f 

40 

Chairman TIBERI. Thank you, Dr. Marron. 

Mr. Brill, you are recognized. 

STATEMENT OF ALEX BRILL, RESEARCH FELLOW, AMERICAN 

ENTERPRISE INSTITUTE 

Mr. BRILL. Thank you very much, Chairman Tiberi, Congressman Thompson, and members of the subcommittee, for the opportunity to appear before you this morning to discuss the regularly 

expiring tax provisions commonly known as tax extenders. 

I believe today’s hearing is on an important topic as the number 

and budgetary magnitude of these regularly expiring tax provisions 

have ballooned in recent years. Some of these policies can serve an 

appropriate goal, but many have crept into the Tax Code over the 

years with little evaluation. 

For example, in 2001, 13 tax provisions were set to expire that 

year or the next year. A decade later, 129 tax provisions were set 

to expire in 2011 or 2012. 

The budgetary consequences of extenders have increased as well. 

For example, in September of 2004, Congress enacted a 1-year extension of 23 tax extenders for a cost of $13 billion. In 2010, a 2- 

year extension of these policies cost over $55 billion. And if Congress were to extend those policies again this year, the cost would 

be even higher. 

Let me summarize three key conclusions from my written testimony. 

First, no tax policy should be intentionally temporary. Any tax 

extenders deemed appropriate should be made permanent, and the 

rest should be allowed to expire. 

Second, each of the tax extender provisions must be considered 

individually on its own merits and against a clearly defined policy 

objective. Each extender must be shown to meet an objective such 

as promoting economic efficiency or tax equity. 

And third, a successful evaluation of the tax extenders—keeping 

the good and eliminating the bad or inefficient—may set a useful 

precedent for the bigger challenges of tackling tax expenditures 

broadly and ultimately tax reform. 

To guide the evaluation of tax extenders, policymakers, I believe, 

need to answer simply two questions. First, intent. Does the intent 

of the provision improve economic efficiency, increase growth, promote fairness, or achieve some other desirable goal? For example, 

the R&D tax credit is intended to increase the aggregate level of 

research and development because R&D generates benefits to society beyond those realized by the firm. 

But one key point I would like to stress is that with any tax extender that is intended to subsidize a given activity, special care 

must be taken to evaluate its net economic benefit. Most subsidies 

will increase the subsidized activity. But that does not mean that 

it will produce such a net benefit or improve overall economic efficiency. 

In the absence of externalities, a credit for any given activity will 

lead to a misallocation of resources, more of the subsidized activity 

but less of everything else. And a provision that encourages more 


joloto on DSK67XMDP1PROD with HEARING
41 

of a particular activity does not necessarily promote overall economic growth. 

The second question, after determining the intent, that policymakers should ask is would the policy be effective if it were permanent and evaluate the effectiveness on a permanent basis, regardless of the fact that it has frequently in the past been a temporary 

provision. 

Let me next quickly highlight four harmful consequences that I 

see from the constant expiration and reinstatement of tax extenders. 

First, tax extenders distort the fiscal budget baseline and complicate revenue and deficit forecasts over the future period. 

Second, tax extenders create financial reporting problems for 

publicly traded companies. 

Third, and importantly, tax extenders exacerbate the uncertainty 

facing businesses as they don’t know whether they can depend on 

these policies once they have expired. 

And fourth, tax extenders may be designed to encourage oversight, but they are generally extended without much consideration. 

Obviously, this subcommittee has held a number of hearings on 

this topic of oversight, but a review historically would indicate that, 

more often than not, these policies are extended without serious review. 

And allow me to conclude by observing, as this committee knows 

well, that the tax base has eroded over the last 25 years. A proliferation of tax credits, deductions, and exclusions has left a system that misallocates resources, creates complexity and introduces 

compliance problems. Reducing the number of tax extenders offers 

an opportunity to reduce this complexity and uncertainty and to 

promote efficiency. 

I hope that such an effort could set a positive precedent for the 

greater challenges that this committee will face as it embarks on 

broader tax reform. 

Thank you. 

[The prepared statement of Mr. Brill follows:] 


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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.030

A~ 

i-l American Enterprise lnsu'tutc 

for Public Policy Research 

Statement before the House Committee on Ways and Means 

Subcommittee on Select Revenue Measures 

Hearing on Framework for Evaluating Tax E.xtenders 

Alex M. Brill 

Research Fellow 

American Enterprise Institute 

June 8, 2 0 12 

The views I!xpresst!d in this '£'stimoIlY are IfIO.'li ojfile' /wl//Or "/(lnl! (/m/ d" fI()( lIecesS<lrily 

".'pre$elll rhost? Q[/he American t'-nterprisl:' hIS/illite, 
43 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.031

Chal'man rlbed. Ranklng Membe. Neal. and membef< oflhe subcommlnee. my name i, Ale. 6"11. and I 

~m ~ re~eafl:h lellow ~t the Ame,ican Enterprise Institute. Th nk YOU 10' lhe opportunity to ... ppe~' 

Defore 'fOU Iht. morning 10 di,eu," t he reglliarly ,,-,pi ring la. p.ovision. oommonly known~' "[ax 

e>lend .... ," 

As you ca.elullY de finoo. in Ihe documenl .ellinglorth Ihis hearing, Ia~ eKiendeJ'l" a~ a subset of Ihe 

lax prIM,ions ~xlended by Title VlI of I~ .. "Tax Re llel. Unemployme nt In.urance Reauthorilation, and 

Job Creation Act 01 2010" (Public Law No. 111-312), as well as a number of otherta~ provisions that 

have ~.pi'ed or will expi'e Ihi. vu,. 8efole elaborating on my view" let me lead with my conclusion: 

Each la. extender provision mUll be consjdered individually. on its own merits. and "gainst 

clurfy denned object Illes. f ach ilnd ever; tiX extender must be . hown to be a ppropriate 

against one or more ofl hese objective •. lat er In my testimony I SUl!I!estlwO criteria that could 

guide this decision-making pratess. 

No la. poli<:y should be inlentionally lemporJIty. Any tax utende" deemed appwpriate should 

be made permanent and the rest should be allowed to ~.pi.e. 

A successful evaluation of la. e.tender~~keepingthegood ami eliminating the bad- ma1 set a 

useful pr~cedenl for Ihe bll!l!e, challenges of IicklinS other tax expenditures_ 

In this testimony, I first present iI brief backsround on recenl trends in lax extenders and Ine" discuSS 

how 10 evalullte whiCh la~ eXIendersshould tie made permanent ilnd which should be allowed to 

expire. Ilhen highlighl lour harmful ef'ects of Intenlionally p.ese .... lng a set ollernporary Ia. provi!oioos 

I condude with a comment regil.dlng tax reform. 

Baekgrou!!d, hx Ertenders Are GrowlnS, and Thus Are II Growl!!1 Concern 

The number and budgetary magnirude 01 regularly expiring ta. p,ovi.ions have ballooned in recent 

vears. The Joint Committe<:' on Taxation (jCTj re lease. a report a lmost every veilr I~\ing uplring 

provisions and Ihe dale on which they are scheduled to expi.e, Tab le 1 .epons the number of expi.lng 

lax proVision, byyeilr for each mtlle JeT re~ns on e.pirins p!"ol/is\ons sjnee 1998. The table reveal •• 

rnpid increase in Ihe numb".. of ""piring true p.OII;sion., p<lnkularly p.ovisions Ihat a.e sellO ""pJre 

within the current year Or Ihe 10110\\'in8 year. In 2001,13 tax pro'l'1,ioM wert! set 10 expi.e that yea. or in 

2002. A decade lalef, in 2011, 129 tax p'OIIi,;on. we.e set 10 exoire in 2011 or 2012. 
44 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.032

n• ' H . N "m be ofE , "" fe<leilT , .. Pt "" " I .. on.;tn d Y I ~r n WhithTh b ' • 

)()jIlT COMMITTEE ON lAXolTKlN liST Of EXPIRING fEDEfI"'~ TA)C I'IIIJVI~KlN> ." 

R'I'"'' '''Iie: "" ,- "'" "" , .. '"" 'W "'" - 2010 ,Ol! lon 

v .. ,o/ 

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,~ I " I • • " ,. , 

- • • • " " " " .. 2010 I I I , '" " " " U 

ZOU " , • " " M 

lOll " " , , • • .. .. 101l I , I , , , • "''' I , , , , , , 2015 , I 

2016& " " " " .- I I • , • • 10111 1 W W .. " n .. '" m '" ,~ 1M '" "";'1", 

1'1& .... 

~" " " " " ~ .. " " .. '" m 

>'l'~ln l '" __ ~..,T .. """'.~"""'_ 

The 8'"'' majoriTy of la. ~.t"nde" are e,ed ils, d~d\lClion •• ~l'\[j .. ,ct''''''"s thai ca n be "iewed ., ta. 

""",,nditure •. The, ef"re, the inu".,,, in lhe ""mbe, of 1 •• "de"""" wO\.lbut ... 10 the inorea ... In i •• 

" ,pendi!",,,s. The JCT ,,,,e1<5 the number ot 1<1> "'PE'nditufes OWr lime and re<emiy r>Oled 1M " ... in 

the number la~ e~PI'nditu,e.lrom 100 in 1981 \0 150 In 2003, and then 10 ISO In 1009.' 

TM budgeta ..... r.ot1'''quence "flaX e)<tend<>" h •• 1110 I"""., .. d .;gnlficant,.,. over time. for ~~ample. in 

Seplembe. 2004, C"flg,es, enlCIPd I1 .R. 1303. tl1e "Wcrtlng ~3mille, Ta~ Relief Ad." whid> COntained a 

one ~a, e""nlion,,' 23 t"" e:<tender1;. ,a"gong!'''''' th t .e,u,eh and e><perimenL>!lon (R&E) tao tredi! 

10 th .. ab<we·I ...... lOn .. deducllon for tnc .... ' cI.'<room ... ""n, .... with . nel ...... """ 10" of $!3 billion 

i JDin' CDmm,nee on ro .. u"" (KTI. "-•• Um"'w cI tnt 't.ff 01 ,he Iotnl Ccmmitte.: on h".tloo ~fcr~ the X><ot 

~'I eo....'l'TUU on Mocit ~.d,",llon · (1CX-49-111. Sep,,,,,,ber 22. 201.1. Ivail.bl. 'lvoulh 

www kt·lo./p~bliu~o""""t",11 (j"".<u>Ulown&id'4:W;l_ 
45 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.033

over Ihe budg~t w.ndow.' In 2010 ... Iwo·year e>lension of lax e~leflder~ cost SSS billion .~ If Congress 

were 10 extend the set olla~ prOlilsions 10' an1lddllion~1 ~ea', Ihe ~I would be even higher. 

As I said at tile outset, each la. e~teflde' sl'>ould I'll her be made permanent or allowed to up',e. To 

guide this delermln3tkm, I ad~ocale assessing uch tax eKtender's appropfialeness and effectllleness. 

Pollcvmakers should ask IWO Questions aboul each lax e~tender. 

1. Does 1M Intent of the Provisfon Reflect Sound Ta. Policy? 

First. polkyma~ers should consider the Inlent 01 each provision IndMdually and e~aluate whelher those 

Intentions Improve economic effklenCV. increilSl' growth, promoit' fairnes.s. or achieve some Olher 

desirable POlky goa l. 

For example. the R&E tax credit iilntended 10 Increase Ihe aggregate level 0111&0 In the United States 

because 01 the 'posllive e.ternality" ~&O ge nerales 0.1' .• benefiu.1.O society beyond those realized by 

the firm conducting the R&O). Th is tao credit is intended to promote ,,,"ovation ilnd fone. productivity 

B.OWIh. In my view, thesea.e saund policy objectlves, and I support makin8 th e credit permanent. In the 

come.t 01 the currenlla. code. 

The dedlll:lion for <l ale ilIld local 8ener I.$aI"l' t"~, another lax eXI~ndel. d"e~ nol seek 10 promot~ 

«onomlC growth, bUI .alhello o~ide pa.ity belween re!ridenl 01 ~Ia es with SI~le income ta ~ ~nd 

,esidents of states with only sales ta~es . In my view, a more approprIate means to 3Chle~e pafity would 

be to .epeal the deduction for Slale and local Income taxe s.' 

With re8".d to a lax eXlender th~lls Intended to su bsidi'B 'it 81ven activity. special ca re must be taken to 

plope riy evaluale 11$ net economic ben~f!l. Most ta~ subsidie s will increa.e the sui»,dl,ed aCllVlty 01 

product. but Ihal need not mean that it wm produce a nI'l pOlitiw economic benefit or improve 

economkeffidenCV. In thea bseflCe 01 exte.nalitie s, a tax creditorol!>e. sui»idy for a given aetMty witt 

generally lead to 'it misalloc.Jlian of rl'SOl.lrc"l' In lhe eco~omy-more ol lhe subsidi~ed activity. bUlless 

01 everything elift. A provision thill slmplv leads to mOIl' 01 iI Pilrtieular ;oclMtv does not necessarilv 

promole overall eCOllomk glowth. 

This first Question has examined I!ach tax extenders' ilPPfopflateness based on its lnlent. 

, ICT. (JllmOled Rno:nw E~w oll~ COff/"",n'" Agre<!'menl ftx fI.R. 1.308. l/Ie "W",kirtfJ FO",mD ro. ~I~I Act 

ollOO4" (10(-6(1.04), Septembe. 23, 2004, ~V;lll ble at WWW.jct.IOV/o·6(J.tI4.Q(If • 

• ICT, l"lmQ~d EJ;J!Jgl!t Ef{ffl' of Ihp "Tax R~I"'I, UnemplOymf'm "'"",afIU Reaull>oti.oliDlr. and lob ("'Ofial! kI 

011010," ~hi!duIedJor Canslde.o'lOII bi' IM Unjfed5Ial<'SSenot ~jO:·S4 101. Oe<ember 10. 2010. '''ailable 

throuah www·i<t.80./publkallcm'.hI .... 1fun""lhowdo_& oJ71~ . 

• Se ~ "' ' Brill,· ... Pro-Growth, PrOJlr",lI ... , .nd Prac11u1 Pro""",llo CUt Bulin<!" T •• ~al "' ," AlJ To~""1icy 

Ou/Iook, nO. I pa""a'V 20121. a""~.b'" ot WWIOI .• '"."'BlOIJ'I<IoI</""'0<10"'luIflKll paIk~/ta ts/'-l>"'11'O WI~· 

p"'8rusi.e-and·PI""IIc.I,p(oPOSilI·lo'(ul·l>I.I50ne;s.-I~'·l'Jles. 

, 
46 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.034

2. Wpuld tbe Policy Be Effrctive If It Were Permanent? 

Second, polievmakers should t~alua!e the likely ~ffect ~~ness 01 the poUev il it w~re made permanent, a 

mo,e complicated question than its effectivene~ in its current lemporary form. For example, numerous 

a na lVSls have noted that the temporary s\(ucture oflhe R&~ tax credil lnhibi!S lis effectiveness.> A5. the 

Technology Polfc\t Instilute's Scott WaUsten hal testified: 

Because firms tend to smooth their R&Ospending over time, Ihe.r responses to 

temporary policies are likely 10 be muted. A tempora", lU credit will, therelore, hIve 

limited effec\hleness. That j~. iffirms do ~OI havero~fidence tha! the credit will remain 

In e ffect, they will prob.Jbly not increase their R&D spending b'/ as much as they would II 

the credit were permanent. A perma"",n! R&D lax credit would be more consistent WIth 

the way companies mal«! dedslons regard R&D spending and is more likely to hiVe the 

Intende d positive effect on private spending.' 

Some tax extende!,; may be ineffe ctive due to Iheirlempolllry nature, but would be e ffective if made 

permanent. Other ellienders may be ine ffective, dr.;tort;onary, or undesirable regardle~ of whelher 

they are temporary or permanent. 

Additional Concern. Ral,ed by ra. Extender. 

To el plain why I ad~oc:ate either eliminatlnltax ~lend"r' or making Ih"m ""rmanent, I now hfghlight 

lour hafmlul oonseQuencel that lhe constant expiration and feinstatement of tax extende!'; h."" for 

businesses. the economy, and ]KIlievmakers. 

\, Tax 'mendel} dislQ!t the fi&ll bvdgel basel,[\(!, thereby compli<:olling re~enue and deficit 

The ro.sal outlook lo! the U.S, economy is sevef'l.'ly troubling, 10.>ay the least. Not only 

h~ve annual defICits el(teeded $ l tr1l1ion fo' a number of consecutive ve~"" but spending on 

health [Me and Soc,al Seourity is projetled to innease by more than S perceOl of GOP in the 

nelt twenty-fio;e vear •. ' However, foreca.tlng the budget outlOOk has berome incre~slnElv 

complicated a, the number of lax e xlende rs and t he a"oc:iated revenue 10" have increased. 

While the majorn.yofth" ,",venue unceruintV I. attributabl e to the explration ol tal policies 

originallv enacted in 2001 and 2003, the portion alllibut able to lax externiers i, ,ignificam. 

Mak]ng all of the ellender. permar>l!nt would r!)duee revenue by approximatelv $400 billion 

• For mo,eon Ihe Impof'Unce to society of R&D,"" 8,onwyn H, HaU,JOIcqu"," M •• """" I nd Pier'e Mohn. ", 

"Mealurin,lhe Retuml to ~&D.~ NationallkJ,eau Ol€«rnomlt Re",.rch. WO/ll.in8 Pape' IS6n. December 2009 

• Scolt W. II.ten, "The Role 0/ mment in prorrpo~rIi! 1180 0,' te<limon1 belr><!! Ihe Sen~te Fln. nce Commltl~e, 

Septembe, lQ, 1011, ••• II.ble 3' _w.ledrpalicyi~<litul"' I)(""~le"'w.Il<II!fI_"' I~3;~.nceJd_le limonv.pdf, 

' CDng' .... ional Buaget OIf",. (CBO). T~tlOlll.ong.T''''' Budg~r Outi""". hme 20U .• valr. bleat 

www.cbo._I<ltt.(del. ultlfile .... boflle<l~I!.d\m .... t./Q6.0S Long Term_BudgeI_Oullool: ~dl 

• 
47 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.035

'"'''' Ih~ nUll~n yea,..' Blldgel f",e(;.:m.s made by the Cong",s~ional Budget OHke theref",! 

present Doth" "current law" and a "current polley" baseline. whIch lliustrateltne uncertainty 01 

expected future la. recelpls given llIe txplradon of "lax eX!ender~" and other lemporary 

poli'i"s. The gap between theSl' two sce narios" widening. making plausible budge! forecam 

more difficult. 

Furthermo re. new 101> eXlenders a,e often created as a resuh of budgel :>eoring m"neu~e ... IO 

m"s~ Ihe long·term budgetary consequences of" new provision. Fo. example. the I\meril:3o 

Opportunity fa. Credit e nilC1.ed In 2.009 for c.alendar yea" 2009"ilnd 2010 at an e,timated co,t 

of $10.2 billion' was extended In 2010 lor two years it" COS! 01 517.6 billion.'" 

1. Ta! extende!} create finan;;al reporting problems fQr pubHC!y !raded com!!ilnie~. When tax 

extenders expire and are retroactively reinstated. this introduces unavoidable discrepancies in 

public companies' quarterfy reports. as they report info rmation based on a poHcy's h.avlns 

expired, onlv to lhen have to a«ounl for the policy' •• ubsequent reinstalement." 

3_ T~x extenderi ~xacerbate the uncerta'nw fa(in!! bu<ines5e~' While all ta~ policy i5 tempor~ry in 

some sen .... becauseCongre " ha.th~ autl10rity to change any provi.ion It choose •• the 

uncertainty 01 palicies scheduled to expire butli~e y to be Kl e~ded (or reInstated) is 3n 

unneces~.ry burden on an alreadv burdened private ",Clor. Thi. burden worsen. the economic. 

en~ironment for firm, by increasing uncertainly .. for a vi,ual repre,enlallcn of how Ihl. 

t.lncer!ainty has IncreaSl'd o~er lime. see FiSllre 1. dfawn from I paper at.l!oored by Scali Baker 

and Nkhola, Bloom. both of Stanford Unive",ty, and Steven Oav1. 01 the Uni~er.l v of Ch ic.ago. 

Th~ index is. in@tfPCI •• dlscountedsummatlonofthedalathltlpresentedin Table 1. Their 

res~aro;h. whidl ~~amines DOliCV u,>o;ella iolies ooyortd j\l,\1 liM poIlcv UOCer1i1intv. (Oocludei thai 

an inc rea", in fiscal policy uncertainlV simil.r 10 what was experienced from 2006 t0201l 

would have had a ~ery Significant impacl on U.S. employment and eccnomlcproductron . 

• COO. "bpj,jng . P'a"j>ions-J.n~.ry l012 5aseline," I.ny.ry 11, lOll, .,,;o;I.tM In'Du&n 

www.cbo,gov{PlJblkatlon!42910 . 

• KT. E<timoUd 8udg" EllfCU Of Iii<' R~""~1Jf PM"sil>l>, C""lalMd In 'M C""f ... ·~u .... grt'~""'"t lor H R. 1. th ~ 

"Ame<kon RtCOW:'Y0"dRti_'f",~nr To .. AcT a/lOC'J"IJOC·19-091. FebrlJ.1ry 12. 2009,a.-.jl.ble '!>rOUS" 

www.jct.g lp\.Ibllcatla~ .. ntmI1Iure-.ta rtdown&ld~ ll 72 , 

"'!CT. f>1 '""II!J&d~~' £{"'((, uflr.. -reI. ~';"J, u,,.,,,,pkJ'I""'''( ~"u,,'m~ uu!l ... i'ur;."" ",,,Jrob C'~Ii(iur,A(( 

o/lQW •• xh~uif:d ""r:"",ldtfOlfon;,~ 1M United Srol~' XrlQfe. 

II Actotdinllo the u,af!\ber 01 (om"",rce. "fTlne unten.Tntv of .,p[,ed deduction •• nd credlu can h ...... 

mal","1 1mpac' on • OOsl"",,' boltom line In '''ruin case,. '"'lUi"", ",n",n dl<do""M lUC~ ., in n""n<ia( 

Ila(r,menl< r.llngs. whl<J> can .dversf!v .ffm Ihe bu>i"",", more ~<W_" (01~mber 01 C"",mCfn'. leslimo!1¥ 

b~Ofe I~e 5e ... te ~I""n,"" Commillee, January 31. 2011 ..... il.ble .t 

www.fin.nc..-leM.e¥>v!imo//Mdj./doc/I< •• ~t%lOT ... tlm...."."..20SF0.20Tll . .. 20£~t .... d""I.pdf.) 

, 
48 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.036

figu,e I Tax leglslalion Elipi,alion Ind"" 

~ 

----, 

U- 0 

• 

g 

~ IL 0 

- ~ 

0 

,,#' ,,# '\.# '\.t§l" '\.t§l'" #"':1 '\.# '\.t§l~ '\.# "'~'\ ~ ",- ,0 

, " ,0 ,0 

. 1<Ivr{~: Stot! Jl Soler. ~ B"""" .• od Slover> I. 0....... """ ......... 1<","""", PoliCy u"'c" .... !"j.' a..-.- 10, 

1011, ." .... ...,., ~tt~://b<",!"j,<"~'",""'I """"" d""«I odf/p.,.;.yu""." "ntv.""'. 

Not · UI,II, .. lu., '" h. hpjrr,ior» ""'" U ... _ ComI!>fU"" Ill> T.QUIIn, [om .,...,-, IO'KOiI {,. 10..,.. .. !IorI, .... 

of """" ...... 1 ... ", futur. """"n, .. ""._ .. e ... eilnted ~ o. ·((T '11/121 whete T i> '~ """,bo!r 01 """""' In 

,1>01","",,,,,, ,,,,,,",1"8, 

4. Tax extenders are intended to enSUr!; overs'ghl, but they are generally extended w'thout much 

consideration. In theory, forCing periodic ,econsid~ration of tax policy may facilitate 

congr .. uional O'Ierslghl of various Pl"ovi~ion'. Numerou~ spending policie~ requlte pefio.dic 

reauthorization, which permits ",forms and policy adaptation •. Obviously, IOday's hearin8 and 

thl, Committee'Ji previous hearing on Ihl, issue could be conside'ed e~ments 01 such an 

oversight effort. Howeve,. I would humbly 5ugjle,t that given the budgetary magnitude of the 

extenders, such oversight has been woefully inadequate. Mv Ylew is that much more oversight 

regarding the effectiveness of tllese policies {and other tax expenditu,es) ,hould occur. 

However, thai oversight should not be driven by sche<lu~ tax policy expirations, bUI rather bV 

the conmnt pursuit of ta~ 'eform. While various spending policies that ~re scheduled fOf 

periodic reauthorizal>on h;we spurred ample research in l~ese a,eas,1> tu extenden have not 

" s"e, lor """mple, A£I'1 "''''~'C~ on 1M ~a"" 8ill ...... utha'I .. lkIn, ".alla,ble thl"1)~lh www .• et.o<&/topiclf<> .... obln i 

and No Child lett Behind, ilVililable throl/ih www ... e;'o'aJtoplc/n<K.hIl<HefI·~hlnd. 

, 
49 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.037

'~rooed 10 cr~~te" I ... meworlr 10. r~'ea,ch around ,he pH",idon" with th~ ~.eepliQn of Ihe R&£ 

credit " ~nd QCc sion~1 reporU on ~ lew other provl,lon~. 

Conclusion, The I,~ olTn htend ... ri I, (Yld ... nc~ 01 thfO.Nud for Ta. R",'orm 

The e>pan,lon In IhI>. number and fi,c~llmpacI Ofla. eonenders , "rooe' a. strong ell1denee that the 

quality and efficiency of the ta. ~vstem has further e.oded. GIVen the budget""" outlook and need for a 

mOre ... tioMI, p.o-growth tB< .."tem,lawmake .. must seriously evaluate each and every tao extende, 

ro~I'\o". (ven utenders with relativelv ,mall budgetary Impact deseNe "''''tlnv, as their economic 

burden Or bener~ could be much la.ger. 

A.I outlined above, the fi.,t question Is whether Ihe eictender is Intended to seNe a valid policy goal, 

slJCh al promotinB econom1c8rowth 0. ta. fairneu. The second question is wllether Ihee.tet:"lder W{)uld 

be effective at ilchi""jnll iii intended goal II It we.e permanent. btenders that meet these criteria 

should lit' made permanent and the others should expire. 

NO revenue should be lorgone lor po!lcies that do not seNe an app.opriate purpose or are limited In 

their effectiveness. The tax extender "momentum" thil hu e.(iSled over the lalt dec;ode. whereby new 

a~ ende/~ a'e added while few terminate. ts not sustaInable . 

As hi~ Committee knows well, the ~X base has e.oded sisni/iCilntly ave' the las! twenty-r,ve 'fl'ars. A 

proll er~lion of tar tredlls, deductions, and e~duslons h~s left a [a~ SV5tem with a myriad of provisions 

Ihat ml",llocate resourees. n~ate [Qmplexity, and introduce compliance problem~ . The discussion of tax 

extenders offers a modest opportunltv tl> reduce comple~itv nd uncertainty within Ihe ta_ code. I nop<.> 

thai a s<>cce"fulelfort toeurtail lneffective!lf Ina ppropri~te tU extende .. will ... t a pnsitive precedent 

for the greater challenge thl' Committee will face II it emba.ks on broader tax reform. 

" See. fore .. mpl~, Br"'lwvn H. k.II, "'~e Priva te . nd Soc;"1 Rel~I~' to Re"",,q, and >'e topment: ~ 

r«hno/ovy, R&D, Qnd t/le [,,,,,omr, frl . Bfwee L A. S/11,th and CI. l>de E. 8~,lield IW.s/11nIIOn, DC: Th e 

&rookln!" tn\lifullon illd tN! American [nterprr.., I",tltut. , 1996!. for • dtKlJ .. lor, of poSllbf • •• fo.",. to the R&[ 

e.Mit. _ Alin O. Viafd. 'i" Pollry an<! G<oWlh ; In Ru~JorGfoWlI»Ptomo in Q /nl\OW1,ioI!nM Growth thTOUQ~ 

~i>I R~fOrm (~ "'". oW, MO; [wlnl M. rlon Kwlfman faund.tIon. 2011), \l.II.b~ ~I 

www .• ei.orlllfolnI2011/01/0/!{Ta,-PoIk"y-.»d·G,owth.pdl. 

, 
50 

Chairman TIBERI. Thank you, Mr. Brill. 

Mr. Gornstein, you are recognized for 5 minutes. 

STATEMENT OF AARON GORNSTEIN, UNDER SECRETARY FOR 

HOUSING AND COMMUNITY DEVELOPMENT, DEPARTMENT 

OF HOUSING AND COMMUNITY DEVELOPMENT, COMMONWEALTH OF MASSACHUSETTS 

Mr. GORNSTEIN. Thank you, Chairman Tiberi, Congressman 

Thompson, and members of the subcommittee. Thank you for the 

opportunity to testify today. 

I am here to urge you to extend certain critical programs that 

support economic development, housing, and community development. Some of these successful job-creating programs expired in 

2011, while others were deemed not traditional extenders in 2010 

regardless of their proven effectiveness. 

The new markets tax credit, Build America bonds, empowerment 

zones, and the low-income housing tax credit have created hundreds of thousands of jobs in housing units across the country. 

These programs play a vital role in encouraging investment in our 

communities. 

As we continue our steady climb out of the great recession, now 

is the perfect time to extend these programs and the critical work 

that they support. 

Let me briefly describe each program’s impact. 

The first new markets tax credit allocations were awarded only 

9 years ago, yet this well-designed program has achieved excellent 

outcomes: $45 billion invested, 92 million square feet of retail, commercial, and office space developed, over 300,000 jobs created. 

These investments in each of your congressional districts are restoring abandoned buildings to the tax rolls, revitalizing small 

business districts, and creating momentum for further development. 

I wanted to provide a few examples from Massachusetts. 

Holyoke is a western Massachusetts city, once the world’s largest 

paper manufacturer, but now one of the poorest communities in the 

State. New markets generated $9 million in debt financing for a 

full service health care center in the heart of downtown, a project 

that created 350 jobs. A few blocks away, a world-class computer 

technology center, a $168 million project, is under construction 

with 600 jobs already created. Universities, including Harvard and 

MIT, are actively supporting this initiative. 

The new markets tax credit expired at the end of 2011, but it is 

not too late to extend it. Because of its importance, I ask the committee and Congress to take three actions: First, make the program 

permanent; second, extend the program for 5 more years at an annual allocation level of $5 billion, and we thank Congressman Neal 

and Congressman Gerlach for their sponsorship of H.R. 2655 in 

this regard, and three, allow new markets to be used to offset taxes 

paid under the alternative minimum tax. 

In the short time Build America bonds were available, less than 

3 years, Massachusetts issued close to $5 billion in bonds, with 

over $3 billion supporting our accelerated bridge program and creating 12,000 construction jobs for bridge repair. 


joloto on DSK67XMDP1PROD with HEARING
51 

Empowerment zone bonds have also been very important in many cities, including the City of Boston, which issued $130 million in tax-exempt bonds to help several blighted neighborhoods, 

creating 14,000 jobs and stimulating retail and commercial development where none had occurred in years. 

Reinstating the Rebuilding Bonds program could put hundreds of 

thousands back to work nationwide, and I encourage you to include 

it in any extenders package that the committee considers. 

Finally, the low-income housing tax credit program has created 

or preserved over 2.5 million units of rental housing. No other Federal housing program equals this record. But the credit is not just 

a housing program. It creates jobs, restores abandoned properties, 

and supports retail and commercial opportunities nearby. It is 

highly flexible, and it supports new construction, rehab, and renovation. It serves families, seniors, persons with disabilities, veterans, and former homeless families. 

On a specific matter, we urge Congress to extend the so-called 

fixed 9 percent credit established in the Housing and Economic Recovery Act of 2008. When HERA replaced a floating tax credit rate 

with the fixed 9 percent rate, Congress brought consistency and 

clarity to the program. 

Chairman Tiberi, we appreciate your leadership on this issue 

with your introduction, along with Ranking Member Neal, of H.R. 

3661 to make the flat 9 percent credit permanent. 

In conclusion, these community development tax credits provide 

many important benefits. They leverage private sector funds for 

economic development in housing. They create jobs, rebuild infrastructure, and transform distressed neighborhoods. 

I urge you to extend these credits on a long-term basis so that 

we can use them to continue to build the road to economic recovery. 

And as you consider ways to streamline and reform the Tax Code, 

please take into consideration the important contributions that 

these programs have made, especially while undertaking efforts to 

lower the top corporate and individual rates. 

Thank you very much. 

[The prepared statement of Mr. Gornstein follows:] 


joloto on DSK67XMDP1PROD with HEARING
52 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.038

Commonwealth 6fMassachuscus 

• 

D EPARTMENT OF HOUSING & 

COMMUNITY DEVELOPMENT 

~.'i "'01 Y of Aaron GO"' I~ in . Under _ n'M')' for Ilo" , in g Knd C""""ulli.y D ....... llment. 

Cll nlmon",~.hh Qf \Ia".rh ~u~ 

U.S. lIo .. M' of )N!SIlnln l;" H 

Co",mimr on WI)-' ud MUlls 

uhco mmin ~ Oil Selt<: ' He,'to ue u';lIres 

JUlie 8.1012 

Ch~'mlan r;~ri. ~nkinl! ML'TlIt..:r Neal. and membc!f1; ofthe SuOCQm",ill"". Ih~nk you for .he 

oppo11uni,y 10 '<:slify ,<>day_ I WMI ct;jlttially hi "okflOwktlgc your leadership on I naliun.llcwl. Mr. 

Chuinnan alld t.k NL"dl, and U! thank you fl)' il 

My ",",'" isA.rOn Gomslcin ami r om .he Und"",,,,rcmry (or Il!",~inll.nd I,;o",mu"ily Dc,clopm!!n' ("r 

re!;OlIrttS Ii>r alfonbbl~ ,",using and communi,), de"elopm~nl ~h year. I'riQl" 10 joining S\l>I~ 

Plann;ng: A»ociation. a non·proro, Orjl:3mzaliull in Mas,,"chu.."Clls. 

r alii hore 10 UfJ>C you III CX\Clld "etta;n critjcal I"'>I1"'ns tha, suppon ecooon,;c dc,doprncnt. hous;nt;. ~n, 

--ftlml10ij 
53 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.039

LQW Incl>me HousioK Tu Cl'l:di ~ hal'e CT~atcd hundreds of thoU5ands Qf Jolls and housing units 

throughout Ihe 1\:11;1'0. A~ we L"Ontinuc.IO climb OUt oflhe GrC'dt Ikoce55ion. now is t~e lime 10 e.~l end 

lh~~ I'ror, .... m, and the won; they SUPll"rt. We canT.m afford \,. lose tI,eS!' in~lru"'Cn~. Qf econQ,nic 

grnwlh, and Ihe CongTeS:'l should toke aCtion to u tend Ihese prol!nlln~ as soon a.1 jJo~~ihlt. On lhe IQnKer 

horitQ". as Ihis Commillcc u"dL'tIakcs the impOrtant lask Qfreforminj:! Qur La~ code. it is impOrt.1m II' 

undet)13nd Ihe Irndwffs Ihal are inn/lved i" ciiminating Ihese provisi{)II$, as Ihere one" dO\.'!i "01 ~~1 a 

c'{)mpllroblc ,,"a)' \1' enbance e,)mmunil), devclQpmcnlthrQugh nlher 1oCC10($ oflhe g.Qn:mmcnt, In facl. 

while the Congress c()(ltinue~ II' cut Il'-"fldjns progr3m~ in \·anouS programs under 8 num!);:r of 

dl1"'rtm~Ius, these rrojec\1i can nlk~ only rdy o:tJ up~ in tI'e la.~ e<>de IQ cOOlin .... •. Eiimmatit:,o Qf 

Ihctlc laX benctit~ CQuid vcry " 'elltcnninatco hi~lory Qfpublic-pri"ste partnership that has rn-ought so 

mUth gNlwlh 11) Qur Slate and the CQllnll"}". 

lei mL' bnen)' d':scri bc ca.::h and what Ih~y have mCanllQ Massach"sells, 

~~w Markel.' Tu Credit I'rtJ1;rlm 

The 1,1'$1 New M~rkelS Ta., <.:retlit INMTq l1o<:alion~ wen' awankd c.mly ninc yean; a~Q, ye1 a\read}' th~ 

NMTC has c.ltablishcd ~ Ir:ick rt'OOrd as a major lI\lurce ofc(>mmlloilY de"cl(>pment r.nan~ing in AOlcricu. 

Congres.o uuthllrizcJ lhe NM"C in 2000 in an ctTOrt tl) stimulnte privaw investm,:,nt in IQ",·income urban 

'wighborhoods and rur~1 eOOlOlUnili~'!i thai Inc ked aceess \llthc capital oL...,dt<lwsuppon and grow 

bw;inCSS(."li, crcat,' jobs. and ~IIsl~in healthy local cc,~nomies. Since the 1i~1 NMTC a llocations were 

award~-d In ::1001. Ihi5 'oIcll-dcJignl-d pl'Ojl,r3m hIlS 8~"L'T"Jted imprcssi,'e cQnlmunilY developnl""l re$uhs. 

l3etwt:cn2(0) and 1010, close to 300 ~ummu"ity development tntil;t."S ICO£;S) hat'" recci~ed NMTC 

ullocatiQns. 

, 
54 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.040

11>....,." eDE.', incJooing communit~ loan fund., Community o..,,'elopmcnl Corl'onllions and privale 

fin~nc.al in,tituliuns, ha,'1! ".;..'1l I"" NMTC 10 finance IhoU>ands OfTC!3il. commercial. nnd culluml 

f""ilil'e.-. "ilh o\lcr n m.lIIon SGu~re r~~1 of~l'ac~. 

Im e!lmonU, in I'IM1C financcd· bous,rwss lomlnl $45 bill."" during Ihis rcmod. orlhi~ amount. nn 

eSlimatcd SlO.9 bill'"n "as din.'Ct NMTC i",·cSlmenlS. and Ihe bnlam:e wus Ic,-cmgL..J from olhcr ~"un:es 

~~h public ruKi pri"'le. lhcsc NM'rC inH'sitncl\1s =I~ orTC!lIWctl an C'5tim~I\'d JOO,()II(I jlJ'bs al a 

«lJ;t of517.ooo per Job. 

In 2010. invCSlmcms in NMTC financ~'d bus'l\C5Scs Iulal\'d S'l.S billi\)!). Of1ha1 am"un1. NMTC financing 

101:lltd $4.7 billiM. Thi. acl;vity in 2010 created cl""'" to 70.(M)() Jubs. All ol'lhis .~on<lmic ;;uceess is 

schie,cd Jor n rcbti,'cly modesl 1~..J~rnl in,."tmenl A pri\'nt~ inH"S-Ior in" N.,,, Markets Tax Credit 

project. in"cSling in a r,n"nci~1 inWmlL'diary urCommunily o.., velOflmL·tU Entity, rL'Ce;"~ 319';~ credit 

Kl!ainsl irs fedc",lt"" lint-ility. In lOIII. taking imo consideral.on the hmd. Icvcrng • ..! allhe project)""t:I, 

the NMTC progr;om pro;.I~ccd S8 of pruj<'CI-lcvcl invc:suncn15 lor each S) o f foregonc la~ n:1',,"ue. 

l'criml'S nK,,1 imponanl i.lhe filclth"l c' ~ry NMTC investment h ... br.,.,,, made in • husillCss in ~ 

neighborhood or communilY hi.lorically undL'r!Ier\'ed by privale caplta1. Countless $1Itt<'$sful 

communities Ihrollgooullhc roUniry an: mup.nelS for privDtc in",-slmcnl in' (Slm~nt lhnt dOl'.' MI nc"d 

lhe cnc(>Untgcmcm 01'0 rederal (lr Slate government ;ncerll"e. 11.\$.' arc nt)tlhe cornn,urlilic. SL't'Vl.'tlby 

Ne" Markcls Thx Cre.:lit. Thc New M3rkclS communiliCl; h.,'c significant pO\'eny levels and rdmi,'t'ly 

low mcdinn incomes. O,'e, lime. Ihes<: communilies- ha,·c been ",rillen olThy pri\late capito1. Yell"""" 

places arc-called home by millions of Americans who \\'0fI,; han!. \\'lUllto live in &Iron!: <'<Immunities, and 

\\'lInl l0 ensure that thcir children h""ce,ery Opportunity 10 ~chi., e Ihe Ameri<'lln dn'3m, 
55 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.041

New Marlcc"!' '''''<'lIlm.nls can o"ly b;.' made In communi i~ .... ilh a ronny I~,d "fal IC'II51111'1t or~ 

mcdinn io.."{Jmc al or below 80'"' nfurch medi~n income. While thc"S<: a .... • Ihe minimum U'f'Cl>holds. 

'ta i~ti""sho" thol New i>h rke\" inwslmcnL. l~llCnlly reach conmlUnilie, "ilh (b:pcr pm-eny le,eI, 

.nd lo\\'~r median incom .... than ""'Iuim.! t>y ' 1"lUle. In Il,cl 'i<:"""1y·fi\'c pcrcem ofNMTC 3cli,ily is in 

communities ,.ilh higher di$l .... "'SS - poverty nues of al \c"Sl 3(1% Il\" median irn.-umcs Ihat do nO! exceed 

60% ofa .... oa median mconlC. Aprro-~hn-~ ely~. oftk Deli,-iIY is in communilies "ilh unomptoymcnt 

nll"~!ll j,;w.<>\ I.~ tim.:s that {tlItional a'o:T1lge. NMTC inw$Il""uts a'" c,""atingiohs ~lld s-uppol1inS 

dc,'cIOpm.:,.,t in plncc"S "he", it i~ OlO:<t nc .... dcd, "fhtse ;n,'C>.lmc."t, are al .... hallin~ hlight. restoring 

abandon ...t building;; 10 lax rolls. revilalizingsmall do\\'n10\\'n busincs.< districis. ""d crealing momenlunt 

I\lr funh ..... o.Ic,'elopm"'Ilt in und ....,.,n' .. --d ncij;hbQrh(.K!lls. dlies.:tlld t<)WtlS. And th" cities and ("wns Ihal al"" 

benefit in)!. from thi~ powerful f'I"Ogrum a~ locn!~d in ea~h ofyourCongrcssion"1 Districts. 

I am sure 11\;\1 you are famitiar with the New Markcts i"~e.1n\cnIS in your distri~ls. and an<kn\u11d the 

impaellhq h.,-c had o n the comml1"i!ics )'01. rcprescnl. Bm I wunt 10 highlight ~ COIlp lc ofpmj ...... ts from 

our $lalC. The r,,,,II·d like 10 highli!Ptt .. th~ River Valley Mark~t in Northampton. MassachuSC11S. 'n..: 

OWner.; or this local food business lInd coopcrJti'"e. in n~d of l' home in the sn," 11 city nt'Northamplon. 

s<:ll:<:lcd ~ fonm,"'gr.l1litc <jU.1rry On a major higllw"y as their Sile. Ilulltwy ~'Oulo.l JII)t Dhract investors '" 

,;«ure fi nancing (II" the "'oil< ncN..'<i 10 hOIti"lheir b115incSfi. With a N~w Mall<ets Bward. ihQ.OW11Crs 

wcre ahl~ to ,upport the enostrui.1ioo ofthc qunny ~paCt ~nd opct\ a fooil coopc-rath<c th~! fealul"t-'S 

rroo.\11ce and mClll frum dozen. o floca! fomlcr.;. tnke .. ""t r,JOd "'''''icc. and. siHl/}wn c~fc, In odditi,,,, t" 

I>cnernting relail "!,po11\,,,ities in Ih~ at,iI."Ullural tC11lcrof MauochuS<.1iS. the River Valley Market is a 

(rue wmmun;IY gathering place. with hundl"\...ts of3l'l:a rcsidcnl$ and tourists COnvC'1!ingon its food tall ~ 
56 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.042

and lakc-O}~l ,;Iand,; on e.'et)'day Oflh" .wck, Kc.\iJcn15 from 1,)"'nS and cilies l~n'lu~nut the Connc~t,Cul 

Ri,~r Vall~y are t>;,n~f'lin~ from lhi~ fa~il;ly. IIhkh eQUld!l()! aUrael pri,-alt inv~,t"'~nt on i .... own. 

An()\h~r projeci "ilh which I know Co g",~';m~n Nc~1 is familiar i~ the Holyok<' Heallh Cenl,-r l'rojei:1 in 

111'lyokc, With a New Man:C1S ~ward from Ille ~b~h"""llS II"us'''1O In\ ~Slm~nl Corpor~tio" {Mi ll e). a 

tl",;ed h,"3.llh ",."t,.,. W35 rcplat<:d hy a fi,1I service. one-Stop medil':!l compleJ(. r.Il(»-'ated into Ih"'" 

c,)mn\C'(cial prop(,flits locnted in t~ IIc;,rt "fllle cClllrdl husine~~ distric\. Iloly,)kc "net was lhe I'ilrld' ~ 

la'gc'{ pal"" msnufaclurer - a llui,ing 19" celliury community I' ilh U a,1i,'c pa""r m"nUfnclurin~ 

plants, In 1'C\.'"m dl.~::,d~. Holyoke ha~ b..~omc one ~fthc low~"St inrome l'om munilie~ in Massachusell~ 

and h~s been dc~;gnnted ~ '-m,"<lic~ ly Ilnden;c ..... ·ed nrca", The <1<.... ' facility hu~ helped 1m a sub:;lanlM 

"ced lor m"'ary care m"dical ..,,,,ic"" and has reducoo the ex,remely oo51ly reliance on cme,!:~ncy room 

<"arc. The newc~ntC'(al~1l 1l1Ti.7S iml"mant new ~r> ;tt:S, indudins ~ diabl""" dinie and $UbStDnCe abu$C 

programs, Ttw MHIC Ne'" Marlo;ets award g,encnlted 'WC'( S\I millilm in debt IInnnc;"g for this important 

projects, And the N~w t.brk"ts in"~I,ncnt led to the crcalion uf 3~O jubs in thi~jmal1 Mass.ehusctlS cily 

bunlc-na! for )'Cars by hish u~mpl()yl11cnl rot~s, 

Scwr~1 bloch from thl' HolYOKe Hcalth C~nt,.,.. a new tOmpUler C~""cr is a bcnefK:iary ofNI:\I' Mm .. :.c .... 

InYC$lrn"m. 11,c High PerfOnl131lC<.' CllIIlpuling Cenll.,. is a 5168 milli!)" t~hnology hllb undc!' 

conSl",ction at B r"nller industrial site in Ihe hl .. rt ufdowmown, When completed, t)w fllcilit)' will be 

New Eng.land-~ lir;1 hi!!1> pcfrommnc~ l ... >mputinl!-eCnl~r and ,,·ill r~nk am{>ng the ~OO mllSt powerful 

co",pulinSc;-ent~f'iw lfId-w;de. 11", .;nIler waS \kvd<!pl'd throllgh a PlII'ute/public panllmhip including 

fiw MaSSll"huS<.~lS uni,'c""in,," _ Ilnr,-:u-d University, Ik Mai<S3chuscus Inst'lutcofTcchnology. lloSlC>n 

Uni,'ersity. Nonheasrclll University. and the Uni.-efsily ufMass.lchusctlS - as wcl1.~ Cisco Systems and 

, 
57 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.043

E.Me COrpllrntioll. Ol ~r 600 con~tn>Ctioo wol1;er.; h~"e bcl!n cmplo)'ed on this critically imronunt 

project. which has allr~ctL"d ~ttenliol1 throughout NL-W En~dalld. 

I would lik~ to de><Tibcl aUQ!hcr New Mal1;~t6 inYeSlm.m in western Ma6""~hu)ell5. The l"ity of Pius field 

is located in the hCariofthe Iklhhi",,, - all imronan! tr>urist destination for IIur ~!:l tc . The city·, 

economy lkclill"d ,:harply i\Cvcnrl d~"""1Ides aso wherr Gon..-nl Electric dOM'd ils r""ihlic-s and mlll'<."d its 

jobs out of5!alC, UnCllll'loym~m incrt:ase<l imm~diald)'. as did the poverty IeH!. Sintt that t;nte. city 

of11dal1i hn"c woncd hord to anmct rlCW bu~inC!\~. =atc a stron~wr 10ClI1 «"nllIll),. nnd panicipat~ in tht 

wurism indo,t!)' in thi$ beautiful 1"<'Si1l11 orlhe SIUle. WiO! a New M"l1;ets award from Mille in 2006. a 

historiC the:llCr ill the ccnter oflh~ cily - cll>5Cd lOr 50 yea,.,.·- was I>cuutifully restored. The rcS\\"Ir"C<t 

theat.:!' is a ~)'mbol ofth~ ru-cmL'fgence off'insfidd. :,fl~'f many diffieultdccadL'S. a~ til<> ~onomit and 

cultural e~mer oflhe llerkshiri.'S. 

Shonly aner tI,,, Colonial Th~3ter""'torat;on, 'he city benefiled again Irom a New Marh-u award. Wilh 

$17,2 milliOn in ftnarlCing i"mm MIlle. lh!' SIX-"""""n Be~con ("i""rna Com"le~ "'3. restored in a long-

'3eanl historic prope!"1y !lear lh~ Colonial ThealtT. The n""· ci,,~nra Ol"'nOO tor buS;!ll'S.~ in 2{l()9. 

Together. thc ~illcma ~nd th~ 111e~t~r have chungcd downtown p;u~r,dd. 31ll1teting as many ~~ ~OO.OOO 

new visitl)fS a year 10 tlJ.c 3rcu. Thc Cily eSlim;ltcs lhat 45 new busincsses have O)JXlll'd si!\~e lhe 

rt'SlOrotjon~ 11m: rompicled. The ell-~n oll n Barringl"," Stuf;c Comp.:my rclncat<."d tn dOllIlH""" 

Pittsfield Do"'rl\{lwn foot trJtTic h~s increa5<'d. I\:t~il sat.'S hal'c improved. and "3Cant downtown 

~lorcfronl S arc now few and far !JctWCl:ll. The New M8rkC!S T~ C",dit progrJm ha, b<.'Cnthc catalyst lOr 

major improvement in lhis sm~1I Wcs!~rn MlSSsachu>ctIS city . 

• 
58 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.044

I hav<,g'nm you M~$sachu""n$ e.nmplos be<:au;;e Ih~y an; besl bl<!wn 10 u,. UUI Ihou .. nds orNew 

Markel~pmj""l~ ~xjsl fn COlllllluniuo:.; Il,mu!;houlln.:- ""UnifY ~ ~od. In Ihe~ll<!n >)lUn o)"n"w },0";Ir"S. 1k<:S~ 

projc~l$ ha\'c demonstrated Iheir ignHi=tee and their valu~. 

The New Mwkcls la~ Cn."dil cKpin:d On IR""mtx:r 31.2011 . [luI il i, n<lllOO lale 10 eAiC"nd il. Becau.e 

o(il, impl>r1ance and s"cce,s. I would 3sk It..: CommilLe<'."d Ih<..· C""gI"CSS 1<> la~c tl""" ~" i",,~: 1) Mokc 

the prog""" pcn,,;U\c,n: 2) At a mi"'mum. c.Xlcnd thi~ prognun For r"e n",,,, years,t an annual ,IIoc31'un 

I.,et ur5~ billiun t.y [l."1S.'ing ILl<.. 1655. We th.nk C'H1B"-""n",,, N""I.n<l C"nllr~"SS",.n Gc.,.l"ch r", 

lru.ir SPQuSQfl;hip "f,his imponantlegisla,i",,: Bnd 3) Allow tht NMTC H' be uSl-"d In {In"scIIl\l\CS p:liu 

uTHlerth~ Altcmali~"Minimllm Tax (AMT) $lrucLUt"I:. In lilt IonS Itn". a~ this CQmmilLt'<> l""!>l\~iucrs ways 

to rcfonn Ollr tOd~. I am ~I"d thatlhis pro!"ntm c"1ljoys the stronS5Upplln of many COl11mitl~c member.. 

and I hope.lhat £ul'Il'I'" " 'ill p!"Ovi<!.: Ibr ils proper~n~idcrnlitifl allhe ap)Kt>priotc lime. 

Ruil d A",ork . R<t nd~ 

nuild AmcnI."U Bonds ha\"i! h<..-cn 'Mlremdy itnp<"lftMt 10 MasS:tchu"cIlS and il I'; fII" hopl: Ihnt Coogre-s~ 

win f'\'in~l/lIC Ihi~ pr"I'J1lTO ~I Icusllhruugh 2(l13. A5 yoo knu".. lhe nuild Ameri\.l1 Bon<l~ wen: Bulho",,::" 

unT.lcr th" Amc.,.icao RC"CO\"C"f)' 300 Rein,·e.lmc"Ilt Acl or2009-and lhu.lhcy do nu! ha\c Ihe hisloryor 

p<:rfotmanc'C ~hlll"<.-d by the N ...... M:ukl"!!; 'r"" Credi! and Ihe Low Income l'lousing r"" Cn:diL But in ~'C 

.hon lim~ Ihc~ ",."rea,·ailabl. - I.,.;. th.n three years __ they ",ade a Ir<:mo"d"u, inlp;K'( I>y <'"Il~blins ~l:ite$ 

and CIties 10 ~cel!$S ~api,al al ~i~nifkmu "osl.<a\"il\1\ll' 

Iluild Amenca Bonds are la ~llble bunds. l'he U. S. Tn;asury piI}~a 15% din."cl subSidy 10 the i~uer orille 

"onds, thus driving down s!gnil)<"IIntTy Ih~ COSI ofborrow;lIg. Betw«n April20!)9 aTHlIX"Ct:ml><:r lilli , 

then: w"",,, o'~r1.27~ >eparalc ;ssuane.,,; nfllmld Am~ea Oonds. roising over 51 ~I billion forcapll.1 
59 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.045

pmje~!~ ~l.ICh lIS bridge!; ~nd scflools. MassadlUscns iSliUed c!0s<:!0 S5 hillion in Build Amcrlc:l Boods. 

and the impa'-1 ru.s t,,:-en ,-",iden! in (V(I)' n:givn of the SIJtC. Tht bonds uunw.:u..J in\'cslllfS for r"ujcc\!' 

~""h., our S3 billion Accc cr~ted Bridge l' rogrnm, which e~~teJ 12,000 eonsiruClion ji>llS while enabling 

the Cllmmllnll'calth til "-'Pair hundreds of~ging bridge'S, illCludin~ the hi~loric Longfell(}w llridgeo\'er Ihe 

Cru.rlcs River. OIU' ""hools snd UIliv=ili~s - so importllnllo our economy - .IS<) benefited frolll the"" 

bond!;. AS()ne c~ampk, our large'Sl schO<'lI-· the Univer.;ily ofM~s!i:lchu,.,ns AmhcMlI - mmvntcd IWO 

laoorutories ~nd i~ t:luilding a T'CW Commonwealth Iionors I!esidl'"..,e Comple ~ thai i~ sclll..Juled to ojl'Cn 

neXI ye~r. This c~lTI:mcly successful progrmll "'liS Icnninnlcd in 2010, Md I urge Ihc Commilll'e 10 work 

10 rein5,Ullc il. Slate und local ~o' ,'mments ,,'l:Te quick 1<1 issue bond,. and the pril'31C seclor was quick to 

p.ncha;c them. As we ",'ait for thcCongrt's. 10 act on a lon!;·tcm. extension of the highway bill, 

rein~ming the Build Am~rica (I"nd~ program ~\lU d help ~n~urc tru.1 projC<:ls 3rc nQt t<!11nin:ltc..J or en,n 

abon~d ""~aUSt! of the uncertainty ufp",j~'Ct fu\Klint. 

Within th~ Build America Bood I'TOllrJln. OJfll<n.">S cswbli,hc..J the Rl,\:o\'~..-y Zone Bond Program, with ~ 

combined nAtional \'{>Iumec~p ofS25 hillion. The Co",mon,,~al1h of Massachu~ts waflallotte<l 5557 

million. GovcrTlor Dc .. ~1 Patrick ~ig n~d Ex~'CutiveOrder 5 14 in Oclob!.'r, 2009, officially opt:ning the 

Re'CO''''y Zon~ Il,md pl'og .. aTll in Massachusctb; and idenlificd the exi,ting slale Econo",ic Tu,¥d A",,,,, 

~s R~e(wery Zones. A111h~ bond allocation conI rolled by h~ 1'31rick·MuTnlY Adminlw"tion "'II, ",.,d. 

with Ihe Recovery ZOlle (I""d I'rogr m t..ing must allrdct;\,e 10 companies thaI wanted 10 rehabilitate o~ 

e~pand Ihe;r li~(;n!; rllCi1l11~ . 

In Lcnox, Ihe Al tegmne C,)mpany. a fumily·owne..J real eSlate and con,tMlclion finn thUI has se r\'~d (h,' 

BerL"$hires For four ~:ener~lions, us<"<l a 53 milh"" Recovery Zone Bonl! issuc \0 acquire. renoV"Jte and 

~xp:lJ1d" !Orr-c\o""d buildins. The I",dal~ Mine",1 Cosm~tics company in Great UarringlOn benef.led fronl 
60 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.046

a 54.6 milli,)n bond i.~>uc IliA! cn~bIL-d il 10 com'en 3 fOmltrclemc"lary scllool int ... ils new hc~dquaneT5.. 

c.'pand ilS swff. and p"'p.:!re fOT gro"'llI. And SpringfIeld "ill gel a new 71.000 squ~l"<.-"'foot surgery ce"le'r 

and m,..jj,,:d ofli"t' buildingcnnfollllclcd for Bny Slate Jl~ohh Sy~lclll~ ",ilh Ihe IladciRg <lfa SI7.S millioll 

I>o",d. Past C<lngrc:sse. considL....,d I"gi,tati"n to L"lmncc the RI."<:t)VL'rY Zone Ilulld progl"3m $0 ihal more 

jurisdictions wuuld I.>c ~blc 10 18~C advanlag;: ofth<=m. It makes sense 10 cQnslde'!" IhQSC improv"mcms ~"d 

eXlc"d Ihe Rcro"cry Zone Uond program. 

SimIlar 10 Ihe New Mnr"",U; prvgram. Ihe Build Amen"" Bond Il'fOI!l"IIm and R""ov~ry ZOIle. Bond 

prognlhl ha,'" had a significant ""onomic impscI and bave provided the impetus l"r projecrs rhBI orherwise 

might never have gOl1c forward. And mosr imponanlly, Ihe Pf'lgnlms h~"c proven!O 1M: a more efficienl 

menns of dclj"ering Ihe tu ocncliloo SUIte and local horn",i"g'" For lhew "'Mons, w(' ~trnngly urg~ 

Congrc.ss 10 ~xle"d Ihis imp"nKnl program ihrough DC1;cmbcr 201). 

F.ml' ....... rnl. '" 7 ..... n. Bonds 

Empo""<m<."'TlI Zoo<"li w"'"" created by Congrc~ in 1'193. bUI ,I wa~ 1m OCf"..., HUD dcs, gn~lctl $11 

Empowem"'nl Zon.· in Ihe City of ilo,\on.. Along witlt the designation. UO$lon n:cci,·.-d Ia.x·c.~empl 

bonding ""thority in Ihe amount of SilO million. Th .. Empowcnncnl Zone pIOK)"Jm rndcd 'll \lte end of 

2011 . nlkr~ rtlllXle,i,'c cS'~llslon. A, of January, 2012. Mer 1.j.IKIOJ<lb~ had bc<"ll cl th~r crca,c.l or 

"'Iain.d i" Ci,y's Emp"wcml~m lnnc. a diversca",a lhal include"S fi\"~ neighbor;'oo,!.. The Newmarket 

Squa", di~lritl in Ihe neighbortll)()d of Ro~bury is un ",t3mplc orhow Ihis program lransfonned a blig.lnNl 

a"'3. fiesl WeSlern HIl'els red.:velop(."<l 3 IS0')'cor old. ind",;trinl building inlo ~ en-mum hotel lhnt sc,.,...",. 

the BoslOn .Med;c~1 CC1ller. Wilh 5t""(:r:l1 Nllcr such proj~'CIs. thi~ ml,a is no longcrdo:solalc. bUI is 3 

thriving 101:31 CCfller uf commcll:c. According 10 n 2010 r<po<I on ih~ Boslon Empowllnnent 7.un~ h)' 

• 
61 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.047

l'<'SCareh~r Jam"" J~,,,,i~~: "A k~y accomplish"'''''' "ftlll.: Emp<,wcn'!<11! 'lon~ is thc~gnir.can~ ~ili, " 

cm.n~e in pcrccpliol)s abo.lul ooinl!,busmcss in !<Jmc aMls in this pan "fl!IC cily." 

The ~mc rqK)n cjl~s lhal belW""",, 2000 and 2009. till' r:Lle of groMlh in lhe EmflOW~nllenl ZUllC i(ler"~S\.-d 

by 12,2 pcrcCOL. farucce.ling 1M I ,S p<'rccnljoh growth In II\(: reslonhc dty. anll gro"'lh nltcs ofl1"r 

capilli income and mcdian h"u$Cholt! incf/me al"" ot,tp.<'<:d the n:st nftllc city. Th~<;c are nu small 

m.nm'pli,hmcms. and Sl1"ak (" Ihe ;mrort8ncc "r c.~tcnd in l! the Em",,,,,.,nnen! ZOO"" and their bondin!:\ 

authority. Atlllilionally. twol)I~r cumplimcnla,y pro~"''''s . (he Emcrrn,." C",nmunity and cn<'w~1 

Communily programs, wcre \Cnninatl-d Bllhe end of2010. Many of the'S(! al\:as uf economic dim"!",,, 

Were located in rural areas. and ('>luld .... ncfil from. long·lerm ~ltnsion Ihnl would .'flsure emaimy tu 

'n>osl()rS in Ihuse ....,a •. 

l'ht t ow Income Il in g Ta. Credit !'.ognun 

The suCl'CSS<'. uflhc New Mar\;~ LS Ta.\ Cn:t1i! f'r<.>gram art panicularly J1Uwcrful. !:lU! lncootcOtllCIl 

generated by tile Low Income ousin~ ra~ Cn:dil program ure t:qffiLlly po""rful. AUlhunlw by 

Congl"C'SS in Ih~ T8~ R~fnrm ACl of 11186. h~ Low I~ co'nc Ii ou~ing 'fas (,...dil progrum "liS crt'a,...d,o 

,pur tile dc, dop<",."t of bIldly ,I«<le.l affortlahk rental h(\U~;ng. It lias ulliloohtc;lly achk,·...d th~! 1;001. 

Sin~c ilS au!horillltion. the Low Income H,~ sing 'l"a.\ Cre.Jil has created ()r pre""n'e.I <lHr 2.5 mHiion 

unilS'ofrental h,m"ing. No ,"h~'f (CdL· ... .I "''''''ing progl'llm - and cenainly nu sl~tc-fu rnl...d housing 

p",,!:\rnm _ call cquallhaL 1'<'COI'd. A~ 'he Iiouse con.idel'$ lax reform n.eru;ul\!S in 11", cO! ;n~ Y"8r. ".., u'1:" 

thal it ":"o~ni~e the lrtlllC11otuWiaCCon'pli!;Jtml'lllS uf ,he Luw IlIl"<lme Housing Tax Cmli! r l'lJl!l"ln and 

surt' ilS CQ<ltinul-d SUccesS. 

'. 
62 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.048

The Lo" Intomc- liousing Tax Credit is rKIIjW;! a hOIl~ing proJ::ram; il is B significan! co",munil), 

dnelQpm~nl prog":,"l. The credit creatc§jorn.. reSlor~s ab .. "doncd or 'JIldemtilizt:d propen;\:S. reclaims 

urban in· fill SiM., and suppons relail and commerciul "1'ponunilics near proj.'C1S. In f~cl. Ihe Low Incom .. 

!I'l!!sing Tas CI"I.'(\il pmgmm is olle oflhe premil'T conlillunily dewiopmcm p1l'JJ;,Illms in Ihe country. 

Lei nle pruvid<." mOft" dc"1.:lil 011 communily d~v~loplllenl througll the hou~ingcredil. As il produc~s or 

I"'"l'Sl.""rVC'I ul1;I$. U .... credit crc3l"l'jubs - million. ofjobsowr lhe lire uflhe progrdm. In M.ssachu!le1IS 

.I\I!>e. credit mVllrds hD"C helf>ed ~reall.· ,,,'cr 4(1.000 jubs- aoo ih31 is iust during cOnSlmctioo. Once- a 

(lfoje.:t ha, Ix""n buill or rehabilitated. il creales pcmml1entjob;; on ~ilc jj~ f(jr propeny managc",. 

so:rvk-e <"OOfdinalOt"S, "",imcnancc empluyees, und ullin' SUlff. 

Admi,)i~lcred allhe Slate k"d by housing "edit agc"ck'S such asou, I)"panmenl, lhc prog"'''' ' highly 

11exiblr. Th~ ~redi! can be awarded 10 Il kinds ofprojC"lS: !WW cooslrw:lioo, r<.:habllilalion, und 

preservalion; projc'Cts ror f3mil il.'"S. for seniu!>. for \ Clcnms.. for p • ."r~m5 "illt disabil ilics. l"or indi,'iduals 

"ilh ~enuln 11e..'dS, for Ille formerl)' 1l00nelC5~. The credil c~n support rcnlullmu~in~ lhal i~ complelely 

~tr.)n1ah1c, bul il can ~Iro SlJppon min"tl.illCOlnc "'"lal hQUSi!ll!. '';It. ~(fonlabk unilS Bnd markel units 

side by ~iIk in the smne building. 

Counlll'1\S housillgCTedil proje<:1S bal'" hnd major impa"l$ on the neighborhoods in which Ihl')' DnllocKled 

and have b.:!en the ~-alalysl fOf pri~alc im'e.lment. II is ca,y lo underst3nd "hy. Many crooil prujcd$ 

io\"ol\'" lile rc:h:tbililaliun of abandOlll."tI ()f underulili1.l'<l propI."i<'S Ihal are ~n eyesore and a blighl 011 the 

surroUl\(hng nclghbo1rh'lIXl. When Db,lJ)dooed lIT underu~d propcrtie5 Qr( r(11,1bililaloo and rclumed 10 lh~ 

Iill< rolls. Ih~ n~ighhQrlwod impro\"l'S _ and privale i"'·<.'Slurs. always alen for opponullil;"5. bo:~" lu \..I;e 

noliee. l"i~ i. ""mmunily dc.\"~l opl11"nt at ils be~l. 

" 
63 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.049

In lIur 1~'1\c.." ci,i",,,llOllsingcrcdil proj~clS oltell are buih Oil uri"", ill_fill siles - siles Ihal frequ"n!ly ha.-. 

become "",iro" ~m l h37;lrd, Ihl"(ll)8h illegal dumping and othe'1" criminal .cliviIY. In Ihousand. of 

Amerie-~" n';ighborho.-x\." til<! I~X credil pr~'l'Um hus broughllhe.-.: ,ileS to lif'(, and hM h<:lpcd SfIur 

~dd li"nal inH'l;lIllcnt - " .. t.,illlp[lOrtllnilil"S or markel ratc hQusinl' - in OIL' ~urrou"ding blocks, This is 

C<IIllmunil~ d~"dOJlmem in Ihe troesl j,efl~~. 

T,,~ credil projl'\:ts thmul;houtlhc counlry kJlunl n"W omce. "'t:.lil, Or commercial space $erving 

rc.idcnl>"aflhc propcn~ bUlalso the bn>a<lcr communily, In addilian, I~ mi,i..'nl$ in hI/using m:dil 

pr<)j~el,<; constitute a rI:~dy_n",dc market of new con~um~~, "ho ollen \:Iuy rrvm local nlcr.;h"nts and 

supp<m Io..'lrl busincs,,"s n,~j()T communilY d~ elopment I'.oai~. R~ri:h confirm! IhBI" hQusil\g pnij~ 

-- an allonlnblc renlal hou5ing pmjl"'l - fn:'1l1Cnlly Icad~ 10 an increase in prn""rty ,alu<:s in the 

surrounding neighbur11000. l "is also is c()l1lmUnily dc,dopmcnl. 

In M;lilOachu!;i..1lS, Ihe DcpanmclIl of Ilou.ing and Conununity /)cvclopmenl has been Ihe ..... te allocating 

H~ency for the credit ~i""e 'he program b<'gln, To dmc, we h~vc ~WJrd..d llUt cm:lilS 10 574 pr(tj<"Ct~ 

cllmpri~inl' 3'1,016 unilS Io<:ated in e,<'I)' ",giM ofllw Slfile, Appn'ximatcly BS )K(eenl Mille 'JIlil~ are 

~rrordablc t<l i"di" idulls or houS(Cholds earning no 1lI0re Ihan 60% ora"", mcdi~n income _ the t"rget 

group im"l1d..d byCol1grelS when Ihe program wa. aulhori~..d 26 yc-ars ~go. The program ~V<$ very 

n~'Cdy individua l. "Old famili<'S, but it also ""rvc~ thou~"nd. upon thousands of work ins lamilies. In the 

BosI()ll m~lropolillln area. our family tax crlodit projects.", filled with "U!kers ollen employed in h<!'~lth 

C8ri:. food servicc. muinlenanc.:. smull busin .. s~ ~nlerpri:l<: . con,;lnoclion, educ~lion, tmnsportalion, TI~ 

ar" tlUt high_payingj"bs - oft .. " i;>e low $50.000 -- \:Iul lht5"jQl>s are in ,n311Y "' y~ ce'01ralto the c'\:'1Oom),_ 
64 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.050

populali"n._ The Commo"weal~ , ofMllS$:IchuscllS i, "ery interesl<'<l in m"killg tal' cn."ditawarti. 1(' 

project> for homelt'S5 ,-..1enIIt'\. We h~ .. cjusl rompl~l~d a lax credi, funding comretition and w~", able 10 

mnkc =dit awards to 1110 Ilew Htcrans' pmjccis. Gordon 11. MJllslkld VHl.g~ " '111 ~ buill in a wcanl 

po ic~ lraininl'-aeademy in Agawam. a small city in WeSlcm ~l3uachu ... '1ts. ·!"he sponsor.;hip emity 

indlodes SoldierQn - a group Ih~t c~clU$ivcly SCI'\I .... Wh,TlIn. ,md has Uh.'ns;V(· el<p"rkncc with homde$S 

,·elcmns. Soldi~ On 0p"rale~ homcll."Ss ~""ltcn;.joh ttu'nlflS. Jjll.nc;sl managemenllrainjng, coun<el;njl • 

• n~ other suppor1m: s.'r"i~-.,s Ihal ,-.,l(:Tans need. When the A!!.""lIm projecl)s read)' fQr o,,<:ul"'ney. 56 

.:um .. ndy hom~lcss ,·cIL-rnns will move ;nlo newly rcll.bililHIW ap""mc,",s 'lrld will "'cei." "uf'l'()fl 

~rvicC'S, 

lhe Agawam pro)e..." \liU t.., Soldier On's !;Ccond ,'mj~"C1 1".luring pcrm.""m hnusillE "lid -",rviee. for 

OOl11el<",:. VtlcTll ~, Th~ fir.;t p",jccl- aliiO fUllIkd by DHC[) ~nd other public lenders - is locau.-d in 

Pin ... tield. MA. and nclud,,~40 units Jill" h"mel~~ vctenms. Al.o;o c~ lkd Gordon 11. Mansfield. 1M pruject 

ha. bo...,n 'lCcupic-d f\lf almost lwo yea",. i. highly succc,~ful. and has n."Cei,·c..J nalioo.1 recognilion. 

Our D"""nm~m also ha~ juS! awankd In.~ credilS 10 Ple~sam SIr~~ . a his!ori. rdlshililal;on rrojeet for 

h()mcl~i.< ,·cICTlmS locmed in the ccntrlll busim:ss district in Ilc"crly, (')nc of Our ~rn!lIer6ti"", l'cabOOy 

Prt.>J"'nies - QIl" of Ihe Pleasanl S"'".·! SPOII8Qf'S •• has -50lid e"peri""L"C in d~,doping and "'.n~gin~ 

pt'Op"niC'S for homdess r~lIlili~ and individual!.. irtCluding humcle-s. '·L"teran •. Peabody'~ manageme"1l1 

company "ill " .01'1< with a locl\l 'CltmnS' group - "'h.m OffieeS3!'l:j1l5t. block 8W8)' from the projCCI -

10 Cnlrur~ lh~ availabililY of ",rviees 10 th~ 40 velCmns "ho will movc into Pleasant SUCCI soml"t;me nc.~1 

" 
65 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.051

At this time. DHCD is working with Ihn."<: add iliwal c!~rao~' pmjt(:l& \\,hru;e spon><lr.l intend to ~k W~ 

cn.'tIilS as the cO!'flerstone oflhcir tioancing. On behalf of the IXp;ortm~nt. 1 wanl 10 Idl you !.hal 'lSing 

ta.l: credits to UPl'<'rt >"-1crons ho"~ing isotlC-of our highest priorities. We nil' fullycommit"'d 10 S"rving 

this p"pulation. "",lthc tax cmJit program anow! ~ 10 do that, 

LeI med""" with"n .... ample or the Low Incom ... Iiousi,,!: Tax C",dit SUI)por!ing high i"'p:!ct c'OI1\munily 

de, e1,)pmen\. A$ n'I:~mly "~ el~hl )"l'llTS agll. hundl'\.'>,!' Ill' d<:leriornted ,collil units were clu,;tered in 

sc,.~",1 neighborh.1OIIs oeaf downlown Springfield. MA. Some of the proj~"'t!i haJ bc<:n pu",~d by out_ 

of-state own,," "hll pro"io:kd mininla l management and ",acted slowly. if~t all, to criminal activity 

within their pmpen i .... Th""" P"'l"'rtk'S were n"loriO!", within l1 ~ 13rgC'T Sprinljficld comm"nity and 

eonstituted B drain On publrc sarely rcsnun:es. Th" Worthington neighbortLOQd was panicul",ly imp:!ctc(\ 

by tile .... deleri"'"ted pmj""t •. Se,'en ye= ago. an experienced ta."\ "redil de"clore' put IOgctllcr. strong 

partner.;hip with the city of Springfield snd I>IJr lJep;lrtm~'f11 and beg~n assemhling n..,;nurct.'S to .cquir~. 

rehabilitate. and manilge the", properties. With 13>. credit awards tnlm DIICD. the de~elopmcnt ~'f1tit)' , 

F'irst Realty J{ffilurces. ~cljuin.·d th~ li'sl propcn i.:s and took ~er m;magcnI<'IIt in 2006. As ",habil itation 

got untlerway. Fin! Realt~' s nlwnagernent company focu".,d ,hurply on chun!r.inll. the I>chavi<)( of the 

rt'Sid~~I!.; by enforein!! rent cull<.'Ctions and leMe t."""$. City ullicials ~nd the police dl:p,:tnm~"tlt h~~c il«11 

'err happy ""th the results. inch,dinll a substnntial drop 1]\ criminal actll'lty mth" neighborhOOd. 

With ta)( credit 8wlIrd s from our D.!partmcnt. Fir.;t KC3II~ now has linis.hc'tl r.:habjl(tat;ngo' ~r 340 ",lit, i1\ 

!he Wonhinllton nei ghoomOO<i. This is ~ tnt" cummunity development and comrntmity «:Vil31i2Jtion 

pmject. The appearance 'lfthe ncighbochOQd has chnnged Mll.nilieantly, a~ has quality of lilt for it" 

ft'SidL~n$. Nu pUlgrum DlhL" ihau the Low (nL'OIne HIJUS;I1J!. ~ Cr..--dil is pow<.. ful CUIJugh 10 SUPI)()f\ 

" 
66 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.052

rchabilitati')I\ and ncighborllQlld imfm,l,'cmL"Ilr at th i~ s<:alc_ This is <In''of many "'asQ"S w" ~k you II) 

~upp<"" !hi~ program in IIIe y~~rs IQ come, 

On 3 sJlC"iric m3Ucr. we panicularly urge Congn:s. Lo e~!end lhe so-callL>d fIXed 'J% credil. eslablished in 

the HOU$inll nnd Econ omic. ~o"cry Act (I IERA) of2oo8. When the It£ RA l~i~I~ i(>T) replate<! ~ 

n""ting I~ ' credit .... te with the ro .'cd ~ Me, Con~'SS brought consi.tcney and clarity 10 !he prnl!;l1Im. 

Dc, elopers ~ould predict" ith mlll.'h ~~tcr accum..:y thee lal!!" nf!h~ 9% er..'<lit to pril'atc inl'estors, 

Chaimla" TiOcri ""d Congrt!Sl;m.n Neal. we pr~'Ci~l~ your Icadc-nhitJ on this is,uc with )'<lur 

introduction ofl,,!;i,I~lion to make the naL 9"~ cn.'<.Iill"'nn3ncn~ II.R. ) 661. 

While currenl luw e~pim; for propcriil .... pl~ccd io sen'icc alk,. 20 1), it has effectively expired alrc~dy 

~i cc new allOCalions ()rHnu~inli! Cn:dir~ ~3nn '1 r~ason~bl) a,;,;"ml! Ihm lhc propcny will be builL8nd 

~upied wilnin Ihc n.e~t year ~nd ~ h.lf. !'ropeny Ik,'clupo::n; recci,ing 1l1l0C'3tion$ of credits in 

M~,",d\U,.,1t .. ""d other states mUS1 now a,,~Ul"~ ~ 10'" credit amoun t. This has dlcCli\'eiy reduced the 

amounl ofequ;ty that can be r,>;sro for llou~inl! Credit del,<lopmCllI by ~1111o~t 20'%, OInking il more 

diffieull 10 develop thi ~ housing. We ask !h~t!he fixed """ I"Jle be cxwndctl. 

" 
67 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.053

Condll,lon 

In condusion. these cotlltllunity development laX crc'tlits prm·ide many impon;.mt ""netilS. The)' lev~ra~c 

funds forcrot)omic dc\'clopml-nt. cQmmunity develupment. and huusing. Titer cn:alejob~ rebuild 

infr.lSlrucm"" and they lran,fomn diS1r,,~d neighborhoods. They ":present the kind ofinn<lv~tiye 

Ihinking Ihal i~ Ihe Wfe nflhiscounlry's jj.mIlncss. Again. I urge)'flu 10 tXlcnd Ihcs.: ta~ crroil program, 

on a long-term basi. so Ihal wenn u .... lhcm 10 cominue 10 build Ihe road to n:unomic ,,"'Cm'''!)'. And as 

)'OU cQnsider ways 10 Slrc~lnline 'ltld refonn Ihe lax cude picaS<' lake ;n(o considcral;Q!llhc impt)f1u'll 

comribulions IhBI lhcsc prugrnms have mad<:. <!S1"'Clally while IInderutkinl' "ny ha>c·broadcning eX<'l'C'>C) 

to l<m~r Ihe lop cO!pOr.l1e Bnd individUIII mlCs. 
68 

Chairman TIBERI. Thank you, sir. Thanks for the testimony. 

Thank you all. 

Dr. Marron, Mr. Brill, in your written testimony and as well as 

your oral testimony today, you both talk about how we should 

change the automatic nature of extending the extenders, which is 

the goal of Chairman Camp. 

How do you think—can you focus a little bit more operationally 

from your perspectives on how we should put the burden on having 

supporters of each extender provide us and how we should therefore proceed in separating the different types of extenders and their 

worthiness of staying in the law? 

Dr. Marron. 

Mr. MARRON. Certainly. So I think actually the last time I appeared before you I thought it was a good start, which was to take 

a category of tax preferences and focus on them directly. So in that 

case, it was energy provisions. You can imagine doing similar 

things, right? While the tax extenders or expirers list is very long, 

you can group it into categories of charity, community development, energy, stimulus, and try to sort of focus on those as a group, 

figure out which ones make sense, which ones don’t. 

Chairman TIBERI. Should supporters be providing certain data 

points, economic development, jobs numbers, any thoughts on that? 

Mr. MARRON. Actually that would be great if they could. You 

know, our friends at GAO sometimes have data on this as well, or 

if not to add to Jim’s workload, but it can be asked to provide such 

information as available. 

I should note, by the way, on that particular issue, I don’t want 

to over emphasize these particular provisions. There are a lot of 

provisions in government policy in general and the Tax Code in 

particular that don’t get enough review. So, you know, certainly 

there are things that are in the permanent tax system that deserve 

more review than they currently get as well. 

But some way of kind of separating them out, giving them attention requiring some data and justification for what they are doing. 

And then also I think the other point is if you can spread them 

out in time, right? So if a typical tax extender lasts 5 years, then 

on average you are only going to have one-fifth as many to look at 

every year, and you are going to be able to give those closer attention. 

Chairman TIBERI. Mr. Brill. 

Mr. BRILL. Thank you. I think you are raising really a critical 

issue. One is the burden of proof question. Is it the responsibility 

of the constituent and the advocate to prove to Congress the worthiness of these policies, or does the burden rest with Congress 

itself or other Federal agencies to prove the policies are not working? 

I think that we would be well-served by trying to pursue both of 

those agendas. 

As Jim noted in his remarks, there is oftentimes not a lot of— 

there may be oversight but—on the administrative side but not a 

lot of evaluation by the government on the effectiveness of these 

programs. 

These are really hard questions, however, because simply observing that a subsidized activity, that that activity is doing well 


joloto on DSK67XMDP1PROD with HEARING
69 

doesn’t prove the effectiveness of the policy itself. And so for any 

given credit, for example, there may be lots of energy production, 

but that doesn’t mean that on the margin we are encouraging that 

investment or activity. Rather, we may just be providing a windfall. 

And so the analysis necessarily requires that you develop a ‘‘but 

for’’ case in the absence of this policy, what would be the outcome. 

These are really hard economic problems to figure out because we 

don’t have a control case. And I think that the conclusion there is 

that the bar needs to be very high. In order to have a policy that 

distorts from what would otherwise be happening, we need to set 

a very high expectation for the outcome. 

Chairman TIBERI. Thank you. 

Dr. White, some of the work that GAO has done on the new market tax credit suggests that we should consider converting the credit into a grant program. So I have two questions related to that. 

First, since 2003, the program’s cost to the treasury has been 

about $5† billion. In exchange, the treasury has allocated roughly 

$29 billion in tax credits that have resulted in what Mr. Gornstein 

has said is roughly $45 billion in new market investments. So that 

is a leverage of about 8 to 1. 

In addition, some estimates are that 300,000 jobs are created or 

retained at a cost of about $17,000 per job. 

So the question, first question is can you elaborate on how GAO’s 

perspective on obtaining that same sort of leverage would work 

through, that ratio would work through a grant program in place 

of a tax credit program? 

Mr. WHITE. Yes. The question we were looking at with the grant 

program was the amount of money that is flowing through from the 

treasury ultimately to the beneficiary businesses, the communitybased businesses, and because of the way the tax credit is structured, credits are allocated and then they are sold to investors, and 

there is a fairly complex process for raising the funds from the private sector; in effect the tax credits are sold to them. And in that 

process, not all of the money is flowing through to the ultimate 

beneficiary businesses in the community. 

And so the question we had was whether a grant would allow for 

the same cost to the treasury, more money to flow through to the 

beneficiary businesses. What we actually suggested was running an 

experiment—divide up the funding for this and have some of it run 

as a grant program, some run as the traditional tax credit program 

and test which one is more effective at getting money through to 

the community businesses. 

Chairman TIBERI. Well, it seems to me that one of the driving 

factors in GAO’s conclusion of the grant program operation is that 

the tax credits are running at a discount. But certainly, the economy and the recession have probably intensified that issue. 

And so Mr. Gornstein suggested that maybe one way of improving that is to treat the new market tax credit program like the lowincome housing tax credit program and the historic tax credit by 

entering into exempting from the alternative minimum tax as we 

do for low-income housing tax credit and historic tax credit. What 

are your thoughts on that? 


joloto on DSK67XMDP1PROD with HEARING
70 

Mr. WHITE. Well, I think you still have the basic question of 

whether there is some alternative design to a tax credit that would 

allow more money to flow through to the beneficiary businesses. 

And then a whole separate issue from what we are talking about 

here is how much of the assistance from the treasury actually flows 

through. And the separate issue is the effectiveness of these programs overall, and we have tried to look at that. 

Our work on that suggested that there was some increase in the 

amount that investors were investing in this sort of program. And 

those are kind of two separate questions. One is the effectiveness 

of the money from the treasury flowing through, and the other one 

is the effectiveness of the program overall. 

Chairman TIBERI. My time has expired, but Mr. Gornstein, 

since you brought it up and I asked the question, do you have any 

thoughts on that? 

Mr. GORNSTEIN. Yes, I do. Let me get to the—answer the grant 

versus tax credit issue if I can, very briefly. As you point out, the 

tax credit attracts significant private investment which otherwise 

would not have been made in very targeted low-income communities within the new markets credit. And I think GAO’s own study 

found a survey of the investors, 88 percent, would not have made 

the investment without the tax credit. So a grant program is not 

going to give you that private leverage that is so important to getting funding into these communities. 

Second, it brings private sector participation in both the underwriting of the projects and the ongoing matter, which you would 

not have under a grant program. 

And finally, I think converting to a grant program obviously 

brings the appropriation risk. And as there is so much pressure on 

the domestic programs, we are certainly going to run into that I 

think as you convert to a grant program. 

So those are some of the concerns we would have with converting 

to a grant program. 

The program is working well. It is becoming more efficient, as 

you point out, since the recession. After the 2-year extension that 

Congress provided to the new markets, we have seen the yields 

going up. We have seen the investments increasing, record levels 

in 2011. So I think we are on the right path and a permanent extension would even build on that momentum. 

Chairman TIBERI. Mr. Neal would be proud of your testimony 

today. 

Mr. GORNSTEIN. Thank you very much. 

Chairman TIBERI. Mr. Thompson is recognized. 

Mr. THOMPSON. Thank you, Mr. Chairman. 

I want to follow up on the new market stuff on behalf of Mr. 

Neal. I have a couple of specific questions for him. 

But I just want to note a couple of things. 

One, all of the issues that have been explained, everything from 

uncertainty to the difficulty in the Code are clearly important. And 

the effect that the work that this committee does on both the Tax 

Code and on the economy I don’t think can be overlooked. I think 

we are in a very unique position here. You know, a lot of this stuff 

is just a math problem, bottom line. It is the political side that gets 

in the way. And I think that is where this committee’s responsiVerDate Mar 15 2010 08:41 Apr 19, 2013 Jkt 080206 PO 00000 Frm 00074 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\80206.XXX 80206

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bility really needs to be stepped up because we need to get beyond 

some of that, the political bickering, and focus on what tax policy 

is going to improve our economy and improve the lives of the American people. 

We need to have honest debate. 

I know that, Mr. Marron, you mentioned in your written statement, you didn’t talk about it, the whole issue of the NASCAR provision. And you said that it adds to the perception that the Tax 

Code is riddled with special interest giveaways, when in fact that 

was merely done to correct an administrative action by IRS that 

would have treated one theme park different than another theme 

park, to put it basically. 

We went through the same thing a couple of years ago where it 

was media fodder over the arrows. There was a company, I think 

it was in San Diego, that made aluminum arrows, and they were 

going to move offshore because the Tax Code made it more lucrative for them to make the arrows in Korea rather than in the 

United States of America because they assembled, they could make 

them one place and assemble them here and get a tax break. 

When that was fixed, it kept a bunch of jobs in the United 

States. And we handled aluminum arrows the same way we handled aluminum baseball bats. But the press went wild with this 

stuff. They talked about it being a giveaway to the bow and arrow 

people, which was ridiculous. 

So I think we all have a responsibility to make sure that the debate is honest. So I appreciate you bringing that up, and I hope 

that we can get to that honest debate to make sure that we have 

tax policy that is effective, that is efficient, that is fair, and that 

meets all of the criteria that a couple of you had mentioned. 

On the new market tax credit, I think this deserves a lot more 

discussion. Not only has it worked in Massachusetts, where there 

has been historic building preservation and jobs associated with 

that, it is being used all over. 

I have a clinic on the North Coast of California that is one of the 

main health care providers on the North Coast, and they are looking at it to do their expansion. And not only is this a growth in 

construction jobs, but it is a growth in medical jobs. You know this. 

Doctors, nurses, nurse practitioners, all of the folks who not only 

are good jobs, but when you are all done, you have got good infrastructure and you have got a healthier community, which saves us 

money in the future as well. 

So on behalf of Mr. Neal, Mr. Gornstein, I would like to ask you 

his question. And you have talked about the new market tax credit 

quite a bit. But he would like you specifically to comment on the 

GAO’s recommendation on this issue. Could you please do that. 

Mr. GORNSTEIN. Yeah. As I had said before, we certainly have 

to look for every way to make the new markets tax credit more efficient and effective. And I think the community development field 

welcomes the scrutiny, the evaluation, and appreciates all that the 

GAO has done to point out areas where the program could be 

strengthened. But, we do have concerns about shifting to a grant 

program, as I mentioned, and that would really be around the issue 

of leveraging private sector investment and how critical that is to 

get the private sector involved in these distressed communities, in 


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investing in low-income neighborhoods. This is a highly targeted 

tax credit that is benefiting thousands of low-income people in lowincome neighborhoods around the country, as you had said in California as well. 

And it is a program that also brings oversight from that private 

sector around underwriting. This is true in the low income housing 

credit. 

So you are getting the market discipline imposed and having another set of eyes on these projects both in underwriting and then 

once they are built and occupied, ongoing monitoring to ensure that 

the benefits continue going forward. 

Again, new markets and the housing credits score very high, I 

believe, in that regard, and the very nature of the tax credit is a 

big reason for that. 

Mr. THOMPSON. Thank you. Thank you, Mr. Chairman. 

Chairman TIBERI. Dr. Boustany is recognized for 5 minutes. 

Mr. BOUSTANY. Chairman Tiberi, I want to thank you for the 

series of hearings we are having on these temporary tax provisions 

and the thoughtful approach you are taking to it, as well as thanking Chairman Camp for his leadership on these issues as well. 

Gentlemen, I chair the Oversight Subcommittee for Ways and 

Means, and we have been looking very intensively at a number of 

tax credits and the administration problems, the propensity for 

fraud and abuse and those kinds of things. 

And Dr. White, it is fairly easy to dissect down on that particular 

aspect. But you have mentioned a number of other areas, metrics 

that we ought to be looking at and some of the challenges. And I 

am kind of curious, help us figure out what we should be looking 

at when we try to make distinctions between a tax provision that 

is very well written but yet hard to measure versus one that may 

be flawed in the way it is written, and of course that creates measurement problems and distortions as well. 

Could you give us a little more insight how we might approach 

that dilemma as policymakers? 

Mr. WHITE. Yes. And a couple of things I would emphasize. 

First would be, as I think some of the panelists have discussed, 

first would be setting clear goals for the program, spelling out what 

the, what the effect is that you are looking for. 

Mr. BOUSTANY. Would you do that in the statute? 

Mr. WHITE. It could be done in the statute. And you know, is 

the community development program focused on construction or is 

it focused on jobs, and is it focused on jobs for existing residents 

or just new jobs in that community that might come in from the 

outside. 

And then a second issue would be focusing on evaluation. And 

there, one issue, especially in the case of tax provisions, is what 

agency ought to be responsible for the evaluation. IRS administers 

these tax provisions, but IRS is not the Federal agency, the executive branch agency responsible for housing programs or energy programs or community development programs. And so what happens 

with tax provisions are they are administered by IRS, the agency 

with a functional responsibility in many cases doesn’t pay much attention to the program. So assigning responsibility for actually 

doing some assessment of the programs I think would help. 


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Mr. BOUSTANY. Thank you. Any of you want to comment further on this? Mr. Brill. 

Mr. BRILL. I would just add briefly to Jim’s comment. 

The evaluation of the effectiveness of any given tax policy extender needs to also occur while recognizing other programs on the 

other side of the ledger. And so we need to think about the net consequences not only of our tax policy geared, say, for example, towards housing but also due to our spending policies, bring those together in a single framework and then make a determination and 

evaluation. 

Mr. BOUSTANY. Thank you. 

If I could shift gears for a moment. Mr. Brill, you mentioned no 

tax policy should be intentionally temporary, and as we go through 

tax reform, clearly we want to simplify, streamline the Code, hopefully see more permanency so that you create an environment of 

certainty. And that sounds all great, but if we are going to have 

provisions that sunset gives me—I mean what is a reasonable timeframe? Clearly, 1 year makes it very difficult when you are doing 

things year after year. Several of you highlighted that. It also creates problems for oversight. What is a reasonable timeframe for a 

temporary provision? 

Mr. BRILL. I think the answer probably depends on the policy 

itself. But I know that the committee has thought in the past about 

how to create a temporary policy that is convincing to the beneficiaries that it’s permanent. That is, in essence, how do you work 

around the budget constraint systems in the Budget Act, yet still 

convince the users that this is something they can rely on? 

Certainly only reinstating policies retroactively is to create windfall benefits. On the other hand, I would look back to 2003 when 

the dividend/capital gains rates were lowered on a temporary basis 

due to a budget process issue, not a cost issue, but budget process. 

At that point, it was viewed that 5 years would give that amount 

of certainty, some confidence to the market. And other policies 

were considered at that time that would have been much shorter 

and not pursued because of the importance of convincing beneficiaries or constituents, taxpayers, that the intent is to create policy that is permanent. 

Mr. BOUSTANY. Thank you. My time has expired. Thank you, 

Mr. Chairman. 

Chairman TIBERI. Thank you. Mr. Marchant is recognized for 5 

minutes. 

Mr. MARCHANT. Thank you, Mr. Chairman. 

Mr. Brill, over the years various industries have urged the adoption of tax provisions with the stated purpose of incentivizing investment in certain types of energy. 

In selling the merits of these incentives to Congress, it was indicated that these taxpayer supports would only be required for the 

amount of time necessary for these industries to mature. To date, 

very few, if any, of these industries have independently determined 

that these subsidies are no longer necessary. 

Could you address the methods and criteria that Congress should 

use to make its own evaluation as to whether the originally stated 

objectives of these subsidies has been achieved and what the appropriate means of discontinuing this taxpayer benefit? 


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Mr. BRILL. Thank you. This goes to one of perhaps the hardest 

questions for Congress or the private sector to grapple with, which 

is the rate of technological progress. And so while many will be 

hopeful that their nascent technology will quickly mature and that 

cost of production will fall quickly in such a way that it will no 

longer need government support, these are really hard issues to ultimately predict ahead of time how well those markets will mature. 

We have seen a lot of policies work their way into the Code on 

exactly that argument. ‘‘We only need this relief, this encouragement, for a limited period of time.’’ 

Ultimately, the industry can grow to become dependent on these 

policies. And the economics for any given activity will rely on the 

availability of a taxpayer subsidy. And the ability to wean an industry, particularly the energy industry, off of these credits is obviously proving very difficult. 

I would suggest that to the extent the committee pursues a policy, an effort to reduce these credits, you need to think carefully 

perhaps about a transition, a phaseout of some of these policies 

that might allow the market to understand how things are going 

to, over time, step down and ultimately end. 

Mr. MARCHANT. So a strategy for an energy source that is 

heavily relying on these subsidies, a strategy for this to come to 

this committee would be to demonstrate very clearly at what point 

they feel like they would not need the subsidy any more and then 

codify that and put that into law? 

Mr. BRILL. That is exactly right. And if you codified the stepdown or the phaseout of that policy instead of having them hit a 

wall where a large benefit goes away overnight, both as a policy 

matter and I also would suggest politically, that might make it 

more likely that the policy will actually terminate. 

Mr. MARCHANT. And then in the investor community, an investor would look at that and make a decision whether that investment was in fact, you could tie the risk of the investment to the 

stepdown of it and it might more realistically reflect—the investment level might more realistically reflect how actually feasible 

that industry was? 

Mr. BRILL. That is exactly right. 

Mr. MARCHANT. Mr. White, you mentioned in your written 

statements that with some tax expenditures, it is difficult or impossible to determine whether a provision is having its intended effect. 

Should Congress decide to extend a given tax expenditure, what 

steps should it take to facilitate measuring its impact? 

Mr. WHITE. As I said earlier, I think setting goals, assigning responsibility to an executive branch agency for actually doing the 

evaluations, and I think that ought to be the agencies with functional responsibility, not IRS. IRS is a tax agency. I don’t think 

they should be in the business of assessing a housing program or 

an energy program. And then that agency then would make some 

determinations about the type of data that would be needed to actually conduct the evaluations. 

So, right now, the only data that is collected on many provisions 

is data that IRS needs for ensuring compliance with the law. IRS 

is not collecting information suitable for assessing the effectiveness 

of many provisions. 


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Mr. MARCHANT. Okay. 

Thank you, Mr. Chairman. 

Chairman TIBERI. Thank you, Mr. Marchant. 

As a follow-up, Mr. Brill, to Mr. Marchant’s question on energy, 

I am sure you were glued to your computer screen when we had 

the last hearing—it was a very highly rated session we had—with 

Members on both sides of the aisle, for example, talking about the 

production tax credit. And we had a lot of consensus from not just 

Members but supporters on this issue of phasing out the tax credit 

over the period of the next several years, which was kind of interesting. 

And as just a side question to what Kenny talked about, I also 

heard that, since this has already expired, that it is having an impact on reinvestment. Because folks don’t know whether or not we 

are going to re-extend it. 

So, as we look at this, how does that impact the policy, the fact 

that it is already expired and the fact that you have advocates now 

saying we will phase it out? 

Mr. BRILL. Yes, there is no question in my mind that many of 

these policies in the extenders package have real, measurable, observable consequences in the market. The taxpayers act or don’t act 

depending on whether or not they are getting these policies. 

And so if it is a determination that the subsidy is desirable, that 

we want more of that activity, there are many of them that work 

that way. And it is observable for sure in the energy sector, with 

a host of the credits, how the levels of investment have increased 

and decreased over time as the credits have changed or expired. 

In particular with regard to letting them lapse and then going 

back or promising to go back or then arguing about whether or not 

you are going to go back and reinstate them, it is going to have a 

big consequence, too, and create an additional uncertainty for that 

community, for that industry. 

And so, to the extent that we are trying to develop a set of policies where Washington is freeing the private sector to do as it 

wishes or to set a set of policies that encourages it without constantly interfering, we are failing that test when we let those policies expire and then go back and reinstate them. 

Chairman TIBERI. Thank you. 

Mr. THOMPSON. Mr. Chairman, would you yield? 

Chairman TIBERI. I will yield for a minute. 

Mr. THOMPSON. That is all I need. I just want to get some certainty. When we are talking about the energy tax provisions, we 

are talking about all of them, not just the renewables, correct? So 

the 199 deduction for gas and oil? We are talking about everything? 

Mr. BRILL. Well, the 199 is not an expiring provision. I was 

speaking generally of tax credits to encourage activity in a given 

sector, including in the energy sector. 

Mr. THOMPSON. So the 199 deduction for gas and oil would be 

one that you are talking about? 

Mr. BRILL. Well, section 199 is not an expiring provision. 

Mr. THOMPSON. I understand it is not expiring. But if you are 

going to talk about energy tax provisions, I don’t know how you 

talk about one side without talking about the other side. 


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Mr. BRILL. So, section 199, which applies for manufacturing income, including income derived through energy production, may 

have an effect on the allocation of resources toward those activities 

and away from activities—— 

Mr. THOMPSON. Similar to tax expenditures’ effect on the allocation of resources as it pertains to renewable energy. 

Mr. BRILL. That is correct. 

Mr. THOMPSON. Thank you. 

Chairman TIBERI. I was actually trying to be helpful. 

Mr. THOMPSON. Me, too. 

Chairman TIBERI. Mr. Gerlach is recognized for 5 minutes. 

Mr. GERLACH. Thank you, Mr. Chairman. 

First of all, thank you both, Mr. White and Mr. Gornstein, on 

your thoughts, further thoughts, on this issue of the New Markets 

Tax Credit. And particularly, Mr. Gornstein, I share your view on 

keeping the program as is and growing it in terms of the amount 

of allocation that is available each year over a longer period of 

time. I think it does a pretty terrific thing in a lot of communities 

with these projects. 

Mr. White, if I can, however, go back to your testimony or your 

GAO report that gets into, again, the criteria for good tax policy. 

And I am interested very much in the terminology you use, criteria 

including equity, economic efficiency, simplicity, transparency, and 

administrability, as well as relationship to other policy tools. 

Interestingly, as we were talking about what should stay in or 

what should be taken out of the Tax Code as we go through this 

process of hopefully simplifying it, you would think and most of the 

conversations we have had center around job growth, making it 

more easy to grow capital that makes itself available then for investment in the economy. But you term it as economic efficiency. 

And can you describe a little bit more fully that term relative to 

jobs, relative to capital formation, as a criteria for how we ought 

to look at a lot of these provisions down the road? 

Mr. WHITE. Yes. Essentially what you are doing with these tax 

provisions—and this applies not just to tax provisions; this applies 

more broadly to spending programs or other types of programs— 

you are shifting resources, you are providing incentives to move resources from one area in your economy to other activities in your 

economy. And the question is whether there is a net gain or not 

from doing that. And, in some cases, there may be a net gain from 

that. 

So with the research credit, for example, it is argued that private 

businesses will underinvest in basic research because they can’t 

capture all of the benefits of that research. And so there is a justification there for some government subsidy to shift additional resources into basic research. Tax provisions are one way to do that 

but not the only way to do that. 

Mr. GERLACH. Uh-huh. And does that roll into this issue of relationship to other policy tools? For example, let’s take the New 

Markets Tax Credit that can be used in an older community in my 

district to undertake renovation of older housing stock and turn it 

around for affordable housing projects. And yet you could find umpteen other Federal programs that are grant programs that might 

do the same thing, say, HUD programs. 


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So is it better, from a policy standpoint, to allow a more privatesector, market-based approach, to use a credit but then allow also 

the formation of cap to do that project, or just have some entity go 

and file a grant application with HUD and get it done that way? 

Or take a look at a situation where you might have an R&D tax 

credit or a section 179 business expensing. Or, rather than a Tax 

Code approach, just have them go get an SBA 7(A) loan to do something. 

So shouldn’t we be looking at these Tax Code extenders as well 

as reform issues not only from the context of what would happen 

reaction-wise in the private sector based on what the Code says, 

but also what is available out there on the programmatic side that 

is also available to people? And maybe even think about whether 

those programmatic approaches to doing what we want to see happen in the private sector—those ought to be maybe reduced and 

provide better opportunities in the Tax Code so individual companies can make decisions based on the Tax Code without having to 

go through the bureaucratic process of filing an application, go 

through a grant review, maybe get the grant, maybe not get the 

grant. 

Mr. WHITE. Yes. 

Mr. GERLACH. But rather then relying on government to give 

them some benefit through a bureaucracy, have a Tax Code that 

can be more responsive to what they can do in our communities to 

improve the quality of life in our communities. 

Mr. WHITE. There are some different advantages and disadvantages to using these different, I call them tools of government— 

spending programs versus tax programs, for example. With the 

Low-Income Housing Tax Credit, for example, the way that is 

structured, the private sector does have some incentive over time 

to ensure that the projects that are built stay in compliance with 

the rules. So it was a way to bring in some private-sector management experience there. 

Another example of what we are talking about here is the assistance provided to higher education, where you have Title IV spending programs and a number of tax programs at the same time, and 

what you would like to do is apply these evaluation criteria across 

the board to all of those programs. 

One of the things we found in our work right now is that it appears that the mix of these programs is just not very transparent 

to many people. They are either not claiming anything at all even 

when they are eligible or they are using the wrong program. They 

seem to be overwhelmed by the choice here. And it has resulted in 

confusion and people making bad decisions from their own financial 

self-interest perspective. 

Mr. GERLACH. Yeah. 

Does anybody else on the panel have a thought on that, in terms 

of the relationship of current grant loan programs that are administered through a massive bureaucracy in Washington versus just 

allowing the Tax Code to be a better tool to stimulate private-sector 

investment in our economy and our communities? 

Mr. GORNSTEIN. Yeah, just one more point about that. 

The grant programs are extremely important, but it is the tax 

credits—Low-Income Housing Tax Credit, New Markets—that are 


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the engine that drive these deals. So the grant programs alone are 

not enough to move forward on most development projects in most 

communities. You need a combination, typically. 

But the biggest resource, the most powerful one, is the tax credit. 

So I think if we lose the tax credit or it is not extended or there 

is uncertainty and we are not getting the yields we need, it is going 

to have a detrimental effect on our ability to do more projects in 

very targeted communities. 

Mr. GERLACH. Thank you. 

Any others? 

Okay. If not, thank you, Mr. Chairman. 

Chairman TIBERI. Thank you, Mr. Gerlach. And thank you for 

your leadership on the New Markets Tax Credit. 

And, Dr. White, just an aside to add to what Mr. Gerlach was 

talking about, I know in my district, which is urban/suburban in 

my current district, the fact is, if you and I drove through it and 

saw the differences of housing policy at the Federal level between 

a housing authority, a HUD property, versus Low-Income Housing 

Tax Credit policy or go to a New Markets Tax Credit policy that 

has private-sector involvement and oftentimes local support from 

cities and counties, the differences are unbelievable. 

And I would love to see you all do a study on how those different 

policies at the Federal level impact, in the end, what the bricks and 

mortars are built on the ground and how it impacts communities. 

I don’t know if you have ever done that before. Have you? 

Mr. WHITE. I don’t think we have done as comprehensive a look 

as you are asking about. I have been involved with our past reviews of Low-Income Housing Tax Credits and have visited projects 

myself. So I have seen that difference, as well. 

And I think, you know, ultimately it boils down to questions of, 

if you are comparing programs, does one deliver more bang for the 

buck than another one; and then also the overall effect of the combination of programs—— 

Chairman TIBERI. Right. 

Mr. WHITE [continuing]. For example, to what extent are the 

programs crowding out private-sector investment in an area. That 

would be part of the evaluation. 

One of the things we found in our reviews of the New Markets 

Tax Credit was that it did appear to increase overall investment 

in the targeted communities. 

Chairman TIBERI. So you probably wouldn’t answer this question. You probably couldn’t come out and support Mr. Gerlach’s 

amendment to the appropriations bill to zero out HUD grants and 

transfer them to the tax credit—just kidding. 

Mr. Berg is recognized for 5 minutes. 

Mr. BERG. I had better cut in there. Thank you, Mr. Chairman. 

And I thank the panel for being here. I mean, this is an important, great discussion that is really the next step. 

You know, I mean, there is no question the problems we have 

with the Tax Code. The uncertainty, the unpredictability, I mean, 

it has just caused so much doubt throughout our economy. I mean, 

I think that is just one of the key things that we need to get fixed 

if we are going to get our economy turned around. There is absolutely no question about it. 


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You know, having said that, you know, there has been a lot of 

discussion about a comprehensive tax reform. And, you know, I 

think that is something that many of us in this committee would 

like to see happen. 

And so I would like to kind of ask the panel just kind of briefly, 

you know, we have the extenders. If we do that outside of the box 

of a comprehensive tax reform, you know, really, what are we accomplishing? Or should they not be part of this comprehensive tax 

reform when we get that? 

You know, I think everyone that is a beneficiary of these, you 

know, the discussion today is make them stand up, make them say, 

you know, ‘‘Here is why this is important,’’ let them stand on their 

own merit, and I think that is important. I think the comment 

about, so many of these are short-term because of the budget problem—well, these are some long-term decisions that, quite frankly, 

need to be made, as well as long-term comprehensive tax reform. 

So my question is, can we do this outside this, or should they all 

be part of this comprehensive tax reform? 

Mr. White. 

Mr. WHITE. I think you want to do both. You want to look at 

the merits of individual provisions or the package of programs targeting a specific area, such as assistance for higher education, but 

then you also, on tax reform, you have broader issues. 

With tax expenditures as a whole, not just the expiring provisions, but tax expenditures as a whole are so large that that affects 

what tax rates have to be. There is so much revenue given up from 

shrinking the base that tax rates on the remaining base have to 

be higher. Well, there are economic consequences to those higher 

tax rates. And so there is a tradeoff there that needs to be taken 

into account at a more macro level. 

Mr. BERG. Thank you. 

Mr. MARRON. I would absolutely agree. The optimal would be 

to do fundamental tax reform and clean up everything. So there 

are a bunch of expiring provisions that really ought to be permanent features of law, either because they are good tax policy—Mr. 

Thompson gave an example where one might correct an error that 

is out there. You know, those kinds of things ought to just be addressed permanently as part of overall reform. 

The challenge, as you know better than me, is that the clock of 

legislation doesn’t suggest that we are going to have such tax reform before people deserve some resolution in the near term about 

what is going to happen to these provisions, particularly those that 

have already expired but are still under consideration. And you 

have sort of an opportunity to let some of them die permanently 

and maybe keep them out of the next discussion of tax reform. But, 

frankly, I think the legislative clock will require that you address 

a whole bunch of these for another year or 2 as sort of another 

bridge to the hoped-for tax reform of 2013 or 2014. 

Mr. BRILL. I would just note that many of the policies in the tax 

extender package are tax expenditures. And there has been a dialogue over the last 2 years or so more focused on the notion of 

broadening the tax base, curtailing these tax expenditures, whether 

they are temporary or a permanent part of the Tax Code today. 


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And then with a broader tax base that is more efficient, less 

distortionary, there is an opportunity to reduce tax rates, which 

would be pro-growth, and/or potentially reduce the deficit in some 

combination that policymakers will need to wrestle with. 

But I think that we should consider these tax extenders and the 

distortionary effects that many of them have, just as we have had 

a debate about tax expenditures generally in the Code. 

Mr. GORNSTEIN. Well, given the urgency and the need to extend the expiring credits, I would hope Congress would move quickly on that, you know, as soon as possible and not wait for the 

broader reform package, which, as has been pointed out, may or 

may not happen by the end of the session. 

So, New Markets in particular, the flat 9 percent fix terms of the 

Low-Income Housing Tax Credit—two very, very high priorities. 

Mr. BERG. All right. Thank you. 

Thank you, Mr. Chairman. 

Mr. THOMPSON. Would the gentleman yield? 

On the issue of the comprehensive tax reform and doing away 

with the tax expenditures to get the rate down, do you all agree 

that—I know we need to do it, and I think you all agree that we 

need to do it, but do you agree that it needs to be revenue-neutral? 

You don’t think we should grow the debt and the deficit in order 

to do this? 

Mr. WHITE. Well, certainly, you know, the United States is on 

a long-term budgetary path that is not sustainable—— 

Mr. THOMPSON. I get all that. I am just wondering, should tax 

reform be revenue-neutral? 

Mr. WHITE. I think that has to be answered in the context of 

how you are going to reduce the debt, bring down the deficit. 

Chairman TIBERI. They all weren’t prepared to testify on tax reform, so you got them, Mike. 

So you may answer if you want. Go ahead, guys. Go ahead, if you 

want. 

Mr. MARRON. Sir, again, as you experience as much as I do, unfortunately the phrase ‘‘revenue-neutral,’’ now there is enormous 

debate about what on earth that means and does it include the extenders, whatever. So it is easy to say ‘‘yes’’ or ‘‘no’’ to that without. 

I would say, the way I would summarize your point is that we 

need a tax revenue target for tax reform. And my reading of the 

tea leaves is, as you look into the future, the Federal Government 

is going to have to raise more revenue than it has historically in 

the past, given the spending pressures that are building and continue to build. 

Chairman TIBERI. Anybody else want to answer? Mr. Gornstein. 

Mr. Brill. 

Mr. BRILL. I agree with Donald’s comments, that we need to 

think about what that revenue level needs to be, given all of the 

spending objectives that we have, and we need to find a balance. 

And so it is a question that needs to be answered both considering 

the outlay side and the spending side. And, obviously, there are 

significant spending pressures. 

Chairman TIBERI. All right. The gentleman’s time has expired. 

The gentleman from Texas? 

Mr. MARCHANT. Thank you, Mr. Chairman. I will be very brief. 


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I would like for our committee to also interject another aspect of 

the extenders and the viability of them, and that is the probability 

of that program or extender having the same ability to attract investment and the proper amount of investment in a, in fact, reformed Tax Code; where if I am at 39 percent and I am an investor, I am looking at deals based on the tax effect on my personal 

tax return. I am looking at the income credits. And, at that point, 

the value of all those credits and the value of that investment is 

worth X. 

If we follow through—and I believe we will—as a committee and 

lower the tax rate, simplify the Code, then in 1 year or 2 years 

many of the programs that we renew or put back on the books will 

not have the same level of viability in the investor community because they simply won’t have the horsepower to attract the investment that they will at the higher rates. 

So I would just like to interject that as another criteria when we 

look at these extenders—— 

Chairman TIBERI. Thank you. Thank you. 

Mr. MARCHANT [continuing]. And see if there is some—— 

Chairman TIBERI. Excellent point. 

Mr. MARCHANT. Thank you. 

Chairman TIBERI. Excellent point. 

Well, this concludes today’s hearing, right on cue with the bell. 

I really appreciate the four of you today. You have really provided 

some excellent testimony. And I appreciate the dialogue and the 

give and take and even some of the questions outside the area to 

which we attracted you here to give your expert opinions. 

And we are going to continue as a committee and as a subcommittee to go through this process and try to determine what extenders should be extended and what should not be extended and 

what, maybe, should be part of a permanent form of tax reform. So 

we appreciate your input. 

Please be advised that Members may submit written questions 

to the witnesses. Those questions and the witnesses’ answers will 

be made part of the official record. 

Chairman TIBERI. Again, I would like to thank you all for taking time out of your busy schedule. Thank our Members for being 

here today for this great discussion. 

This hearing is adjourned. 

[Whereupon, at 10:51 a.m., the subcommittee was adjourned.] 

[Submissions for the Record follow:] 


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Rep. Doc Ilaslings 

1203 Longworth House om"" Roilding 

(1(m-225-5816 

Whitncj.riW@Jnail ,bOll".go, 

Evaluating Certain Expiring Tax Provisions 

Chaimlan Tiheri. RIUlking Mcmbcr Neal and Membel5 orlile Sdttl Revenue Measures 

Sube01nmillec.: 

As yoo conunue consideration ord,e fUlun:: of our e,)untry's tax policy. I appreciate the 

opportunity (0 submil testimony in f~, or ofrcnewing the stale sales tRX d~'<IuC'lion and 

respectfully ask that my testimony be submitted into the rL'l.'{)rd. 

American taxp.'YL'TS deserve 11 tax cooe Ihal is les.~ complex ond easier II'! und=wnd. II is time 

10 ~pla"e the ~urn..1lt cooe with on~ th3\ is simpler, fairer, and more c<lllsist<'lll. A simplH'icd ta~ 

code will nOI <lnly assist lax payers in complying with the law. il will reduce the cost of 

adminislering and ~'{)lIecling laxes. Ihereby saving laxpayo:rs money. 

A5 you consider ways 10 simplify and imprO\'e our tax code. ensuring r.1iOlt'SS in Ihe ((IX cooc 

shOtJld be 3 tOp priorilY. Rcstoring the Slate salcs!ax deduclion would pr.:l'cnt millions of 

Americans frum being pU[lish~'lI for their state's tax t!1lc!ur~. 

My hllm" StJle orWashio!;lon is one <If nin" ~tates acro~s th"coulIlry lIlal does nOI have a Slal<' 

income tax. Instead. Wash;nglon and non-incolIIl.' ta.~ Slatl'S h"vc opted to charge residents a 

sub$t8nlial sales IH<" in order to [inance ~la1e s.:rviee~ , ThecurTCnl ta.' code contains a f~'<k1 .. 1 tax 

deduClion lor state income taxes. but excludes b d~'lIlic ion for sales 1:l)[E'!; - pcnatiling residents 

OfSlOlCS \I·ith no income la)(. A, ),on know, COl\gres~ reeogni:n.'<llh~ inequity orlhis prnvision 

and rcsl<lrcd th~ Siale. sales !aX deduction in ~004. 

Unfort\Ulatcly. in spite of ",f1orts by myself and my colleagues from impacted states, this 

deduction wus never made pemlanent. After ~e\'cral eSlensions. the SlOle SI1I~ ta .~ deduction 

expil"t'tl at Iheend of1011. $hollltllhis pmvisiun oot!)o:, Tl.'llewt'd n::troru:livdy, Washing(()nialls 

antlmillions orOlh,'r Americans will be fOKed to once again pay a disproportionale amOUIll in 

ta;\c~ on their ta, relurns. 

Residents ofstate~ who opt to have a higher iIo1les ta~ ;nsk-:Jd o(SI:lle incorne !axes should not be 

punished by having 10 tum ovcr more ofthcir hard earned moncy 10 the k'llcral j;ol'emmelll. In 

20 10, Ihc ruost recent year of published IRS data, '151 ,803 Washil1gloniam tQQk atlv3ntage onhe 

state sales lax dedllction. By renewing Ihis imponanl deduction. Washingtonians and those in 

olher StDles with a sales !ax inslead of an income ta:o:, will be nble to spend ond ,n"l'St more of 
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• ABM. 

June 22, 2012 

The Honorable Pal Tiberi, Chal, 

The Honoratlle RIchard E. Neal RaJlking Member 

Subcomm<ttee 0f1 Select jI.('Vef1oe Mea50res 

Committee on WaYi and Means 

U.S. Hou~e of RepreSent.11ivl.'s 

W.uhlnglon, D.C. 20515 

Dear Chairman Tlbe,; and Ranking Member Neal; 

On behalf of ABM Energy, a leading provide' of in ~Braled facility solutions thaI also provides 

energy effldencv home and commercial retrofi ts across the CDuntrv, I thank you for the 

opportunity to e~press support for thl! restoration and 1'~lenslon of residenHal and commefl:ial 

energy efficiency tal credit$. 

PleaK' consider this leiter a Slatement 10 the 'Ko.d for the House Committee on Ways and Meal1s, 

Subcomminee on Select Revenue Measures, Hearing on a framework lor Evaluating Certain 

e.plring Tax Provlstons em June 8, 2012. 

We respectfully request tnat tne Commlttei! act quickly to renew dnd extend tne Tax Code SectIon 

2SCthatprovides a 10% ta~ credit for the purchase of certain ener8Y efficient materials up to $SOO. 

Since lIS passage in 2005, Ihls lax credil has been a significant Incentive for homeowners 10 choose 

energy efflcJentproduc\S over less·expensive and less·efflcient alternatives. It ha. proven to be an 

important tooi to promote energy effkiency by helping owners aHard nigher efficiency windows, 

doors, HVAC s~tems, hot water heate~, roofing and insulation. It has also served to creMe "nd 

preserve American jobs in the remodeling and retrofit industry. 

The 2SC tax credit cOIJld be improved. 8etween December 31, 2008 and January I, 2011 the tax 

credit was expanded to 30% of the pu,chase of the energy efficiency products up to $1500. This 

supported a growth In demand for thO!ie products in a cha!lenging eronomlc e~Vironment for those 

in the building industry. A rewm to those levels would further support American jobs in the 

rnidential building sector. 

A8M also asks the committee to extend and modify the "Energy EffICient CommerC ial Buildings 

Oeductlon" (~Clion 1790). In addition to e~tel1!Mg this proViSion, we recommending making 

adjustments to the legislation 10 specifically encouraging existing commercial building retrofits. In 

partkular, ABM urges the committee to consider the basellne of an eXisting building as the baseline 

for a performance calculation latherthat the current code for new construction of Ihat buildinS. II 

is mOre apPfoprlate and effl!ct;ve to cal~ulate energy performan~e improvements of the actual 

buildings and reward those real energy ~avinss. To ad~ance the country's enerRY security, 

significant enersy-efficiency improvements 10 older building is important. 
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May30,1012 

The HOIIOfllble Dave Camp 

Chpir 

Commlltct' on Ways and MeDlis 

U.S.llousc of RepresentJtivC5 

Wa shingtlm, DC 20515 

h~ ()no rabl~ I'at Tii.J<,ri 

Chair 

Subcommiuce on Select R,:vcnuc Mca5urcs 

Cornrnin(~ On Ways anil Mean) 

U.S. House of R~prcsentJ(i ves 

Wa ~hingwn . DC 10515 

The Iionorabic SandlT M. Levin 

Ranking Member 

Comminee on Ways and Me311s 

U.S. Iiouse of Rcpresc:nt~ tiv cs 

Washington. IX" 1051 S 

Tb~ Honorable Richard E. Neal 

Ranking Mcmi.J<,r 

SubcO!l1Inin~ ... on Select Rl'VCnUC Mcasurcs 

Comrninc« on Ways ~nd Means 

U.s. Iiousc of Reprcscntalin:s 

Wa~hinglOn . IX" 20S 15 

Dcar Chairmen Camp and Tiberi :md Rcpresemati\·tll Levin and Neal, 

We, the undl'l"Signlxi companic~ und OfgIlni7.utions. strOngly urs" you 10 renew the Non,flu!iines~ 

Eoergy Pmp;,rty Credit (scction 25(' in thc ta~ codello help homoown.:rs imprtwe the Ctlcrgy 

cfToc'eney of their h(ll"cs. This credit helps ~"Qns umcn< dcflllY the uplr!.!nt costs 01 residcntial 

effi,';eney I1:'trol;ts. helping to Crt'3h: dom~slic jobs \\ohil", saving homcown~ s money on Iheir 

energy bills. 

TIlis tax credit was included in the Energy Policy Aet of2005 ~nd enacK-d inlo 18'" by President 

flush. Wh~n it e.xpircd at Ih" Clm or ZOII, il was wortb 10% of <'ertain en~'l!\Y clf,,,it!!lCy 

Improl'cm"nt costs (up 10 S200 for windo""SI, urn! t1sed amoonts lor sJl'l'Cifk-d ~allng and 

cool"'g cqoipment. u!' I{l 3 limit of$5oo. [lui it had a much larger i"'pacl for 2009 and "20 tU, 

"hen it waS.'Ie1 al 30% of <'ust;; up to $1500. Thre un: sp<."t:il;('t/ cfficien"y perfonl1ann· criteria 

to quulify for all produet.~. 

We urge you 10 eXlend Ihis i'"ponam cr<..-dil. l3 y ti,dncoing Il'e efficieocy Crileria while 

increasing the amount of the ~TI.-dit. it " 'ould signilicantly iucrt.~ .. se Ihu <11t:l)!:y Sowing!; sod mark"t 

impact otthe SlIme lime as limiTing the eOSllO the Treasury. This credit is mOSI effccTivc when iT. 

f:l<:ili\al;:;; initial deployment and market gru"'Ih "f cunio.\\·w!!;c technolo.\\ies am] prJI.1ices for II 

lim;ted time, but avoids paying for routine n:plac<'mt:nts. W~ ",ould bt: available tu discuss 

appropriute criteriu and amounts WiTh you. 

' 1'e imprn\"CntCol~ clil!ible fnr Ihis lax credit nclud~d upgrndcs 10 building compoocn~~ like 

insulation, windows, and roofs as well us <,(]uipmenl like air <"Onditioncrs. fumacl." and water 

healers. While it wns available. the 2SC credil wll.~ an c~lrclI'ely popular u!x inc\.""fIli,'c, driving 

demand for "nergy "ffieicnt producl.& and building matcrials whilc supporting the employment 01 

IllCal <"QntrnCiOr:-! and buitdcrs during the ct'<)Ilomie dQwnturn. It was the only tax crcdil related 

to building t:flkil.'fI<'y that ,,"cnt.direclly 10 ("()nSIIIIICts. 

Energy efficiency i.s an issue with blpartiS:ln ~upp"rt . It I~ about do,n& mOT':: "ilh Ihe crleF);}' "" 

POSSl..'Ss aod making the mOSl Qf our resourees; it is al!iO Ihe cheapesl way to address our ~II~TSY 
87 

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needs. [Jut while many efficiency improvements pay for themselves over their lifetim.:s. the 

adl'anee cOSts ofth~ projttls remain a barricr. T~x ;nccm;~es help defray Ihe~c up-from costs. 

Thc 25C credit in panicular has been an integral comp()[Jcm of the federal govemmcm's 

tlssismnce 10 Anu:ricllnS 10 reduce cocrgy cnnsumpliOl1. CIll COSll'. erealc jobs. and improve air 

quulity. Mort' imponarl1ly, Ihc im:entil'l' is r~"di!y acn."siblc to ncarly lmy humeuwner. 

Renewal of this imponnnt tax credll should be a central p.,n of energy la.~ PQliey. 

Sincerely, 

Alliance 10 S81'C Ellert)' 

Cooncil ()fN()rth An1('rical1 Insulation M~nufacluri'1"!! Assueialioll 

Ingersoll Rand 

Johns Manville 

Knauflnsulalioll 

Lowe's Compani~s 

Mas(;o Corporluion 

Nalional Lumber atld Building M~ll-nallRalcrs Association 

Owens Coming 

\{ innai 

The Oow Chemical Comp,my 

Vinyl SidinG Insli1Ulc, hie. 

Window and 1)001' Manufacturers A~soci~lion 
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~""'''Ciln cleaning [".tltute" .,,--

CommenLS Reluting to 

A Framt!work for Evaluating Certain E.~ pirillg Tax Provisions 

House Committee on Ways and Means 

Subcommittee on Selecl Revenue Measures 

June 8, 2012 Hearing 

Submitted fo r the Record 

By 

The American Cleaning Institute 

The American Cleon,n!, InSI,1u!C (ACt) ,5 a n~lional trad~ assoc,Q(,on r~llresenl'ng tile ,nlerests 

ofde~nlng pn)(!ucl fonnul~tnrs. !he supplim nfingredienlli and packaging til [hO!.e fQm,ulaml"'li 

~s weI! as th~· d()m~"S ic uh oc:llCmj~al indu;;lry. ACt submits th~",... comments 00 k:hulf ufil~ 

olct~llemkal m~mbm:. Th~ 1(oal of<'SiabliJhi,,1' criteria f<)f the ~onti"U"nl-eor aJj )(t~nJ ~n; ~ 

laudable ~~ .... ell as I'Sscnlial. The Suoc<.lmmincc i~ t<.l be eougratul3ted for taking up Ihis critical 

i""ue. 

EquilY, th.1 i~, lhe inherem fairn~$.\. of 11 13.~ cS ~nder is 11 l'Tilic-almleri(>n lhat must be 

incorpQrJt~d in any cvaluati,m pn>eess. In Iheir broadest charoclcrizalion. w.~ e.xtcnders arc 

c("t."1Iillo Ihal are ""neruUy granl~d in order I" SUIlIX'" a K-.:hnology or i"Ju5lry thai ~ dee'"ed 

wonhy for 3 f1scal or public policy purpose. While in mo~t ;n,lances Ihe c",,,C<!uences ofMlch 

.. 'rcdils 'Ilay be whoUy hc~,"oknt. th15 i& 001 RI'Ml)'ll thcense. In thc!'e l~llcr c~ses. Ihe .Ttdlls ~I 

issue should be consid~Nd ripe for el imin3110n or jlm.ndm<~'\. 

10 11,,· rcgul~1I'ry arena, agern:ie< are l"I.><juircd 10 as:;;~ss d"5ig"'H~"1I f"CIO'''- c.g., I"'f)I.· .. ·work and 

the em· ironment. when delermini ng regul~l!)ry impacts". In Ille III ex tcnder.;' conlext, il 5....,,,, $ 

reasonable lh~ 1 ~n BnBly~is of polential compe1iII,·e 100polcis oil col!alo;:ml or let;acy indl~\lric s 

~haring , forc~ample. markels or raw m~h.-ri~1 [l<)Qls should 0" undcnakcn. In Ihi. munner, al 

minjmum. Ih~ ·'c<tuit y~ ora cn."1Iil eould be anaiy.wd and m:ldc poln of tile policy debate. 

EKumplcs of .. "tlmpeti[i\'c impacts In.-evah,,,!io ," could indude government funJingof 

focililiesl rOlJucl~ in di""'l eOlnp<'1ltion will, e~iSl; g privale sector caJXIbihlie, us well as market 

dj~lonions such 3$ rJw nmerial supplies and ("(I~IS. Analy:l!ing, the Nmpe1itive iml"'ciS ufa lax. 

eXlender WQuid ~Ilo'" policy n'"k~rs 10 belle, !argcllu credits for n'aJ<itnum benefil "nd 

minimal ham' 10 ~Xi5ti g indW;lri~~. 

\l.lll S~_NW. SuIt.16Il w.,,"-, DC 20005 2C'.lotl ~ 

- ....... '""i'~" ..... .9 
89 

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, 

The diNldvanlagcs crcuH:d by tal( credits ClUl crcatc cxtrtlTldy stressful conditions for an 

e5wbli,hcd induStry wilh Ih~ potential 10 fo,\l-r significant. though avoidable. dislocations. Joe 

dom~'$ric oleochcmical In du"try"s cnl3ns"-'mCnl With foocral biofuels subsidies is a caS<:' in point. 

Olcm:hcmieals are Ihe orig.inal ~grccn" clwmiS1ry. They may be produced from "animal fals~ or 

seed oil~. The domestic ok'(Khcmic~1 indU~lry has hisloriea!!y be"n bDs..'Ii on "animal fats." 

Prior \0 passage of the American Jobs Creation Act Qf2004" (AlCA) "animal f.l!S·· were 

purchased in an ull5ubsidized. f1\."C. compelitive marla:t. Implementation oflhe VERTC 

provisjo,,~ of AJCA "'hQng~'(! al1lhal by I:realillg a 51 /gal ta~ coedit tor the prQduclion of 

biodiescl. including thaI produc.-d frum "unimlll fats:" This was I,,!lowed by similar sl,lbsidi.-s 

crented for olhcr calegories ofbiofl,lcls nlso usillg "animal fats" M a mil' material. 

Wicllthcir ta~ credit subsidy. enhancro by the vulumc mando\l'S of tile Rcvis~ Rcrwwablc Fuel 

Standard (RFS2). biofucl produce,," hal'e been ven e.~tT:lo rdin3ry market Icvenlg~ in the 

purchase of"unimal fhIS:' Olcochcmical producer.> receive no subsidies or market guaram~"t'S 

yet compete for the Mime T:lW mmcriAI. 

Complicating the situJtion ~'Vcn mlm;, th,' " animJ\ rat~" supply is inclastie. Cows are T:liscd ror 

meat, not their fats. C,)nscqucmly, '"animal fal~" demund has increa:;cd whlle sUl'Jlly ha, 

remained rdatively sta lic. As a result the economic outcome has been a sustained price increase 

Ol'er eight yl".Ir5. CUTrl'ntly tallow trad~'S for about 50.45/Ib. Prior IV implcm~"11tatioo of the 

AJCA. historical le"cls were spprmdmatcly 50. 13 - 0.16/1b. At thde price levels, subslitl,lh.'S. 

princ ipally foreign palm oil. arc brcoming incri.'usingly comlWlilil'C in the Unil ed States as 

oleochcmical mil' mJtcrials. 

While th ........ is nil doubt tl1M "ullimal fal~" [)riCI'S would l1~ve il1cTl'a.~t"d \Vith thedcvclopmcnt Qr 

biofuels.the allocation of this 1lI\V malo.-ri n! would haw be5t been leli to a free. competitive arld 

l"<lu;table marl;etpI3cc. Olcochcmieal producers arc now cITectivcl~' competing a~in!it their own 

guwn1mcrU's policics. 

It is cssemi~llhal tile c'lliity (If coliatcl"JI impacts rcl~lcd 10 la ,\ c;\,\cndcrs bi:eomc a 1l\:t1rvck 

tTiterion in assessing the future of not only lax cst~'1lders bul Oflu~ j)01icy rclillingtn credits 

);encmll y. 

Submillcd on behalf of the American Ci<:anin); lnstitute. 

Iknnis (jri~inl! 

DCa Public Affairs. LLC 

2400 Cll11\:ndon !look-vard 

IIPH(l.I 

Ariington .. VA 12201 

D127@oomcuSl.nct 

571-24'J-Q118 
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Comments for the Record 

Hearing on 

Framework for Evaluating Certain Expiring Tax Provisions 

Steven Nadel 

ExectJ!lve Director 

American Courlcil for an Erler9y·Efficienl Economy 

529 t4"' Sireet NW. Suile 600 

Washil19lon. D.C. 20045 

I am writing \0 pro~ide Ihe comments 01 Ihe American Council for an El'ler9y-Efficient Economy 

(ACEEE) for the record of the hearln9 0f1 Frameworlt lor E~alualing Certain Expirll19 Tal( 

Pm~isions. ACEEE is a nonprofit research organization formed in 1960 thai acts as a catalyst 

to ad~al'lce energy alficiancy policies. programs. teclmologfes. ~eslmenls. and behaviorli. We 

now amploy more than 40 researcherli and publish dozel'ls of well-regarded studies each year. 

Additional information on 01.1' organization can be found Oil ht!g:/Iaceee org. ACEEE has 

conducted substantial research on energy effioiency tax Incentives and nas also done researcll 

on how broader lOll( policy afleets lnvestmenlln energy effIciency. 

Regll.ding tax eltlenderli. many of the witnesses at the hearing discussed a ~a.iety of alteria 

including economic efficiency. We bar-eve that Congress should go luntlll' and explicltly 

examine the benefits of Ihe ~arious e~pirll19 tax provisions relative to the,r costs. Given current 

budget deficits, we assume that funds lor tax incel'lijves will be ~ery limIted. In such an 

environment. only those inCl!l'Itives with benef,ls substantially greater than their cost Should be 

considered. We also lavor establiShing an explicit budget for tax expenditures and allocating 

this budget to a limited number 01 specifIC incentives that maximize bonef,lS partederal dollar. 

Eva)l.letion of benefits should be relative to what would happen in IN:! absence of a tax incentive_ 

Thl.ls. if S to billion is invested by consl.lmers under a tax credillor efficlenl windows bl.lt without 

100 credit$8 billion wOl.l ld ha~e been invesled. the net benefit for the leder31ln~eslment is only 

$2 billion. 

Regarding energy tal( incenwes. we recommend that the limited a~aitable Il.lnds be targeted Oil 

instances where lhe technology or practice is not wlOespread. bul WIth medil.lm-term supporl 

(e.g .. five yeaf5), marl<:ets can be translormed so that these lechnologies or pracllces become 

ml.lch more Wtdely used e~en aner ta~ Incantrves end. We can no longer afford Iol'lg-teoo 

SUbsidies butlrn;l9od shol.lld use limited dollarli in ways that can use "jujitsl.l" to leverage lasling 

chaflQes in markets_ 

Recenl examples of such tax credits Indude the energy efficiency appliance a~ credit (Section 

45M) and the new homes tax credit (Section 45L). In the case 01 appliances. incentives have 

targeted very high efficiency appliances. substontiaily raISing market Share and energy !oavlngs. 

Many of the ploducts IncentlvlZeIll.lnder the original 2005 legislation now represent the maJority 

of product sales. This progress has allowed eligibility levels to De Ugnlened several times so 

that incenti ~es are only available lor the very most efficient proctuCIS on the markel. WIth 
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Incenlives phased out lor lower efficiency levels Ihal no longer need support This credil 

expired al the end of 201 1. but given ils success. we recommend thallhe credll be renewed for 

2013, bul wilh Ihe least stringent clothes washer and dishwasher IncentiVes deleted (ending 

these lower tiers;s pari 0 1 an agreel'Tltinl between appllance manufaClurers and groups suCl1 as 

ACEEE). 

lI~ewise. the new homes tax credit has targeted very high levels of performance, raising 

qualifying homes from less than 1% of new construction to more than 10%. We recommend 

~tending this credit. which expire<! allhe end of 2011. but also adding a new. higher efficiency 

lier. When the market share of the original tier grows some more. Incentives can be phased 

out, leaving only incentiVes for the new, higher tier. 

On the other hand, the residential weatherization Cledit (Section 25C) has had mUCh higher 

costs to the Treasury_ For example. GAO found thai $5.3 billion was claimed by taxpayers in 

2009.' The residential weatherization credit includes useful credits for l1igh-efficiency healing 

and cooling systems and installation ollnsulalion. but also a less uselllt credit lor windows 

where much of the money eppears to have gone to consumers who would have inslalled 

qualifying windows wilhout lt1e credit - our analysis indica!!!s that nearly 90% 01 resldenlial 

window sales qualified lor the credit. Due to its hi.gh cost. Saelion 2SC is a lower priority for 

extension. Furthermore. If 25C is coosidered for extensiorl., the quelifyinglevel for windows 

needs 10 be substanlially inCleased. 

Our analysis of the Impacl of these and other energy efficiency tax Ir.cenrlves can be 1000nd in an 

ACEEE white paper aVailable at hUp1laceee.o rglWhite"p.~~9tlffrCl~cy-l ln cen!iv es. 

Based on this analysis of experience, we recommend that future energy incentives; 

Target energy-savlng equipment a~d practices wilh substa~tlal e~ergy savings and 

talget energy sources that can produce a SUbstantial amount of energy ~er the long 

term (we want mountal~s" not -molehills-): 

Target efficiency levels and new eoergy sources thai currently have a very small fllarket 

share 10 keep costs dow~ and minimize the number 01 "'ree riders' (purcttasers who 

wouklllave bought equipme~t anyway, eve~ without i~ce~tives): 

Pay substantial incentives to motivate sig~jficant sales: 

Continue to incentiVlze investment In research and development: and 

Leave incentives in place for a medium period of time (e.g,. five years) so manufacturers 

and other market players know incentives witl be available for long enough that it is 

worth making investments. Short-term incentives do not provide sueh assurance. After 

this medium period of time. incentives should either be phased out or eligibility levels 

increased. starting a new market transformation process. 

In addition, for meaSiJres that are expensive and for which Quidr market Iransformation is not 

possible, such as comprehensive home and building energy effic1ency retrofits, Congress 

'GAO. 21)11. ""rlJ~ CanJ~fWf!a~ mdOi""'f~ CI)c"'J ~, Faeron laCof'.id~r " rl!~ ~<ig~ O/ IM /OOfIlnJfi"~ .. 

E .... 'Vy "'Of}t!nvCr '1oI. GAO-li·318. W •• hing!on. DC: Gene r.IA<oountonK Office. 
92 

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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.064
93 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.065

Statement of the 

American Farm Bureau Federation 

TO THE HOUSE COMMITTEE ON WAYS AND i\'IEANS 

HEARING ON FRAi\'1EWORK FOR EVALUATING CERTAIN EXPIRING 

TAX f"ROV1SIONS 

June 8. 2012 

"' __ """ __ '_":_'.>IR"_"'" __ _~''' 
94 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.066

The American Fann Bureau Fcdcr7llion we!comes lhis hearins providing an <'xaminalioll oflhc 

rl':lmcwork Congress ~hould usc lu !'v~ U~lc lhe cxwnsion ofexpir~-d and cxpirinS Ia.~ provi~ions, 

Fann Bureau bdieves Ille lax sysl~m plays nn important rote in delermining lhe economic " '1'11-

Ixin!!, offamlS- runchcs and other businesses involved in the production or foo<1. libcr and ('nergy, 

For thi~ U'3son, Furm Bun:~u slrongly SUp)lQr\3 a s<'!mllcss-cXli::nsiun of key expired and e.~piring 

tas pml'isions nffecting the ~grieulture induslry, but mo~t impon31111y l>ecaus.: Faml Ourcau farm 

and nlr\ch I11c"'bc~ need ~",nainly in ordcr 10 engage in sound businC$5 planning. 

3efOfe discussing spccilic provisions, I"arm Burellu would lik~ tn cmphasilc Ihe impnrtanc~ of 

eXlending the cu=nl l"Stat!" ta.~ ".~emp Jtlll . This is and has been al or nCar th~ top ofleglslali,c 

prioritil'S fur ol'l:r a d~"Cad,·. Establishing clear, rt."d ,mnablc ruk-s for estate t3S~'S w!)<lld probably be 

the most effective action Congress could \:Ike to help ill inler-generational Irnnsfcr lind 

cSl:lblishment of young f~m1Cr~, When estale taxes on an agJ"iculturul business exceed cash and 

other liquid as.>eIS, surviving.family p~r1ners may be forced 10 sciliand, bu ldin~ or C<)uipmenL 

needed to keep their busines~es operating. This not only elm cripple a farm Of ranch npem!ion, but 

also huns the rurnl eommunili~':S and businesses that agriculture suppons. DlhL'T im!X'rtanl iSSUes 

include maintaining. capilal ~ain~ ta.~ rnlC:-S, individual income 13.\ rntcs and holding the Altl'Tfl:ttiv\." 

Minimum TlI~ harmless. 

!nc\."mi\"csJor Rcnewa~le Energy 

Clean, renl'wablc, domestic energy ,,~II help America achieve long-leTIn economic growth, crt'llIe a 

ckaner covironmcm and shicld thel~onomy from unreliable foreigo enl'Tgy SOUll:l'S, American 

farmers and r~nchers pre playing a bigger rl\le in supplying the natioJl with th .. "ncrgy it needs 

through the production ofagricullund-based, n::ncwDblc eneTID' resources. Long-Ierm eXlcnsions of 

rcnc\\'able C11ergy ta.x inn'lti"c> are Ilccded 10 bo<ist renc"ablc !\."\:hnoIQgie-s and sUPI)(m 

dc\'elopmcnt oflile mnrkel infmslrucHlre necessary to makc Ih= Icchnolosics more competitive. 

In add.lion. Ihe lo g-t~rm <'xtcnsion of rcn~wablc encrgy inccnhvcs will cnsure industry siability 

along with 311l1lcting the t'apitall1cccssary \0 reali~~ the bcndits of long-term plunning. R~ncwablCl 

energy ta~ ineemi\'cs thm should be t'~tcnded include: 

Biodi~scl and rcnewlIble biudicsd lax Incentiws: 

Small biodiesel prooucer tu en:dit; 

Tax inc nlives fordiL':SC1 fuel crc~k'{) from biomas~; 

Tu ;ncentil'es lor alternative energy reruelin", property: 

Ccl1ulo~ic bioiilel5 producer IlIX credit: 

Production lax credit for power from wind: and 

Production ta:o;. credit for power from biomass. 

With hea lth insunmIX premiums ()fl the risc lind bencfits on the decline, sdf-employt"d individuals. 

including must ramlcTS and rnnch~ ~. conlinue 10 find ;1 difficult lu ubtain and alford heallh 

insurJlK"e CO\'l'Tllgl\ Congress rccogni~cd Ihe nc<:d to makecovel':lge more alfordable by 

pcmlMently ~lIowing u deduclillll for heulth insurance pl"elniums 3gain~t incoOle tnxe,. With many 

producers paying as much or more in sclf-employml'nt la.~~ 8S Income ta~es, il is important 10 

rcinstatcand extend the deduct,on for h\."allh Insurance pn:miums against sclf-employmLl1t UIXl·S. 
95 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.067

Section 179 Small Business E.~pcnsing lind 80nlls Depreciation 

The ability to deduct e~penscs immedialely instead ofhal'illg to dcpn.-.:i~te ihem OI'CT time 

imprlllics cash now and allo,,~ fann and ranch oo$ill<:SSC1; to bcll~ match incom~ 1I1ld H~I1SCS. 

Section 179 atlow~ small busin!:Sscs to ~xlWnsc lb,' ct)Sl of qualilicd propcny in the year purchaSl'd 

in lieu of depreciation. Bonus depreeimion gil'.:!; businesses a way 10 wrile ofl'addili()nlIl expenscs. 

I:nhunccd Se;:liotl 179 small business e.xpcnsing is especially importa!llto f..1rm and r~nch 

bu,incs~es and should IX' c~lCndcd. Boous dcprccilllic!O is also I'Bluable in in,cances inl'oll'ing the 

purdUlS<! of n~w equipment 

Fh'c Yenr lkyrceiatil>O of farm Equil'n'em 

Agritullurl' i~ all ~-quipmeol·inl~nsiw industry with n<"drly $130 billion of stock ill use durillg lIny 

gh'en year. Idenlly. the nllo\\ed number ofycars \0 d~precia\e II piece of busincss machin~ or 

~'quipm~m shuuld malch the period of debt service so thai the 13)( ben~flLS can be u$Cd 10 !inanel' 

payments. Surveys from th", Dep;trtnle!1l of Agricuiture·s Farm S~rvitt Agency show. on a,·er.tge, 

farmen; and r.tnch<":rs lillanc" buSineSS i:(juipl1)l'nl and machillt"f)' for li"e y<:a' 8. Five-year 

depreciation of (ann equipment shl)ulll be reinslate-(] and eXlended. 

Intcrest. renls. myalti~'S and annuilies (i.~ .. paymenls of pnssil'c income) are gencmlly K'Cl.'ived fn.~ 

or lUX by exempt organizations. Under InllTn31 Revenue Code Section 512(b)( 13 ). ho"cl"l"f, Ih(.."e 

paymcnt~ arc subject to tas ;fthey are received fmlll 0 ··cuntrollcd·· organi1';lIion (c.g,. a subsidiury). 

Fsirmarket provisions pro"idc a ",aoonablc and fair \\'3y 10 d.:teml;nc when UnrdJtcd BlIsincs~ 

11\(.'Om.: Tax (UBIT) ~ owed. ~nd iihould be reinSl:lk"tl. eXiClld.:d and al1\cl1dl.'d 10 ~O\l.'r new 

~Ol1tracl S bclWwn ta ~-c~cmpl pa"'Q,t organiZutil)lls aod their controlled subsidiary org;.nil<1tiOIlS. 

Individuals living in mral and isol~ted areas face speciul chn ll cng~s in rcceil'ing timely, quality 

healthcare. The ..... areas onen sulkt from Shortages ofphy$icians and other healthcare providers. 

and thl' costs of providing quality hl'althearc in a nlral h .... Jlth infrastructure can C!(tend btoyond 

Ilvuilahle resources. The tl1:l;·fil:c lrealmcm I'Ifscholurshil's lIWl1rded 10 hC3lthe3rc provider> who 

ag",e 10 prJclice in underserYCd areas should be e~tended_ 

Enhanc..'11 Charilllble l)~'IIuction For Contribulions of Food hl\Cnlf!!):' 

Some farmen.' and ranchers Iready donalc ~lcnned food to charitable Orgol'liZ3!ions thai feed Ihe 

hungry_ Many more ,",ould do SO ifth.~y are ab ~ 10 tak~ a tax dcdticl;()n Ihat " 'Quid help Ihem 10 

cover Ihe c.xpcno;eofhar\·cstint:. ~S.~ llg and trJll~portalior1. Thl'cnhlmcl'd charitablec d~duclion 

for dona led Food For lIon-C; eorporolions should be reinstated. cxlend~-d and c.\p;lnded MllhBI ~sh 

m~1hod rarmers (who do not usc accrual ac~ount ng) c~nlake advantage of lax ineCllliyes for 

donaling food, 

2 
96 

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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.068

EascmL'I1IS arc an important 1001 for ooo~ ing 0111' nation's rCSOUI'CL'S and safcgllaroinK fannland, 

Wh<'11 fannl'l'S and ran~hC1S vulunlJlry donat~ CUIl~Jliul1 casentcnts thcy prcs<'r\'(~ fannlnnd fur 

future g<'11~l1Itions by giving up dc\clopmenl rights while retaining ownership and management of 

th~ land. The enhanced deduction tor donat~ cQllscrvalion eaS<',,,cnlS ~hlJuld tx: ,..,inSllIled and 

ctlded 10 gi\'c farmers and rJnehen all incent;\'c 10 pf'<.'S<'rve fannlnnd and ;n t"I:ctlguilitln uflh" 

reduceil valuc ufprotttioo furt"l"nd. 

Railro;td Track Ma imenilnce Ct~'dil 

Shorlline ra.lrnuds are a feeder sysl~m for large Class I milroads. picking up or ddil'crin!! olle OUI 

of ev;.>ry four rail cars n"win~ on Ihe nationa l mil nClwurk. They ofTer agricultural pro,,h,eenl 

moving commodities 10 markel an altcnmlivc 10 lruck Iran sport and allow proliUCCnllO reach 

markCl~ far beyond Ihal in whkh trucks call reach in an iXun<lOlic manner, The \a~ credil f<ll" lrack 

maintenance sllOuld be reinstated and c~lclldcd. 
97 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.069

June S, 2012 

nll! Honomb!e Dnv~ Camp 

Chair 

Comminee on Ways und Io. leuns 

U.S. J Jou:;e of Kepn:seIllJli~cs 

Washinglon, DC 205 15 

nil.' I~o or~b!c ral Tiberi 

Chai, 

SubeOnlminl'C lin Se'lcct ReYl'nuc Measures 

Comminec on Wllys and MC:lns 

U.S. I10o:;e ofRepre$CIllJlivcs 

W~shil1gton. DC. 205 15 

i"h~ Honomble Sander M. Levin 

Ranking Mem\x-r 

Commine.: on Ways and Means 

U.S. 1101Jsc ofReprcscntmivcs 

Washington, DC 20515 

The Ilooor~bk Richurd E. Nl'aj 

R:l.nking Mcm~r 

Subi.·omminceon Sell..:t Rcvcnue Mea"lJrcs 

Commine<:: on Ways Dnd Means 

U.s. HOIJsc ofRepreSCJJlmivC"$ 

Washington, DC 2U515 

Dear ChuirnH:n Camp and Tiberi 81ld Re-prcscn!ativcs Levin and Neal. 

As you l"{)JJlinuc your onglling re"iew ofmx cXlendlTs, we urge you to pt.'rl11Bnently extl~ld lhe 

mMS Imnsil oommuter 111.\ benefit (~'Clio!l 112(1) in Ihe 13~ code) m the level equivalcnl 10 Ihe 

monthly p;lrking bcnelit. Originally enacted in 2(109 as part ofbipartis:m lcgi~I~lion. this 

provision. which cxpir~d at the cnd of Ins I ycar. helped CUI comnlUling costs by e~tab1i~k;llg 

parity wilh the Ulx-t'n.'C p3rldng bcnciits available 10 cQ"lmu(("TS who drive. 

Thrct, years ago. COlIgrc$S rai:s;:d Ihc 18~-fn.'C !)cllelit lhal workers could ~pply toward monlhly 

commutingc)(penscs. from S 120 per mOll~lUp 10 $230 per momli, pulting lmnsit bClielilS on par 

with parking benefits. Sill~"e the end of last year. however. Ihe tal' savings for Ihe l"msil benelil 

hllvc bcc!1 signifieomly n."iluced os commuters who use mil. subwnys. buse~ N vanpools ore only 

eligible liJr up 10 $ 125 in monthly pre_ta}; Ir~nS;1 benefIts with tbe r~"",ent Inlcmall{evcnuc 

Service Cllst of living adjustment. 

In the past, Ihis important provision kns enscd the burden of e,'mmuting CO~IS on Amcrienn 

familieS, rt'du~ed Stress and congestion on our roads and lIighway , low~red ham,!ul air pollulanl 

emissions and d~'Cre"~>cd dom~' tic I1.'lian~'c on foreign fucl iiQun:~"S. More lhan 2.1 million 

Americans natil'nwide utilize 1m: lransil bcnetk wilh over one third nfthoSt' users ~pcnding 

more Ihan $125 per month. Additionally. commutcr bt'nclits arc an attr,Ictivc Iringe illcClllivQ 

ofTen.'tI by employers. 

As ~uch. failur~ to .~ tcnd the higher mass trallsit bendit would prolung the tax hike on middleclass lrunsit ridl'TS and their employers during an economic recession and rising gasoline priel'S 

when such ridership should be encollrJg~"il. Unlike other ia}; cuts. Ihis bellClil impacts employers 

3nd employees ilnmcdiotely and reduces Iheir tax liability. resulling In sound lisenl suI'ings for 

both. Furthcmlorc. i"cderul !a}; l~w should refrain from til'"Qnng one means oftOlllmuling over 

nnotkcr. 
98 

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99 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.071

n.,." au",,,,·,.,. Co ....... <:01 't)< r:iir.iI Sustainable 

LLMEnergy ' 

'''' '' '' ~----

Statement 01 the Business Council for Sl.Istainable Energy 

House Committee on Ways and Means 

Subcommittee on Si!lect Revenue Measures 

Hearln, on a framework for Evaluatlns Certain Expiring Tax Provisions 

June 8, 2012 

l~~ 811.t. ... C""n'~ '01 ~u<"lI\ObIo E"~D "".,. (arc'''' 10 ""nt'n..e II< ......... ".nd~ ..... pport lor . 

1><0"" .,roy 01 elf." _JY , ... _~ ..... Ie ,~"' irwo.lmeM, <TeOle jotI. on<I aiYe'~ Y "'" """OIl', 

ono", '''''''0li0 '" _Of .ho us. '''''J''''''''~ ' Wh~' Momber< <>ICO"I"' " ~ .. n,~d n loW .... ' In 

,,,,,,,,,. he.,1Ye to. ref""",. ,he co.l\t~ .. II .... ,h'l "" ~ 10. 'e'",'" " __ I.d ,-"., ",,10M> . 1'1 ... roo 

d .. " one,,, p,"""lon,. ""'gr." ;hOllld «,,,."' .. the redtl.' rom",I'",o"' '0 d .. " en.,,,, t ... 

"'e"'wes D\' .o'e"""" .. pI"",,.f>CI "Plrod ", ... !>te •. 

rho BII~""" "'"""~ rOt s"" ... _ EnPtsv (acsll ~ • """1\0<> '" «><TIP' fIIe""" ",,,. ...... 101'0<1. 

It..., 11M' _rllV .1f\c 'IC"/, " ; '"fJl ", • • nd '." . ... ble . ..... 1\' ,e<ton . . .... ~ w lu<leo Ind.......". nt 

,,10<1"< _ ... ,,"O,hK"" inVfUor_d u,iIt!~, puDli< POWE""" tonI"""".1 end · ....... Fo",ckdln 

1992, 'ho (e<>rIdO ~W><lI'" tor poIkln ,"", e.p .. d ,,,", ",.. of "'''' .... <1.11,· ••• 11 •• ''' de.., eMIl\' 

o<hook>t;~ .",d<><u , nd ""'''''''. rho molltlo<>·, <I .... " .. ................... "'"hl" I, united .,o,md "'" 

,.,i"li"''''' of , ... """"""".<HI 'M «e.,Ion 01 • ><"cu'" . "" ,.Ii.l .... '''''''rY !.'",e I", Ame ,ica. 

BC5E ...,<I.r<ror., 'tl<! Cfrt=l """ , ..... t ,INn ~rY 'ap; """,';>ti pI ~ in hf:1l",.. the ~ 5w .. 

K~;". III", o<on"",,,,, .... """tRY "",.,i'" obje<"'e.. 70, 'iw, .,e on ImporQr>t ,,>It 0/ 00' 

"""1\' PON<v ""<I ".. .. bo.n os elforu.o ., on, "Ole", fe • ..,;01 ....... 1\' policy ",_onl"" .. M'IIi<>a 10 

e"""", "" -..mo. _ . sale. """'."'001\' '" e"*'ll'l ,",,"taIlS. h ' ""'e.lM!. <An bo .!It!,ti"". efflclen' '001, to Hl<C<I,"P p!w.t. OKlo< i"_''''"""I. ~ue. <0'" to. <o"""".,', . nd ("'''''try. >!>Or 

' o<hMk>lIc., '"""",t"" . n<! "''''"," th~ .......... n<! dO!lk>ymen, 01. '.r~ of ,,"'.n .... tRY ",,'lon>. 

5<001' fe~.' pdl<"I h., " " ' led tt,. ",,,,,.) I". , ..... , .... '" enersl ,nd ..... '1'1 .111010.<'1'" .. ,,"'. In 

0d<I"" """" ..... of ,no""no. olio'" \C ,h. O.S. e<ooomi. ~I .. " of ... ...,,, ... II'HI "n. g •• f'i!'IIOI\rIIOn trnrl is prOYiaOOQ "" """'l' DoInoI\lo ""' .... "'" 0"""" SIal" .... ""IIf>O<1Od. In pari. by _ ... 

-, .... Coolin.'eI """pot, 10< tlNn ........ 1 inCOM,"'" bitt' .... ""', 1/1""." of "' .. b " , •• ~ ... . f\d 'up...,." 

.... II-re._ ,.. ....... , .... ,&"\' ""I.ei\' thO! Inr",,,,, .. o>u, eto"","", ' .... ~i'!orI •• , 1Iom ~ and 

.t, .... ,~ .'" . compe'I ~ I" tI>e gi<oDoi ..... I'\lIIKI. 

Tho Co .. ~tiI f\d I .. "'."' ..... ~ ..... I>t.n '"eof"lln~"' ,""" . . ... ru ""..., .. <leon "". 'IV....,~' 1.' 0 

«.m"",l>0<1<..., '"' ",Iorm""" lk Cwncillo wWIIni to ""8_ I(, <I"'.><Ion' ....... ' _ '0 >lfuel ... 

',,",Q,.,..,n,," t .. ret",,,,. If of\d who. COnltat, "'0""" leci>13!ion In , .... '" • h",,,. Cen" ... , 
100 

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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.072
101 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.073

Commen ts for the Record 

!louse Committee on Ways Ilnd Means 

Subcommittl.'l.' on Sel!.'ct Revenue Me:tsures 

Hearing on Framework for Evaluating Certain Expiring Tax Provisions 

Friday, June 8, 10 12, 9:30 AM 

By Michaci G. Bindner 

Cemer for Fiscal Equity 

Chllimmn Tiberi and Ranking Member Neill. Ihank yQU for Ih~ opponunily.lo submitlhcs<: 

"'omments for Ih",n:cord 10 the 110use Ways and Me:ms ComminL-e Subcommittee on Selcci 

Revenllc M<!:lSIIre<i. 

As always. our commems arc in Ihc C{)mClll of our propo->ed comprehensive Ulll refonn. As you 

know. Ihe Cemcr for Fiscul Equity proposnl includes tour m3jor provisions: 

A Value Added Ta.>.lVAT) to flmd domeslic military spending and dom~Stic 

discretionary Sp"nding with 8 mte between 10% and I J%, which makes sure lhal every 

American fumily pays something. 

Pcrsomll income s~Tlaxcs nn joinl Dnd wido'I'Ct! 1,1"1"$ \\'ith nel annual in~om .. s of 

S 100.000 and single filers camillg $50,000 per year \0 fund net imCI\."S1 payments, d{'bl 

retirement and ovel""SCal; ~nd slmlcgie mililary spending and olher intcrnational spending. 

,~i!b gmduatcd r.u~s between 5% and 25% in eilher 5% or 10% ;n~~m~"f1t~. Heirs would 

also pay tillies on distributi,)n~ ITom estate.', but notlh~ as-.cts th<)mscll'cs. With 

distribulions from s.ak-s to a qualiiicd ESOP continuing 10 be ~cmpl. 

Employee contribulioll~ 10 Old Age lind Survi\'ors Insurllnce (OASI) witb II lower income 

cap. "hieh allows ror lower payment Icvels 10 ,,'eallhicr relir"CS without making tlf,nd 

points more. progressive. 

A VA i·like Net Business Receipts ~x lNBRT), which is essentially II sublm~lion VAT 

w;lh addil;()naltax (!.~pi:nditurcs ror nuni!y suppor1, hcattl) care und th", privatc delivery 

uf govcmmemal services, III fund enlilll'l11l.'1l1 spending. and replace incom .. ' tax filing for 

most pt.·oplc (inCluding people who fil .. without payin~), the eorporat .. in~omc 1a~, 

busin~ss tax filing through individual inl'ome ~cs and the employer contribul;lln to 

QAS I. nll payroll ulXes for hospiml insur:lncc. disability insumncc. unemployment 

insurance and survivors under age 60. 

Whil .. Ihe call for comments ~xclud .. s transportation truSI fund taxes from the mix ofla.~cs 

consideTl."d under Ihese comments, we fintl that our analysis ufsu~h taxes provides a very m;cfu! 

criterion in judginglhe appropriatenes, of targcted mUl;. III OUT testimony on the issue ofcncrgy 

(and by definition. Imn:>pOr1alion) t(!.x issucs. "C laid Oul thc principle thaI if the la., pruviSion led 

to a gencr.tI incn!"'dsc in a broad based ta~ paid by employers in mha induSlric,. tben Ih" tn~ 

break ""as inappropriate. 
102 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.074

For c.\amplc, if ~ncrgy compani.;:,s I\'eciwd a crediL that was applicable LO them. mlh\.'r than to all 

busin\.'sscs, th\.'n it would be wrong to maintain such a eredi\. If. on the otlL\.'r hand. all fimL s 

cOLlld utili:te thes3mc credit in principle. then it should be allowed, TILis is InlC in both 3. 

~'orporule income IlIX system and the m(jr~ gencrill VA T·Ii~e Nt1 BusillCS, R.-ecipts Tu);. we 

uggc~t as JXlrt o f our comprehen i\'~ pl an for lax rcfonn. 

To Ihe <'~tcnt 10 which lax rdonn eliminates a spcc.it;c tax lind the relatl'd su to ~i dy and replaN'S il 

with r('[onns sueh as Ih\.' Net Business Recl,iplS Ta~ i which taxes both labor and profit), tux 

extcnders arc problemalic. but not impossible w preservc. 

This is one of the vinues ofa ..-..:parat\.' Net Business Receipts Tax. rtllha than replacing the 

CUIl'l'r:tIC Income Ta.x with a VAT Of II Fair Ta.\ - which by their nature have 00 o fl;,cuilli; ta.\ 

e.\penditurcs. Thechullengc arisi:'li. hnwcver, when the cxi~tencc of tax subsidies can)' with 

them the I'el)' justified impression liLat less lI<:,n conllect~d industries must pay higher taxes in 

order to preserve \h~ lax subsidies. Worse is the pereepl;on. which would aris<: with liLeir use 

in u t>usinl:'Ss rtttipts tu~. that such subsidic, efTeclively result in lo",er wage> across the 

toconomy. Such 8 pereepl,on, wh,ch has ~omc bas'5 in realily. "'ould be certain dCllth for lIny 

subsidy. 

One must look deeper inLO Ihe nnll,re oflhcsc a~1il'iti es tet d~K'fmine whether 8 subsidy is 

justified. or e,"en possible. If subsidized activities al\' purchased from anOlht:r lim}, the natufC of 

both a VAT nlld on NURT ~lIcvime the need for ony sub:<;idy at oJI. becBu~e the V AT paid 

implicit in th{, t .. cs for rc""arth and e.~pIOr.ltiOtl would simply bt: pas>;etl thrQUgh to the nCxl le,·el 

un the supply chain end \\'ould be eon;id~!l!"d OUlsi';e cxpt'lldilufL'S for NBRT cakulatiun u\1d 

Ihcrcfore notta.~obk If re5e.1fch and explomtion is eonduct~d in house. then tht: labor 

component Oflhcsc activiliC!< wQuld be tau"'; under both thc VAT and the NBlH, as lhey arc 

cUm!ntly taxe<! under pcn;onal in<'ome 8nd payroU taxcs now. 

The only reJI issue is "helhcr th" proli15 or los.scs from thcse activities reeci,'c spcci~ltax 

11"t"J.tl11tm, Ik-clLUse prot;1 and loss arc not Si.'para\ely calculated under such taxes, 'lhidL art 

esscnti~lty cOllsumption taxes, the answer must be no. The ability to socin i1~ 10 s~t'S and 

privatiz~ profits through Iht NB IH would ccar.c 10 exisl "'ith the tax it is replacing. 

Thank you fbr Ihe opponunity to addl\.'5s Ihe commilte~. We are. of COUTSC. DYDiI~ble for din.oct 

l..:stimony Or 10 ~n~wcr quc~tiQns 1;>y meml;>cf$ and staFf 
103 

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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.075

Contact Sheet 

Mich~cl Bindncr 

Center far Fiscal EquH)' 

4 anl~rbury Stjuare, SuiI<' 301 

IIl ex~ndriit, Virginia 223(14 

571 ·334·8771 

ii'(~!t'I1u,\)'@k~p~on '"" 

COllllnluef Oil WAYS pnd I\!~a s 

SUhCOllllllilltt on Selecf ReHnut I\!ta,ures 

!lea ring on Framework fur E,'sluating Cerlain E:lllirillg Tu Pru, isions 

Frid y,', June g, 20 12. 9:JU A.i\! 

1111 submiS$ions must include a list of all cli~lHs, pers<lIlS and/or organi:t;ltions on ""how behalf 

Ihe witness appears: 

This testimony is nOI s.ublllined on b ... half of Iln)' elk'nt, person!;lr organi,mtion other than the 

Center itself. which i51>O far tmfunded by any donations. 
104 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.076

Oty 01 Glc"~I ~" d lJep'''''''''"! of I.., ... 

601 Llke<idft Av .. , Suile 106, CI~,,~13nd, Oil Hll~·IOH 

f216161>4 50~ 

1I,s. IIOUS£OF REPRESEN1'ATIVF.5 COMMITTEE ON WAYS /\NO MI!AN"S 

SUBCOMMITTEE ON Sf.J.Ecr Rl!VENU~ ~ASURES 

8/12 11 ~ad g on F ... ",cwo,.k ror Evaluatlnll Ta~ hlende ... 

POOl-H urlng Written CQrnrnlUe~ $Ubrn iu IQ!1 

"Dramatic dvers l!aradi~· for syste rnic ""onornic recov~ry. investment-;. and jQbs· 

creation thi;,- Is assuredly the certain unavoidable. undeniable. Inescapable consequence which 

must follow the expiration or the ta~-~xlenders or tax-expi"" .. unde r consideratiml. This 

co"cluSIO" is drawn fro'" II years' e~perience as Co unSel to the Cleveland Empuwern'enl Zon" (a 

S200 nlllilun dulla r prugram funded by HUD Serllon 1011 loans, and EOI grants. and DOl. wurkforce 

dolla .. and Stat~ of Ohio fundS). and lead counsel fur the City uf Cleveland un 6-8 recenl and 

pending New Markets Tax Cr ... dil (NMTC) transactions (Iulal aggugate Ilnanejns in txetss of S100 

mHlIlln). My meSS3ge. my hias, is simple and stra ight-furward, 'rax-toob und~r prllgr:llns like EZ 

and NM1'C are admittedly not fully So~\-eff Cllve pr cost-efficient; yet. they are m"der~tely 

productive and. ImpPrtantly, the only tools currently 1V~nable or In-play. It would be not only 

counter-productive; but £Oneill,;ve ~v;dence ufa coa ~ste""" or £Owardke and hubris for Consress 

not to extend the useful lives of th""c vital tools. Havti,ain"d vOur anenlion? 

We arc call<><l. by virtue of our respective positions. experience, and intellect to euga!:e in Informed 

public discourse ..,eking dnigent di sc~rnment of solutions fur ongoing economic criseS whicb are 

beyond vi ta l and urgent- they 3"" eudemit and end-~am;c" Are the .... any 3mong us who wo uld 

deny tIl e purtent-; or duom readilY a,,"il~ble from the mOSI cursory cunslderatluo of the European 

Union. particularly Greece and Spa,o, ur. domestically. a study of California and Michigan? Even the 

second-largest and only robusl nalional c<unomy, China, is nuw seeing a ~ig nificant drop in growth. 

I.eadcu at alileveis. national. sl3te. and globalla,k the visiQll, the will and the courage 10 generate 

and hnplemcnt e!t"ettlve ""cove')' plans, Stili, we mUSI continue to do what little we CII n do and 
105 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.077

have been doing, Clearly we ne~d an exhaustive and mmp,..,hensive re-working of the Intemal 

R"venn~ Code and world trade and marhlS: but thos~ rdsks art! beyond our cur ~nt scope. Unless 

and until pr~nted with some viabl~. effective alt~r ative t"",ls, !!!il!tl\. en..! tf,Ul;e'!..tQ.o s 

!Il..!'tMIC and.J'1..iill!t.gthen, 

It is imperative th.lt we recognize. address. confront. challenge. and nltimately discount. dismiss 

and abandon various accepmd or conyentional premises, pre<lkates_ assumptions. temlS. conceptli 

0, notions. If we are to cnllalle folly and productively, Simply and summarily sta ted: our national 

GDP is deceptively defined and is nGt growing bLU is stagnant. at best: re!KlrlS and claims that our 

national unemployment is at or near 11.2% are dangerously deceptive; the accepted notion of 

~quivalency of impact or treatment between tax credits and tax eXI,cndirures is, IIk~wis .. , deceptlv ... 

mustcJarlf)'..ourJ hou ts . 

lIy this, the rmath paragraph. most readers wlllnoromforl3hly wnnller wheth~r t here will be any 

f~cts or data or ~ppllcadon ofmetrk' In s"'pport of the verbl~ge, asking "Am I merely Indulging the 

ramblings and ,amlngs of some rhetoricianr What is there to distlnguisl, this diatribe from the 

exhortltlons or scnhllngs "I' pnlitjclans or candldat". staring at their t.ete-prompters and guided by 

poll results? Wh~t Ind""d? I LI'g" the Committee and IlIIcrested readers to ""spend disbclief a while 

longer. 

Congress- may readily ronfirm through OIG, GAO, IRS. HUO, and Its own experiences thai the 

process- and tools for musurernent. rt!portin& ~nd mnnltorlns effechvellc.~s of such pros",m5 lIrt!, 

g .. nerally. obluse and sustepllhle of manipulation and mlsiotcrpret;,Uoo, either unwlttinll or 

contrived. 

liE: ZJ~ ogJ;3 l.u" The Offic .. of Inspector Gener~1 (OIG) «Inducts <me or more audits of a ~mpllng 

nfsuch programs and finds successfully completed prajed" with lobs-creation fur permitted uses: 

yet, challenges dlKumcnl~tl"n. The Government Ac.:ountabllity Dmce (CAO] oonduCls repealed 

program reylews and Issues reports acknowledging lobs Crt!3tlon. economic development and the 

apparent leveraging of slgnlliG1nt private capital; yet, challenges c~usBlity. The Intemal Reveoue 

Service (IRS) asserts an inability or unwillingnes~ to qu~ntify ~ml document the extent I)futlljz~tion 

of t he EZ elllplny",,-wage and other IiIX benefits. The Oepartment of Housing d Urban 

Deve!opment (HUD) is fu lly engaged with proscriptive implementation e/Torts and unable to devote 

adequate resources to m~asurement and monitoring despite an overly compleK sell-reporting 

Performance Measurement tool (PERMS), There are perfonnance and process deAdencie. In the 

EZ program. StIli. in the Cleveland EZ, with a hcnefidal focus on the EZ communities ~nd 

communtfy bas .. d development organizations, over tile past d<'Cade and 3 half, I'e rmitle<l,use 

prolects generated almost 4,000 new jobs. plus an unreported number of conslruction iobs. 

provldetl en'ployment training for over 5.000 low-,ncume reSidents of EZ. and leveraged over $:$5(1 

million of privat .. capirnl-all at a cost of $87 million in EDt grams and loan" of SB? ",illion In 11UD 

Section 108 funds anti 3 DDL Grant of$20 miliion. 

R.E: NMTC ~B nks_ d~v"lopcrs, qualified enlities and communities have recognized so 

much value In this program that tile available allocations (S3.5 billion for 201 1) have been overapplied-for by a factor of lOX. A sound argument can be advanced that the Community 
106 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.078
107 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.079

ClearStack 

i CI •• ,Sta ck, LLC 

6100 Dutchman, Laoe 

9"' Floor, Suite 900 

LoulSvlile. Kentudy, <40205 

June 7. 2012 

Congrusman PatrlCk J. liNn 

Chalnfl!ln: Subcommittee on Sl'kId RavII<loo Measu'~ 

Hou!18 Ways and Means 

U.S. HouS41 of Representatives 

DearCoog,essman Tlbe'" 

We awreciate )'OUr re-.... slting tne U,S. energy tax cred~ provisions. We Mve oevelOp&II a tecMOlogy 

thai more lnan o;omplie5 with all of tne pollutant r&dI.lC1i<m provlsloos fOf refined coal as delioealed in the 

To. Relief " nd Job C,ea~on Act 0[2atO (,,",",ed on January 1, 21)12). 

Tlla llIC/lnology ill a low COlli air-bklwn gasifl8r(~) that can bEl rEllrofitle!l 10 eJ(istlng ooal-flrea !>Oi""I!. It 

reduces sullu. dio~loo emissions by 0IIeI" 1~. me~ury emisslom> (and other air metal kI~ic5) D)I up to 

100% orn! ,educe. nitrogen o.ide emissions to IfIss than O. \0 Iblm~lIon Btu. TI>II t8JI Cfedil provision 

would be very helpful In allowing uS to demonstrate Ihe ledmology. II w"s proved It) a demonstration on 

a small steam DOlle. at Ihe Liocolo DevelOpmental Center", Ul1«Iln. IL aM is re3C1y to De lIemonstrated 

011 a larger scale electric utlijly bo~e. for power generatioo1 Wiltl S<leh a sucr.essful commercial 

demonstration it should well become the Best Available Coouol Technology lor coa,t./ired power plan~ , 

We ask that )IOU consider extending the rer,ne<1 coal tax CIed~ prollisionB in tM Tax Relief and Job 

Creat'OIl Act or 2010 10' al least iIf1 addillol\8l thre<! yea.s, II woutd lake around 18 I1'IOI1ths to doeslgn. 

oo".iruCI. retrofit and start.up our gasiller technology . so one yea. extensions as haW! been do"'" In the 

past are not..ery ~plullO the corrlll'le1cia,zalion oIlh.s Clean Coal Technology. 

This Is an easy 18trof,t technology that C8n diminish Ine number of ls U"9 coal ~'ed powet plant! 

planned lor shutdown \leoCa1lSe 01 the currenl easily retO(jniJ:ed US EPA mission 10 destroy the coal 

Industry; W these plants are shutdown ~ will result In Ihe IGs$ of many coal mining end POYier plant jobs. 

We are Mving df!.cussions with American Electrie Power col\C8mlng retrorlliing their B's! Sanely coat fired 

units Illal could pullhem [nlo EPA compliance by 2015 and save /fIiIny Jobs. 

Kinoesl Regards. 

Rol>er1 A. AshwOf1tl 

Sr. Vice Presioent - Technology 

!;C: John Siegel 

Jim Wolff 

Steve R~meiel 

Steve McClure 

AnIIy Hamilton 

....... ··,·_ .... ,...._, ... _,_..-.,..""' __ ... <tf"""'I""' __ .. • ___ ... _· 

www.clea,."r.c • • com 
108 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.080

Contact Inlormalloo ~ 

CleafSlack Ef'lgineenng 

Robert A. A~hWl,lrth . Sr. VP • Technology 

8123 Buffalo Sprif'lglO CoUr1 

Sugar Land. TX 11479 

281--343-5561 

no~Shworth@earth n~. l 

ClearSlack LLC 

John Siegel. Principal 

6tOO Dutchmans Lane 

9"' Floor. Sul1e 900 

Louisville. Kentucky. 40205 

502.s84·6022 

J~!l!@~~ars\a cl<£9!!'. 

""'_·f"-......J_ ... ·_ ... "' .... _"" .. "'""" ..... _oI_t .. ·" ............... jo._ ... ,_ .. ~ ....... _ www.clearstac/r.com 
109 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.081

JUlleU.2012 

The HOllorable Pat Tiberi. Chait 

The HOllorable Ricl'lard E. Neal Rank;lIg Memtler 

Subcomm>ttee on Select Revenue Ml!asure'i 

Committee 011 Ways alld Mealls 

U.S. House of Representatives 

Wa~hillgton. D.C. 20515 

Dear Chairman Tiberi and Rallklng Member Neal: 

On behalf of Wlciencv First, a trade association representing America's Home Performance 

worllforce. I thallk you for the opportunity to expren support lor the restoration alld e~lension 01 

the residential energy efficleoCV f25C) tax credit. Please coMiderlhis leiter a >l:3tement to tile 

record for the House Committee on Wa'(5 and Means. Subcommittee on Sele<:t Revellue Measures, 

Hearing on a .,amework for E~aluating Certain upirillg Tax Provisions on June 8. 20ll. As large 

and small tl!Jsinesses that make up the home perlo.mallce illdustry - including contractors. 

buildillg product manufacturen alld related orgalllzatJons - we recognize that energy efflciencv ta~ 

ncenlj~es are «itical to increasing the efficiency 01 our nation's homes, redUCing energy bills, and 

putting ounontractors tlac~ to work. 

We urge you to fllCtend the Tax Code Section lSC that pro~ldes a 10% tax credit lor the purchase 01 

certain energy efficient materials up to $500. Since in passage in 2005, Ihis tax credit has been a 

significant incenti~e lor homeowners to choo~e energy efficient products o~er ess eKpeml~e and 

less·efficlent alternati~es. It has pro~oen to be an important tool to promote energy efflcienCV by 

helping owner.; afford higher efficiency willdows. door~, HVAC ~ystems, hot water heaters. roofing 

ilnd insulation. It hilS also served to create ilnd preserve American jobs In the remodeling and 

retrofit induSIf'1. 

The 2SC ta~ cred" could be improved. Betw~n December 31, 2008 and Januaf'11, 2011 the laK 

credit was e~panded to 30% of the purchase of the energy efficiency products up to $1500. This 

supported a growth in demand for those product in a challenging economic en~l onmentlor those 

In the building indu5\f'1. A return to those levels would further support American jobs 10 the 

residential building sector. 

In addition 10 re.sloring. extending, and expanding the 2SC ta~ pro~ision. Efficiency f irst expresses 

support for a new ta~ credit propo!.)I, recently Introduced in the Senate. The bi·partlsan ·Cut 

Ene/'iY Bills all10me Act" (5.1914) would create the B E tax credit --11'11' first residenlial 

perfofmance·based tax credit given to homeowners who make energy efflciencv improvements. 

As a performanc ·ba~ed incenti~ , 2SE would reward energy sa~ing le~els rather thin specifiC 

products, thus ali8ning taxpayer dollars directly with publk policy objectives, creating significant 

energy savings and Job creation. The 2SE tn credit would lay the foundation not only for short 
110 

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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.082

term ga'M, bUI will al50 he lp neale a markel for energy efflclerlcy arld arl irlctrlllV1! for 50und, 

effic,em coostfllct!oO by "a,oed (oonaClO'S. 

Few laK credits u"dercorulderalioo provide laK relief 10 Ihe G~erG!e America, homeowoer. Doth 

2SC arld 2S[ would Jl!duce America's eoergy u5e, create jobs, protect our nallon's securlry, aod pul 

money b<lck loto the pocket of Ihe American taxpayer. 

We appredale Ihe opportuoilV to eKpress our support of Ihese IWO importanllax proylsioos. 

51100ld you haye any Questiorls about our position or organization, please do not hesitate to 

cootael Il"'e or our Washlngtorl Repre~eota tve Kar a Saul Rinaldi at ~ara@anodyl.som or 

202.276.1773 directly. 

Sincerely, 

Jay Murdoch 

Executive Directo/ 

Efficiency First 

70 Zoe Slre~t 

Suite 201 

San Francisco, CA 94107 

202.680.11915 

~.murdoch@effotiencyf;rst.org 

Title of Hearing: Framework for EYah,ating Certain bpirlng Tall Provisions, Jun ~ 8 2012 
111 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.083

iI 

FEED NG 

AMER CA 

Statement for the Record 

Submitted by 

Vicki Escarra, President and CEO, 

Feeding America 

For The Hearing on Framework for Evaluating 

Certain Expiring Tax Provisions 

Before The 

U.S. House of Representatives 

Committee on Ways and Means 

Subcommittee on Select Revenue Measures 

June 8, 2012 
112 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.084

Chairm~n nberi, Ranking Member Neal, and members of the House Subcommittee on Select 

Revenue Meas~res, thank YOU for Ihe opportunity to submIt this statement for the record on 

behalf of feeding America. We ire grateful 10 the Subcommittee for recogniling the 

importante of e~amining the impact thaI numerous expired and expiring tax enendcrs have on 

the US economy and American taxpayers. In particular, Feeding America recognizes the vitallv 

Important contributions that the chilritable giving tax extenders have on the nonprofit 

community and those we serve. We urge Congress to swiftly renew the food donation tax 

dedu(\ion extender while the process of eumining extende~ in the conlext of comprehensive 

lax reform continues. 

feeding America is the nation's leading domestic hunger·relief charity With a network of more 

than 200 food banks In every state servIng over 60,000 local food asslslanct' ilgencies. Feeding 

America food banks as well ~s food a~slstance agencies reJV on a variety of public and private 

fu .. ding streams, govemment commodities, as well as food donated by retailers, food 

manufacturers, larmers, and restau",nts. last year, 37 million people, or one in eigln 

Americans. received emergency lood assistance through the Feeding America network of over 

200 food banks. This represents an increase 0146" since 2006. As a result, appro~lmatelv S.7 

million people per week ilre now receiving emergenCy food anistance through Feeding America 

food bilnks. 

During the ·worst economic downturn since the Great ~pres5ion, the number of Americc ... 

families stru@.8lingtomakeendsmeetllaslncreasedsignificantlv. With unemployment stilt 

hovering near 8 percent and millions of Americans underemploved, the need for food 

assistance continues to grow and food banks continue to be pressed to meel lhe need in their 

communities. 

The food distributed by Feedi .. g America and the programs our food bank members ru .. in local 

communities provides a solid rewrn on ta~payer investments arid helps reduce state 

governmenl and private sector health costs as well as Investing in a healthv future workforce. 

Feedl .. g America network members utilile local and Ilatlonal publk private partnerships to 

ma~im le the impact of government commodities and provide the most complete and 

nutritious rood packages available. We. also continue to do more with less, responding 10 an 

ullprecedented increase in demand while cOrflbatting a 40% decline in surplus agriculture 

products from USDA, stagnation in manufactured food donations and a sta@.8ering150% 

Increase in the amount oflood purchased bV Ihe Ilelwork. 

The. food donation ta~ deduction (Internal Revenue Code Section 170 e3) is a critical food 

sourcing tool for Feeding America network members .. The deductio .. provides an "Incentive for 

bUSinesses 10 donate fit al}d wholesome food inverltory to a SOle3 organilalian serving the 

poor and needy. The deduction seeks to capture food that would otherwise be wasted by 

providing an incremental tax deduction over the cost of goods sold if the food Is donated to olI 

501(3. Without Section 170e3, then.' Is no Incenllve lor a bUsiness-to donate the food verses 

dumping the food inve .. tory in question or selling Ihe food to another retail outlet. 
113 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.085

Sillce the inception of the food donation lax deduction In 1976, the proyisloll was ayallable 10 C 

corporattoll taxpavers ollly. Howeyer, as mallufaclurlng effitiellcies and Improved sales 

forecasting by food manufacturers decrease the surplus goods donated to Feeding America 

members, it is yital to secure addilionalfood product that Is ayallable ac(oss the food industrv 

specuum, indudlng from small busillesws like restaurants, farmers, and retailef'5. In 2006. 

Congress enacted as part of the Pellsioll Protection Act a two year prOVision expilodillg the food 

donation tal deduction to include all business ta.o:payers as eligible dono~. IlOt just C 

corporatiollS. This modification to tile food dOllation tax deduction gave small busillesses, 

;ndudillg pass·through entities (Subchapter S corporations, limited liabilltv companies), the 

ability to take the same enhanced deduction for the COntribution of food Inventory as C 

corporatiolls. 

The expansion of thO! food dOnation tax deduction in 2006 to include small business donOts has 

wor~ed to spur additional food donations. Food Donation Connection has seen a 137% InCfease 

In pounds of food donated by Its restaurant clients to food pantries. This is food that would 

otherwise have been 'lent to a landfill. Feeding America and its food banks have benefited from 

inCfeas~ donations from food mallufacturers, retailers and lrOwers that c;m IlOW talce thl'! 

same enhanced deduction fOf dOflating food as larger food compaflles. Still, despite the 

success of the food dOflatiofl extended in spurring addltiofl~1 food donations, we ~flOW tnat this 

is only part 01 the solution in capturing the 7S billion pounds of nutritious food lafldfilJed eyery 

year. 

Feeding America wonglv belie yes enactment of lhe Good Samaritafl Hunger Relief Ta~ 

Irtcefltlve Act would help maximize donations of excess food invefltory ilcross the food llldustry 

spectrum. The legislation would maWe permanent the temporary proVision allowing all 

qualified business tax pavers (Including farmers, retailers, restauranl$ afld food maflufacturers) 

to rnke a heighlened charitable ta. deduction for donaliofls of fit afld wholesome loodto non· 

profit charitable orgaflizalionsthat serve the needy. feeding America has seen a siSllificant 

increase in the amount of food donations from small busillesses such as restaurants, retailers, 

and farmers since thE': temporal)' proylsion was enacted in 2006. According to data collected by 

Food Donatioll Connection. In 200S prior to the 2006 e~pansion dOrtallofls of food from 

restauranh enrolled ill FOC's Harvest Program were approximately 1S million pounds. By 2008, 

that amount had grown through the expansion of the provision to Include 22 million pounds of 

food donated ifl 2008. Howeyer, the temporary nature of this provision makes it yery difficult 

for small businesses to incorporate food donations InlO a long term buslfless plan and reduces 

the amount of businesses willing to donate food. 

The legislation would also allow farmers and other Hcash method" accountillg taxpayers \0 

consider 25% of thE': fair market value of the donated food as the cost to produce the food. 

Current law does not accommodate the accounting choices thai most farmers organiled as sale 

proprietors use afld prevents farmeri thai are sole proprietors from lakillg the tax deduction. 
114 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.086 Insert 80206A.087

liIstly, the legislation would codify a" Important Ta~ Court ruling, LucKy Stores, Inc, v. 

Commissionero! Internol Revenue, I" which the Court uphe ld the right of tile taxpayer to 

determine it reasonable fair market value of donated food rather than the IRS. 

We greatly appreciate Ihe opportunity 10 submillestimony loday on behalf of feeding 

America, our overlOO member food banu, and the 37 million Americans fed last year. The 

food donation la~ e~tender and tile broader Good Samaritan Hunger ReliefTa. Incentive Act 

would provide strong incentives to capture millions of pounds 01 nutritious food currently going 

to waste while giving small business owners fair and equitable access to the food donation 

giving Incentives C corporations have had lor deades. We urge the Subcommittee to swiftly 

pass iln extension of expired provisions as a bridge to consider extenders thoroughly during tax 

reform, and to use tax reform as an opport unity to erlaC{ HR 3729 to expand and improve the 

food donation tax deduction. 

CO(1t<tct Informa tion: 

Carrie calvert 

Feli!dinll America 

One Constitution Ave NE 

Washington DC 

202-546-7001 

ccalvert@feedingamertw .org 
115 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.088

~ fei. r,,,,,~1 !>l!ruQw< 

,nte," ,H lg nel 

STATEMENT OF 

COMMITTEE ON TAXATION 

fiNANCIAL EXECUTIVES INTERNATIONAL 

BEFORE THE 

' )111' __ l'1i0i00 

.... "'_,'~ _ 

...... _ ....... '0_' 

lin"",,,, , •. y"~,,j' 

sUaCOMMITIEE ON SElECT REVENUE MEASURES 

COMMITTEE ON WAYS AND MEANS 

u.s. HOUSE OF REPRESENTATIVES 

HEARING ON 

FRAMEWORK FOR EVALUATING CERTAIN EXPIRING TAX PROVISIONS 

JUNE 8, 2012 
116 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.089

The Comminee on lautlon of Financial ecutlves International 'FEll thanks Chairm3n Tiberi and 

Ranking Member Neal fo' the oppo!!unllV 10 submit tht<. slatement on the annual la ~ extender 

proviSions. The Comml!\ee on Tuation urges Congress to act as soon as ponible to extend these 

expired ta~ provislons. In~ct lo n on these tn proylslons has brought InstablfllV aod uncertainty Into the. 

U.S. economy and put Ameliean companies at a com petit lYe dlsad~antage 10 the Blobal marketplace. 

FEI is the leadh'R advoc~le for the yiews 01 torpOr ate IinallCl<Il management. IU 1S,ooo members 1I0id 

pollcymil;lng positiOns 35 chief finif\clil offlcer~, l!'enuren. ind contrelle!> it companies from eveN 

major industry. F[l en"ances member profesli"nal deYelopment thrOU8h peer networking. Ca reer 

management services. conferences, teleconferences. and publications. Members participate in th e 

actlyitles of 86 chapters. 74 In tile U.S .. 11 in Canada, &nd 1 In Japan. FEI is headQuartered In 

Morristown. NJ. with additional office. In WashlnRton. D.C. and Toronto. The Committee on Taxation 

formulates lax policy for FEI in line with the views of the membe"hlp. 

1 he Committee on Taxation believes that tax polkV that support.'l economic growth ind ud .... cert~intv 

and predictabilitv In the Interna l Revenu~ Code 'the "Code"l. Manv of the tax e'ltnder~ have long been 

pan of the Code. and Ia.paye" "aye come to expectlhey will !... eXlended annually. failure to extend 

some 0' all of these prO\lI!ion! before they eJplred, or doing 50 later In the legl!latlve session with 

retroactive applica tion. creale! uncefl.lnty. as well a. ta~ finanCial reporting and planning chali"!!ge" 

The failure to extend the.e tax provis'ons in a timely manner reduces their incentive effects and raises 

taxes on bUSinesses. leaving less Income for investment and /Db eteatlon. In addmon. expired tax 

p'ovislons can have a material impact on a business' aYailable capital and public perception when 

disclosures ale required in financial sutement fill!!g •. 

The Committee on 1axat)on supports tn reform t"at simplifies. makes certain and predictable. and 

ImprOVf!s the Code, while increaSing the global tonl~lIti"eness of U.S. companies. The Committee on 

Taxallon also belleYo!! t~at these tax p,OV\Sions'should be carefullv eltamined. along wltl1 all ta ~ policies, 

in the context of fundamental tn reform. However, the Committee on Taxation believes that these tax 

p,ovislons should not be allowed to remain eXpired during the carefUl and deliberative le@islatiw> 

plocess on tax reform. Nonetheless. the Commilt .... on Ta.ation !...Iieves Ihal permanenl tax increases 

should not be used to pay 101 the tel'llporal'/ extension 01 the!.e proyisiom and that permanent tax 

<hanges ,hould only be considered In the cantul of fundamental tax relornl. 

Many 01 the provisions In lhe annualt .. e.tender pachge "aye become lI~tures 01 the Code. D~,plte 

thei' recurring explr~tion dates and uncert~ln renew~l. ~~pa~ers lIave come to rely on these u. 

plOYlsions when maklns business deci,lons. The research and de~elopm nt 'R&D) ta. credills such an 

example. Wllile the R&D credit hu been ~ proven Incentive for R&D Inye.tment and job creation In the 

U.S .. COII1J)<1nles fl'UU 'ely on annual Congreulonal acUon to flI~~e the investment. Global competition 

for R&D Is Ilerce. and the U.S. R&D tax credit onlv ranks 17'~ overall among the 34 countries In the 

Olganllation lor Economic Cooperation and Development (O£CD). That is why the Committee on 

,autlon supports not only utenslon of tile R&D tax credit, bUt also eflons to modernize, stren8then, 

and make it permanent. In the meantime. failure to extend the current credit Increases tile risk ~a\ 

, 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.090

R&D - ~Iong wl~h the jobs, nve~~men~, and intangible properw ~h ~ ma~ result - will be conducted 

outside the U.S. ~t the expens~ of our ~ronomy, 

The Commil1ee on Taoa"on believe~ that active financlnB ""en,ptlon i~ an!>!her e.ample of very sound 

la~ policV wllhin Ihe tax extender pacllage and should be extended. The actl .... financing exemption i~ 

another longstanding ta. e",ender provillon Ihat prevenll the double taxation of income from active 

foreign bu~lness operations in the U,S. fin~n~lal set!or, Induding upllve flnante companies of U.S, 

manufacturers. II al'iO en,ures that American f,nandal s"",ices pro"'d~rs ana ~. e.JKln, financed by 

cap!ive finance rompanles are not p~t at a competitive disadvantage <omp~red to their worldwide 

competitors. 

A more recenT tar e'le~der that the Commillee 0" Titxation believes shOUld toe e<tended il Ihe related 

controlled foreign rorporatlon (CfCj look·through lilies. This provision also removes the double 

Ia~alion laced by U.S. companies that operate and compete abroad. It allow. related CfCs of a common 

U,S. parent company to mal<e "oss-border dMdend, interest, rent. or royallY payments wlthou~ 

ereatins ~ubpan f income il the ~mount!, are paid from active foreign busine .. prof,t!, or effectivelv 

connected income. Withoul these ru le., urh r~inve' ments' would b~ ,~bie(t to Immediate tax that 

(ompetitor~ ba, d in many other counuie. do not incur. 

, he Committee on Taxation al,o urge, Conjlressl!> ""tend 100 per<ent "nonus d"preci~tlon· expen,ing. 

Tempora", partia l e. pen,jnE ha. been enacted. enhanced, and reenacted several limes since 2002 to 

nomt economic recov~ry. The 100 pereenT expensing wa, enacted in D~c~mbe. 1010 and expired at 

the end of 2011. The Commlt!ee On Taxation believes that expensin8 is an effective invEllment stimulus 

and Should be inCfea!.ed b3c~ to 100 percent. 

, he benefit, of renewinS the annual tax extender paaage and 100 percent bonu, d~preciatlon to jobs 

and 810bal competitivene.s C3nnot be overstated, The United States not on.., haUhe highest corporate 

ta. 'aw in the DECO, but al,o is the only OECD cOlJntry that u,es a world .... lde sY5leh1 of tuation. These 

ta. extender proyisions he lp U.S. companies ooh1pete Hlobilly. U.s. companies and American wor~ r. 

can m·a//ord the unc ertainty caused by inaction on these Importan! ta~ prOYi,lons. 

The Committee on Tartallon appredate. the opportunity to submit thele comments and lookl forward 

10 working with Congress in support of extt nding these tax proviSions as Qukkly as possible. 

, 
118 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.091

Submitted by: 

Karen Lap5e'Jic 

Dire ctor, Govt!rl'lmel'lt Affairs 

Final'lcial Executives II1Ierrratiollai 

1825 k Stre et, NW, Suite SID 

Wa5t)ington, DC 20006 

To 202.626.1809 

F: 97].B4U222 

• 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.092

@ FOOd Donation . Connection 

• p' 111M"'''!) ... ~ .... 

Statement for the Record 

Hearing on 

Framework for Evaluating 

Certain Expiring Tax Provisions 

Before 

Subcommittee on Select Revenue Measures 

Committee on Ways and Means 

The U.S. House of Representatives 

June 8, 2012 

By 

Jim Larson 

Food Donation Connection 

PO Bo~ 22781 Knoxville, Tennessee 37933 

865-777-2398 www .!oodIOdon ale .com 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.093

Statement for the Record 

of Food Donation Connection 

U.S, House of Representatives, Committee on Ways and Means 

Subcommittee on Select Revenue Measures 

Hearing on Framework for Evaluating Certaill Expiring Tax Provisions 

June 8, 2012 

Chain'l)'HI Tiberi, Ranking Member Neal, and member~ 01 the House Suocommittee on Select 

Revenue Mea5ure~, thank you for the opportunity to ~ubmit thi55tatement for the re<;ord on 

beh~lf of Food Donation Connection (FOC). One of the mo~t beneficial ta~ laws within the lin of 

e~pired t~x provi~ions is the e nh!!!ced cl\i!:itJ.!!!, degyctlgn fqrJood 'y~ntory . This provi~ion 

encourages the donation of surplus, wholesome food to the needy through ~n incentive to 

foodserv ice companil!5. This tax incentive servl!s to offset the lime and I!xpense required for 

thl!se companies 10 safl!ly save and dona te surpills food to non·profit organizations. 

The current economic climate has intensified t he needs of charities seeking to feed the nation's 

hungry. Feeding America reports that since 2006, the demand lor food assisla<lce i<lthelr 

<lational network of lood banks has increased by 46%. Om' suctes5lul approach to meet this 

<IeI'd isto redirect surplus, wholesome lood from restaurants, universities, hospitals and other 

foodservice companies to food banks and hunger relief organizations. 

There are many reasons for extending the food donatlon provision !!f'w, bridging the gap since 

eKpira tion, and then making it permanent with the proposed House Bill HR 3729. Before I 

elaborate on those reasons, I'd like to explain Food Donation Connection's role in this process. 

Since 1992, FOC has assisted companies Ilationwide il"\ esrablishillg programs to safely donate 

their surplus food to local hunger relief agencies. FDC's vision is to "let nothing be wasted,· and 

the company has coordinated the donation of more than 230 million pounds of wholesome 

prepared food from nearly 14,000 locations to over 7,900 non·prof,ts helping people in need. 

We currently partner with a wide range of companies and organizatiotls including Darden 

Restaurants (Red lobster, Olive Garden, longHorn, Seasons 51, Bahama BreNe, Capital Grille), 

Yuml Brands (Pina Hut, KFC, Taco Bell), The Cheesecake Factory, Chipotle Me~ican Grill, Bob 

EVans, Mimi's Cafe, HMSHost, ARAMARK, 5t Jude Children's Hospital, 5tarbllcks Coffee 

Compatly, and others. 

Reasonlio htencU.he.£.hari~ l!Le Food Donation Deducti9n 

There are sever.,! reasons 10f e~tending the food donation provision and then following up by 

making it pe rmanent with HR 3729. The food donation enhanced ta~ deductlon provision for 

non-C corporations will : 

Serve a va.!!d_pollcV_gQ!j1 01 encouragTng food dOl1ations by olfseulng the costs Incurred 

by donors iind provide iin economic Incentive to donate rather Ihan dump SU~llJS food. 

, 
121 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.094

Result In ta!laimes5. This provision results In a just tax code since non-C corporations 

would be allowed the same enhanced deduction as C corporations. 

Promote the equity in society by helping the nOr\·profits that he lp people in need. 

Inexpensively accomplish the policy goal bV efficientlv usin&.l!ublic funds, For example, 

a donated $10 pl~za results In a $1,17 tax savings for the donor, which costs the 

government $1.17 1n lost revenue. The (ost to the government for providing this food to 

those in need is considerably less than the retail price it would pay for a sImilar product. 

Allow for proper Ln planning for non-C corporations and good stewardshIp of 

wholesome surplus food that can help people In need. 

Katrina £mer&! ncy b x Re lie f Act {KETRA) 

When Hurricane Katrina devastated the Gulf Coast In late August, 2OOS, Congress passed KETRA 

to make it posslblt' lor 011 busint'ss entitles to lake the enhanced tax deduction allowed bV 

SectIon 170(1')(3). This meant that non-C corporatrons like S corporations, Partnerships. and 

Sole Proprietorships could take the same enhanced deduction as C corporations. The law, whiCh 

expired at the end of 2011, was previously extended on thN!e octaslons with the PenSion 

Protection Act of 2006, the Emergencv Economic Stabilization Act of 2008, and the Middle Clan 

Tax Cut Act of 2010. Whilt' these measures have helped to meet the needs 01 hungry 

individuals, this bi·annual, retroactive tax extender approach makes it dillkult for potential 

lood donors to undertake <ldequate tax planning. 

!:!!U1..29· Permanemlyj._tend and ExPJ1~ he Charitable Deduction for ContrlbuJ!Q!!!.~ 

Food Inventor,' 

The uncertainly of incentive longeVity and lapses In the charitable deduction prOVision increase 

the difficulty 01 convincing non-C corporation business owners to donate food. Manv things 

compete for the attention of bUSiness managers and as an unfortunate result wholesome food 

continues to be thrown awav at many food service locations, fOC supports the permanent 

expansion 01 Section 1701e){3) to 01/ food industry businesses as proposed in HR 3729, 

introduced in December of 2011 by Representatives Geoff Davis and Sander Levin, 

The language included in HR 3729 provides an enhanced hlK deduction for all business 

taxpayers and codifies an important tax court ruling regarding valuation lor food donations. 

Specificallv, this legislation would do five things: 

Make permanent the proviSion to allow small businesses (non-( corporations) 10 apply the 

enhanced dedu(Jion for contributions of lood inventory; 

Change thf cap on charitable deductions from 10%to 15% in an effort to increase the 

amount of food donated to individuals in need; 

Codily the definition of fair market value as the price at the tIme of the contribution without 

regard to internal standards or lack of mar~et; 

Allow taxpayers using the cash method of accounting to deduct 2S% 01 the fair mar~et 

value of food donated (this generally aflecls farmers and ranchersf; and 

Allow non-C corporations to carry forward the Charitable deduction for 5 years, 10 mirror 

the treatment of C corporations. 

3 
122 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.095

Ta.~lm~1 

fOe i~ uniQue\v po5irlon~d 10 enmlne Ihe eff~ct of ~.p~ndin8 Seaion 170(1.')13) 10 ~II bu!ln~'5 

la.pavers Tn lhe foodre",ice industrv_ We trac~ the donations of nearly t4,ooo foodse",Tce 

I<ICiIUoos. FOC's rol~ In coordinating food donal Ion programs allows uS td measure the impact 

wilh data that Is not collected OIlU, returns. The followIng charts iIIuSlrate I~e benefTt of 

e.panding Sealon 170(1')(3) 10 non·( corporallons. 

_-c_<.......-._ 

· fin;:\ ~ ~ "- · -- -- -- · - · -- · -----_. 

· ,11111111 

· -------------------

'-"---"'- o:fOCj~~- uo .. _ .. _ 

-,~ ---- : 1------_.-,.--:-

The first chan, NINI-C and 

C CarpararJony Oonating, 

IIlumates Ike increase in 

the number of mm·( 

corporations particlpatfng 

In the fOC's food donation 

program when the ta~ taw 

Wa~ extended ta nan-C 

corporat>Ons. 

The ... cand ch~rt, Paund5 

Oonatn/, graphica lly 

illustrates the Increase In 

pound. offood donated In 

conjunction with th~ KETRA 

extensions. 
123 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.096

Cho,IU .. AnI ..... 

-r 1f:ii:S~'"'=-____________ 1,_ Chorill .. 1 In 2011- _ 

-'--------------, ------

:'1 ---•• --..loI~~~~~ 1 

II I I I I 

The third chart, ChQrities 

Assisted, illustrates the 

increased number of 

orgarli~aljons helped ~s a 

result of the ~ETAA and 

subsequent e~ten!ion!, 

All three charts ilh/strate the growth In donations from companies Involved in FOCs HarV('S\ 

Program, in part due to the expansion of section 170(e)(3) in 1005 and sub>equenl e~tensions , 

Another e~tension is critical to kN!p food from non·C corporations Irom being discarded. 

P!-rtinent History 

The fundamental features of HR 3729 have been previously e~amined and agreed upon In 

bipartIsan bills designed to expand the capacity olindMduals and organizations to serve those 

in need - the Charitable Giving Act, HR 7 and the CARE Act, S. 476. 

-In the 108" Congress. the CARE Act, 5.476, passed the Senate by 0 vote 0/95-5. The 

House 0/ Representativespa51ed companion legis/alion, rhe Chari abl~ Giving Acr, H.R. 7 

by a vote 0/408-13, Tragically /Or those In need, the bill was ch,mm as the fir$t bill to 

nor be allowed to go ra con/e!ence air!!! pa51og!! by bath chambers and thus pFeventl!d 

from becoming law in the las/ Congress.' 111 

"1 Senator Rick So OIOfUm. C~ajfma" of ~. Subtommln .... "" Soc.I.1 SeC;\lfity .nd f .mlly Pel ....... Senal~ 

r;".n<~COmmiU"'" ~p"' m"", U , lOO5. 

In dosing, lea~e con~ider the fo llowing. typlc~1 comment from a recipient hunger relief agency, 

concerning the Impact of prepared food donations. Stephanie Paine, Director 01 Food Service 

10f the San Diego Res<;ue Mi~sion writes: 

... The donations 01 pj~1a from Pina Hut and chicken wings, rice. mashed potatoes, corn 

on the cab and macaroni &cheese from ~FC have increased the nutritional value olthe 

food we had avajlable and the men. women and children that receive the5e meals have 

been so grateful to have more Yarietv in the weekly menus. We collect enough otthe 

Pizza Hut and KFC items to serve three meals a weeki And IV(' serve 500 people at each 

5 
124 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.097

meaL That Is lS00 free meals that would otherwise be thrown away if these restaurants 

didn't donate to our organization .. 

AS you consider the best ways to address taK eKtenders and help end hunger throughout the 

United States of America, please remember that food donation programs provide free prepared 

food to lion-profit organllatlons in local COmmllllities, resulting III an Immediate Impact on the 

lives of less fortunate indivIduals in need of food. Surplus food donatlons re·direct wholesome 

food - otherwise destined tor a landfill- to the stomachs of hungry people. 

E>rtellding the food donation ta~ law alld ultimately passing a permanenllaw outlined in HR 

3729,would fulfill the original intent of the Section 170(1.')(3) legislation by allowing no'l·C 

corporations to take advantage of a charitable deduction for their CO'ltrlbutions of food 

Inventory. The provision makes efficient use of public funds for 3 valid policy goal while 

creating ta~ code parity for non·Ccorporations and C corporations. 

Thank you for your efforts to make a difference in the lives of thousandS of people by el(\ending 

the enhanced Charitable deduction for food inventory and ultimately making t/l islegislalion 

permanent ta~ law. 

Sincerely, 

Jim Lar'lOn 

Program Development Director 

Food Donation Connection 

PO Bo~ 22787, i<noKvllle, TN 37933 

865-777-2593 

Jlm.larson@foodToD0l\3te.com 

, 
f 

125 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.098

Fuel Cell & 

Hydrogen Energy 

Association 

.lunc /l, 2IHZ 

SIAlcmrnl of l" ~ fu 1 Cell nd II l' " Energy AMindalloll 

Ilou!i~ Commillre 00 WM)"S and MC"' ~ 

Suhfommillce On cc ' o,, ~ urrs 

II cnrilllt on ~ Fnul1 cworl; for F. ~ .. lualil>g Ccrt"ln F: Jj rin g Tu ro, 'l ~ 

The Fllei Cell alld llydroi'."" Encr~ Associalion (!'CHEA) commends Ihe ConHnim:e for mn~io~ a mlloh 

nffilcd reviewoflhc frnmcv,·ork for eval,,", .. in!!, mpQrary taX provision~ in Ih~ U.S. TA~ Co-dc 10 ensu~ 

continued efficacy and l1CC<":I~iIY. The fuel ~H and hydro!:"" encrgy indu!1rY ha$ ,,""'end)" begun 10 

ulili;ee $I:\"cralla~ inte"1llives Ih3111re criricallO ensuring com;nw .. d Amtrican Icalk'r'lhip in thi~ 

l~c nQlogy. 

!'OleA is Ihe Inllle assc>cialion for 100 fut'l cell and hydrogm e"1lergJ indumy. Out mc",be",hip indudi.-S 

fucl Ct'li malerial~. tompon~nl~ and !yslem~ m3IlufaCIUrff'l; 3ulomOliw companios; hydrog .. '11 producer.! 

and distributors; ul1i~eni'ies, gowmmi.'I1llaoordlories ilnd agenci'-'S; and OII11:r cnd ~rs . 

As you may I;now. fud .. ..,H ~ and hydrogen enor&l- l~hnolo!:il"5 dcliwr dean. rdiable pt.wer I() 1i.'lIdin!!, 

~dg~ ~ol")Xll'""dte , a~de'l11ic and public 5<.'1.101" ~rs. ~nd FCHEA memtJ.ers arc helping to tnmsform our 

cn,:tgy, .. "C()nomic. and ~nvironmcnla) fUlun:. Our indU>lry h~s quietly bttome a ~ignilicanl soum: ofjom, 

and l,<:onumic gro .... lh in Ihe US. o"~r lhe polSt fl'W yc~rs a. fuel c(ll produl"U !}ain tJrly ",ark~ t traclion. 

"fbc prosp'-"CIS for grow,h arc C);'''1>I;on31. This ;s an l1ncrsing Ame,.ic,"l 5UCl"t."SS stOT)' - AllllTicau 

Il"<:hnology and Amcrjcan mad~ prodUCIS domin~l~ the t~rlr co"'mcrci~1 fucl cell Olarkl1s IIcre and all 

over Ihe ",,-,rid. ThIs is ~n cnefJ!.y !{:ChlK.ID~ · wedDIt"t have 10 buy baek from,tIc Eu",p':~ll s 01" Chincs<:. 

Rul we do Ill"<:d,o fos'L"r i"o 3chlcve ma~imum grDWlh and increased c~ports 91Jd more Americanjobs. 

FCllflA is opel' 10 (be concept ofcomprchcnsivt ta~ rcfonn Ih.1l would simplify lhe la~ code and 1001; 

forward 10 "'orking .... ilh lhe C,-,,"",illce 011 proposals ,hal could Ix put inlo pia ...., all .. ,. ,hc e~lsliog: ctl'tli!S 

"II' ,hdr course. Wcunden;land thnllhc li,u~ is 110 .... and con,,,,,,nd Ihe Comminl"<: forWI;;ng lax ",nmn 

and !llC prolif ..... alioo Qfindividualtax crooilS 5 ..... iOO$I)·. 

Wilhin lhecontex, Ollhe "'vi~w I)", Cnml11inee i, underml;ing currenlly, Ihe 16()3 Grdlll III Licu ofT3.''S 

provisioll is I)..., Qoe Ihal ha.. had Ihe m~ impaCI on Ihe illduslry. Th~ )(\(H program is good policy; il i. 

etTicicnt. casy IQ~, and exirelliely .-if~clivc ill crealingjobs and ~upp<lTling ''''0I10fllicde\"~loplO~nI . 

IfilI3 Gralll_lo_U . u or Tu ... : Thi ~ prow-mil, which allo .... ~ 1M dect'."n ,,(a gmnt 'nSI~ad ,,(the tax 

credil u\ldcr Seclim14S. 1m. he<:n vcry elTecu\"c for the fuel cdl induSlry. In (ael., l1~arly all '>11/0" fud 

ccll SIll'S in Ihc Uniled SI3]e"5 in 2009-"1011 lOok ".hamaS" nrthe pn'l>",m. whioh i~ nluch more CQSI 

clTicicnl as . markel lrunslormalion l11"d"",i'lli than arc, e,'cn Ihe lax credits !hi.'I1ls<:hcs. TI,;S is simply 

bccaUS<:.lr.msaclional "<lSI. arc lowcrthan for the la., credit. both for Ihe priv.,,· enliry using il and fQl'llle 
126 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.099

gOlcmmCni. Because. 1603 is lap$eJ in 01~. FCHEA member.; "i.<ume tim! 201 2 sale:> in the Ulli!oo 

SI~ICS "ill IX· approximalely ooe-lhird lower Ihan in 2011. This may hav~ an 'mpll<1 onjobi gro"1h. 

"hkh w3salmosl 100;' ,w.,. I~ Iusl 2 )"eg1S wilh the fud cell ,",d hydru!!,~n Indusl!)' btin!!, 'lied by 

I3reakthmugh In~tjtutc as onc uflhe l"a!il<>lil growing dean energy $1....-:1....". The FLK:I Cdl and lIydrogen 

Energy AS§QCiation suggeslS: 

Extcndinllthc IMl3 progl1lm Ihroogh 2011 !>flthal we can be 5"rt thut ~apilal markets are 

r~Mcred and Ih~...., Qrein"~I= for lild edt IlI"OJeclS. T1lCSil projCi.1~ tend 10 be smaller lhan 

with utilCT technologies eligible for Ihe program and thercfnn: will rebound more ~Iowly than 

capital f10w for I~ :;calc projects. 

The Grant·ln-lieu i~ ,mly available ror PTe and ITe eligible CrOOirs and Ihe continuat;un of the 

Wldcrlrinll SCalion 48 Pud CelllnVCSllncnt T ... ~ C",dit thrnu.;/I ilSSlIII:;ct of January2016 is criliea l In the 

fud cell and hydrogen indusr,)'. This crOOil wos put in place in 1005 in order 10 spur U.S. marker 

introductiun of American ",ade fud cdt system". tne cn..Jit of.3O% up LO 51500 I"'r haifa kilowatt 

currently eMcnds Ihmugh 2015 and has bc~n sil.!Oilicanlly undL"TUlili,d nnlil ,cry ......-:emly. In SOme 

scnSl). this ,,'os a refle.:lion f>flile cmhu.iilSflt for rnel cells. both in the indusI,)' and nmO<lg.jXI!i~y makt:1S 

thai was slighlly ahead oflruc marl;~ viabilily. The en:dit, howe"cr, has now txgun 10 be u:i<'d ~ b,l mOf~ 

fOOuSlly as ~ralionary. indu£trial and bad up fuel cellS are beginning 10 gain :<orne smalltra<:linn In 

cllrnntercial markers, 

The Wdtnology ~m~ins mort.' cxprnsivc Ihan incumbenl technologies in must case'S, howeVt'f. provides 

several poblic b<-nc1irs thai ~3.l) ~h~rd ro caplure, hence lhe "ecessil), IIfa cff'dil_ FirSl. foci cell sy~tL~ns, 

wherhL'1" using fO!l;illu.,ls 10 ll""eralc hy~'e!' Qr f"Cnewable ~~51~"'S. arc !t'uch clealR'1" than the 

lecbooillgics lhey ff'pIJN. Moccover. \l!cypro"ide vt:l)' ff'liable. $(:Cure and slead), POWo.'T. wilh m~ 

sbilil}' to Il",d f"llow os U('"Cc'SS'II)·. In nl"ny "pplicariorls. such an io industriallnot;"" O1,.,..,.,.r;OIIS, Ih~~' 

i"cre"", producti"ity, and in SOIllC power ~""ratioo applieruion.<. they are upw"rds "r85% ef1icic,,~ 

Th~ Fuel Cell and Ilydrog.:n EncrJ!...~ i\S!<OCinlion suggest.lhe liJllo ... ioJl. in reg"ds 10 Section 48 fuel ce ll 

credit: 

1'111 inlO pbce a ,ier<"<l '}',um Ih., ,,"'ould make Ihe • .,."di, "'0<) rob"01 fu .. more ~f1icien! ' y>lcrn, 

TI,is wo"ld move ",ward Jl'I."fformance based credits .... hich we r""l are IR'C~'SSary in" .cfOfm~-d 

~nviroorll<!nl 

Dclin.eatc how Ille <.Tedil is ~"~lt'I,l~t~d for m'lliveoper~liol\s lIch a~ industrial forltlrtlCks and 

Olhcr mOli.c <."<tuipmcn!. !t R. 1659 arid S_1417, the Ind"~lria l Fuel Cell Vehicle ACI ~ a 

modifiCll1iu!l oftne c~isl;ns.crt:dir 10 allllw them 10 UJ(If(: smoothly apply I<J Ille nl",rive m:lrl:C1 

Section J OC III dTlIgen lnfra, trllchorr Credit: While Ihe i\llcnluliv~ Fucllnfrastructurc Credit npiR'S 

,nlhe lim .... lrumc ""inl! ~on iJcr~d by this Cummillc"", tne lIydrog~n Inft1l truC1nre cr.::dil dues onl c~pi'" 

,,,,'il l>c.:cmbcr of 20 14. This ttcdit ""as aJ,., iniriated in 2005 and has e>;isloo ru ,1IrI<Io5 levels thl" 

~vcral ycu<s with a CUlTenl expiralfon dme ofDcc~nlber 31. 2014. This credil ii for all lcrnaliv~ 

fudin!'. infrastruetur.: nnd is cUnt'ntly ,app..-.J at 530,000 p"r ~y~tC'1lI. rcg.ardIL"SS ofwhcth~r in an ethanQl 

refueling. n.:Irunll gas ",fueiing. or hydrol'.~~' rcfudinJ; ~YSt~m, This Ic,'e! of fmllling i~ robu.! for SOmC 
127 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.100

,)'stems and n"l!ligiblc f<lr OIh~rs, p'u1ie~larly h)drol!en. rcfi.eling for which (an cost upwR,ds of 

SI,OOO,OOO and c, ~n more "'itll 005itt refonning.. Thisen!.! is expected to COme down signifiantl) but 

nOl withoUl "olunl~, which will be .... sist~ b) ,useful ta~ c1'~ l. The Fuel Cell and Hydrogen Energy 

AS5Q<iation !ugg~t" 

Increa5e tile up f(!r hydNit"n S)'jlems signifkllntl yor eliminate Ihe c;lp 1b •• 11 refueling Properll 

50 thai the r~lative t><.",efit iJ th~ same for all t)'pe$Qfinfrastructure. This will encour..ge In "all 

uftlle above" approach lu alternalive fuel vd!ie!e<; and infraslructu", and allow locall'$ to decide 

un Ihcir approach t>asN on th"ir IIniql.lC ncc'<l!; and n'SOllfCC'S. 

Include insl~llalious lOr "'~terial hand ling fuel cell equipment such as fori; lruc~s in warehoIl5C1;, 

since Ih"Se ~Y'lems are prOCllfSOl"i 10 ~ large scale rcf""ling infl'3struclure and can help in <'arly 

stage build out of such infrnstructurI,s, 

EXlend the cn.,dillhftlugh 2016 10 line up Wilh the fllel c~III~~ credit and I" bener rCnCCI the 

commercial realilies of the fuel Nil ,'chide martel, l'I'hidl isn't ,~peclN hI stan sc:llIng. 

eommmially until 2014-1015, and ev"n thc'l\ nl fairl)' small numbers, 

Section JIlB Fu l Cell Ve hlcle Tax Credit: 

Wbik this "edil dUt.'S nvt ~pire, we "' .... ,Id I:Pc remiss in 110,>1 poin(l...t UUllhat the ~""dil "'as ml",,:t'd iQ 

1010,. rnloc.ion that "'as ",';nc1,I into 1l,eori¥inal EPACT 2005 "stuw. !>rio!:ing 11", CtI"" credit from 

S3000 (0 S)500. This redUC1ion. ",rinen in 2005, "'''" p",mis"d on lhe ide. (hal fud cdl ,~h d",,- w"uld 

be rotnmcrcially I\'.ilable, UnfM,matdy, IiI<"" 0111<.-. fuel cell systems, fuel ce ll ~eh ide!l Dre 1'1,'1 bting 

"idely purchased and oo.nmcnial introdu..'ti'ln i~ nOi planned untH 2014·2015, The I'wl Cell and 

IIrdrogen Energy AS'lOCiation sugge:51S: 

The Credit reverlto the <l<itinal amo"nt wriuen inlo Ihe lOOS bip;ln isan Encrg) P{}lky Act 

Modify Ihe crcditlO alluw industrial "chkl~s 1\1 dJim Ihe cn...til s ud t as in Il R. 1659 and S.1417, 

Th~ credil b<: e~tcn<kd umil 2016 or unlil,»: ",[om> has ONu!Ted and we havedevdopcd more-

~;mpli f, .d and te<:hnolllg'y 'gnOSlic mcallS by "hieh to ensure c()l)tinued American lea<!=hip in 

flld cdlt.chnolug)', 

lj«tio" 2SD ",'Sid. nliul Fue l ~II Tu di!: Whi le this credi, is nOi du~ to "-,pi,,, Ull1, l 2016, il i. 

11(~. "" we under.sland il, under' ",pur>li~.,. ' "fthi" cr\.'di' review; however we (<-" llh", this en,di, ""cd< 

SOme mod ilication I" 3gfl." more cl Jy wilh th"commcrcial fud cell rr"gram, This ""...tit, "hieh was 

alw ",itiated in 2005, pflw'dcs I JO% to~ erc<iit for fuel cells used In rt'~identlal t1f"pen) up to a cap of 

S500 p<" half~iloW811, A~ with ,<;ev;:ntl ()tl"'r:< ",enliQl'.ed abo"", the q-"Jit W<lS e,~tcod«l in the TARP l:Iil l 

in 2008 Ihrough 2016. 11,100. has ~en undc'ruliliUoJ t{) dale; in facI, the: FtHEA know$ of Qllly u huod fui 

uf~JC$IO Ihe re;i<k:lIl;al martC1 ({) ill the IlSI 7 years, Again, e~citcm<.'n( about Ihe kiSC offud cells 

~mollJ; th~ industry a""I"'Ii"yUlak~~, oV\-'r,;hddow..-ltb~ d~"d<>pl'"'IIl"1 realily. 'n,e rnel Cdl """ 

HyJro¥tll Energy ASsociation Ul!l!~.'I S: 

Inc""",,, the cap for (he se<:tion 25d Iud cell m~di t along Ihe sa11K.' lines as (h.: credil cum,-."tly 

available t{) business purch~St.'B from $500 per halHW to SI5(1) per ~lf~W, It ll:u 1lC\'C!' 

been ckar why we would provide" larger ~red t to businesses th,.11 10 illdividuals, panicularly 
128 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.101

si~ tl\c smaller sized fuel cdl~ t~~ld to be a more ~xpensi~c h:clmology and moo! costly to 

io(crconnc"Ct on a per kW basis. 

In conclusion. we lIg3in wan! (0 thank yoo for taking tile initiati~e to thoroughly review t~~ ext"'lders and 

how they are ""aluatc"! as We all begin to think "Dout preserving American intemation311~adenhip in the 

Cuntc)(1 ufa more simplified tax system in the ncaT future. 

MOfT)' (J. rkowit~ 

Pmidcllt & Exc<:uti,'e Director 

Fuel Cdland Hydrogen Enc'1"&.v Associatiun 

-
129 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.102

M . Manufacturers 

Statement of the 

National Association of Manufacturers 

For the Hearing Record 

of the Subcommittee on Select Revenue Measures 

Committee on Ways and Means 

U.S. House of Representatives 

On 

uFramework for Evaluating Certain Expiring Tax Pro visio s~ 

June 8, 2012 

L.-,g '''''''\Ie/ion- C"" ' ii>p ()pjxvtwI1(y Pt/rsollf>g ProgrwS$ 

m ,0"_, NW ' _700 ' w ...... "'" tIC 2OOO, · . 2Olfl' 300D ., 2(20)73.12 . _ ...... ''''V 
130 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.103

Statement 

01 the National Association 01 Mamilacturers 

For the HeatiflQ Record 

of the Subcommittee on Sele<:t Revenue Measures 

Committee on Ways and Means 

U.S. House 01 Representatives 

Hearing on 

"Framework for E~a ualing Certain E~piriflQ Ta~ Provisions' 

june 8, 2012 

The Na!ional Association 01 Manulacturel1l (NAM). the largest manuractu(lng13ssocia~on In the 

United States reprnenting nr.mulacllJrers in every industrial sector and in all 50 st~l . Is 

pleased the subcommiTtee is holding hearings on temporary lall provisions that expired at the 

ena 01 201 1 or will e~pire at the end 012012. While the NAM suppons a numoel of the more 

than 60 e~piring or expired provisions. our statefTIenl fOCliSils on three e~pired tall elltanders 

widely used by manufElcturel1l: the R&D tax credit, look·through rules for controlled fomign 

corporations (CFCs) and deferrallQf active business financfng income. 

The NAM is a strong advocate for reform of oor current tall code to make it 5lmpler, fairer arld 

more competitive. and we welcome the current focus on tall raform. At the same lime. unlll 

pohcyma~ef$ agree on a finalleform plan. we believe that It Is important to keep our cUlTent tall 

system il1 place. Piece-meal ci1anges to long-standing rvles will inject more uncertainly into 

bUSiness planning. makIng U ,S companies even less competitive and threaten economic growth 

and U.S. jobs. 

In contras!. renewing the tall extenders witt provide a bridge of certainty and predictability for 

manufacturarr.. The'tax extenders described below repra~nt f>ound t;lIC: polley and have a 

history of slrong. bipartisan, bicameral support. These proVISions help manufacturerr. innovale 

and compete in a global marketplace and contribute 10 U_S eCO!1omic growth and job creation 

In light of the current uncertaInty In the U.S, economy. Including a persistently nigh 

ul'Elmploymen! rate. we strongly urge Congress to e'roacti~ely e:xtend these and other business 

tall provisions as SOD'I as p05slble. 

R&D Tax Credit 

The R&D ta~ credit SPUIS U-S __ based innovation and R&D jobs_ By design. only U.S.-based 

R&D may qualify lor the credit and 70 percent of the credit claims are for R&D wages. Since it 

was first enacled in 1961, the credit has incentivized companies 10 increase spending on 

researoh actiYltles and hire mOi"e R&D wor\(ers. 

In recent years, however. more and more counlries havlI realized the imporlance 01 R&D and 

now provid!! mUle rolJus! :md uft!!n pelflianenl.R&O IncentJves. ThIlS!! new incentives !Ire 

having an Impact on R&D spellding: the U.S. share of globat R&D dropped to 31 percent in 

2009 from 38 percent in 1999, according to the National Science Board. 

The credit has been renewed 14 times Since It was first enacted into law l n 1981 and it is critlcat 

Ihat COIlgless act as soon as possible \0 renew this In1Portant innovaliol1 incentive, retroactive 

, 
131 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.104

to January 1. 2012. When the credit ex~lrtid. the cost of parfOff1ling R&D in the Un~ed Slates 

immediately roSIl and elfactively Increased taxes on com~anlas that use Ihe credit. 

Furthermore. It1ls lapsed credit Is e~acerbating the trend of new R&D invlIstment dollars flowing 

from the United Stales 10 counlnes offering more renable and more ganerous research 

Im:entives Thus. renewing Ihe credil will eliminate the \ax inerease on com~an ies that perform 

U.S. R&D and make the United States a more attractive ptace for both domestic and foreign 

Investment In research activities. 

Global Active Business Financing Income 

The NAM also supports a retroactive Bxtllnsion ollhe ~rovision that taXIIS aclivlI financial 

seNices income lIamed abroad by foreign subsidiaries of U.S. com~anies when the financial 

il\COl11e is brought back to thll United Stales, Whilllth,s ~rov'slon (also known as an exem~tion 

from ~ub~art F for active financial income) typically Is associated with financial ervice firms, II 

also is important 10 U,S, manufacturers With affiliates that provide fiflanclng for ovetSeas buyers, 

The allility to provide competJtiva fiflancing for customers has a direct and pos~ive Impact on 

U.S. exports and manufacturing jobs. In contrast, since the exemption from subpart F e~pired at 

the end of 2012. U.S. financing arms, unfike lt1elr foreign counterparts. are subject to 

simultaneous foreign and U.S. taxes on their oven>eas income. This added tax burden makes 

U.S. manufecturers less oompatiINe, threatening U,S IIKports and jobs. 

The "look-through" Rules 

Similarly, the NAM SUPPOItS a retroactive aKtenslofl 01 a plo~islon thai aHows "look-through" 

tteatment lor payments of dl~idends. interest, rant and royalties between related CFCs. WithoUT 

this prOVIsion, which expired aT the end of 201 1, Americafl companies are subject to immediate 

U.S. Ta~atlon when they redeploy foreign earnings from actiVe bUSiness operations <n fOlelgn 

market$. In contrast, our foreigfl competitors operaMg In tile same markets geflerally do not 

pay this IBlI to the,r home countries. Thu$, American companies are at 11 compelilNe 

disadvantage Ifl servIng loreigfl customers and consumers. 

With 77 percent of the wOrld's purchasing power outside 01 the United States. \t1e ability of U.S 

manufacturers to compete effectively in the global marketplace is crilicalto ourcountr{s future 

economic growth. The retroactive renewal ofCFC look-through is vital to helpir1g American 

companies compete globall~. 

Like deferral lor active finaflcing iflcome. the look-through rules were designed to strenglt1en the 

ability 01 American companies to compete more effectively Ifl the global marketplace, American 

oolTlpaflies tha! operate WQr1dwide create and suPPOf\ U.S. jobs. An estimated 21 million peop~ 

In the United States are employed by companies with ove/seas operations 

Conclusion 

The e~plration or pending expiration of these and other business "tall extenders- /ap/eseflts a 

tax increase lor manufacturers afld businesses of all sizes that use these Incefl~ves_ 

Manufacturers already lace a 20 percent cost disadvantage In comparison to companies 

opere~ng outside the United State. and Taxes represent a major factor In this cost differential 

Increasing the tax burdefl on these companies makes il /TIDre difficult for them to compete and 

) 
132 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.105

thrive In the global mar.cetpliioo and Imposes yet another road block to durable U,S, economic 

growth and job Cfeation. 

Manufadurer.> agree that comprehensive taK reform 01 the U.S, iaK code is soraly needed, 

particulerly In the current economic climate. As we move toward laK reform, we strongly urge 

you to revive and eKlend these important incentives that are part 01 the current system and 

ayold making an uncompetitiYB system BYen worse. 
133 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.106

Conlae\: 

Statement of the National Association of Manufacturers (N'A.MJ 

For tM Hearing Record 

of the Subcommittee 00 Select Re~enue Measures 

Committee on ay~ and Means 

U $ , House 01 Representatives 

00 "Framework for E~aluati!19 Certain E~piring Tax Provisiofls' 

June 8. 2012 

Moniea McGuire ~ Senior Dlreclor, Tax PoliC)' 

Nalional Association of Manufacturers 

73310" Street, NW 

Suite 700 

W;lshil19lon, D.C. 20001 

(202) 637-3076. mmCSll.ire@pm,Qrg 

(202) 637·3182 Fax 
134 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.107

---"",,~ .. --- , .. '-_ ... _""''''' 

_ ""''''''- .. , __ -'" . DC"""" .. ,-- ..... ,,,,..,,- l"" .... ,." ... _ ._"" 

Written T .. 'lmo ..... 01 AlIne 51f<~el 

H""'uI81<t<!10 •• , Boord Vk.o P""'~' of f.de,.I Aff.,,, 

SUbmitt..d 1o ,10. U.S. CommittCtl on W' Y' end M Um 

S"b<ammlne. an 'Wect Rev.n". M ... ur ... 

H •• lin, on F .. mowar'fo, 1 •• ,,,,,11,,, Cot ... ln EoplrlnlTo. Provl.ion. 

lu""l, lOU 

E~""lf •• Summ<tt)': 8iodietel I •• r. n.w,bO!, low ... ,,,,,,, <ti • ...t , .... oc~.n, "'., mO<le !rom .n 

ifKI ••• m,,~ d, •• ". m,~ or f""',lod. inc!ud"" .JIicu~lITaj ail., rKY~ 'oakin~ o~, .nd ....... ! r., .. " 

i. ,~. on4~ domo"kallv p,oduced. romm.rdll-oul. Ad".nc.d ~., - .. d.f!ne<j bV ,h. 

!n"i,on",.n"1 P'O'""I.,n A.g.r>t'/ (!PAI_ ,10 .. I .... dllv ,vljl,ble ~d ",.pled n.'lorlwld., It m ... ts 0 

wlet MTM luel,poo"fl<.a'ion .rod I. u_ In e)I1>1'''Il dle>el 'nBi"'" wi,""", modlfl .. ,ian 

In ". ,1I<>t, IoliIO",. ,"" _ie,,,, ",. I"""",, •• ~. och"""d Iii d"",ed _, 01";"'" '0\'"' U,S.lliod" .. , 

p,<td<><tlon - ""', ..... n. ,"" dorrn!>tic ","n"f.<I"'in!! of 0 cleon';'u,nl"" ,.ne",.ble I~I While ~.".,.tin. 

)air" 'edolC,", Amer!c.o·, "II,,,,. "" I"" illn oil on<! lmpro.Oni '"'" .n."onm~nl. 

When ,h. , .. '"rontl .. 101 •• e,,.,,",, In ZOO5, I~O U.S . p,oduced 'l2 million g.'lon. of blodlewl In ZOII. 

W~h , UDPO<! t'Dm 'h~ .... In"'n.;., •• nd ,h. RFS, .he Indu"'y ..... n.w p'oducfian ,",,,,d at nu,ly 1.1 

billion ~atloru, ,uI'I'0rtlllg "'0'. Ih ... n.1XKl job' aero" ,he coon'ry Whll. I~n.,..tlng II , .... $6~8 

rnill~ in J.~er.l, "al •• nd 1ocJ1'" ,.."en.ullS, . o;cord ..... to • ",cent e<Qnom;< lIu.dy '. 

Tile biotllo .. ' '''''<Ii!r/ i. poI .. n to con .. noo tJat "'omentum In ZOI:l "" '''''1 •• CenB'es •• mI tho 

Adm,nj",.,"," rontinuo 'UPPDfU". "ro", oa+ic .. , ,UCh . , ,lie bionie...t II. in<en'iYo for "'mol.tin, 

d .. n, dOrnt''',t 0""'1"1 p,odU,MfL 

HO"'''''.'. 110. IndO>lry'. 'o<.n' .""ow .I'!a<lld "". ~ (.1l<en fa, .,""'.d, • ..0 lhe ro<e". "P:,.,Ioro of 'ho 

Sl ~ pi"'" biad .... , (.1. i"".nII •• _. a 'i~",Ik"'" 110, •• , 10 In. IrMI""ry" conlinued . ,0 .... 10. U.s. 

b/odlele! ,.","n, • Vo"n, .M ""lneroble 1M"",.,.. In ~o<t, we OMW f'''''' """,,t hloto..,. "'h" could 

Io'p,"", wi''''''''' ,h. biodi<! .. 1 II. Iroc"" "'e a"". OIIon8 R_w.blt fuol Storodord (~fSl. Wh"" lhe t., T""en""" I.pse<! In lOIO, tile ,e.,,11 WI' predi<,"bI.: Flon" <"',ed . nd Iha" .. "'" ot peoplt KID" 1M. 

''''nlry !O., w<>r1r. 5pe<.riully. U.~. biodl<"" prod",tlon plum mot«! b~ ~2 ",,«0"', ,.,,,Iti<lB in ,100 100. 

of n ... ,1y 8.900 Jab. ""d I d'OIIln to""Sfllold In<,,,,,e of 5485 ml~lon . 

Only In 1OH, afto' C""Br ... "''''lIled tM t., IIKNI''''' .nll , h. ~fS W •• luHV Implemonted, did 1100 

Inau.try ,~g.a'" Its loatl"R Ind 1><11" "mQln~ "~ ~r<lauctian ap;". Wltn ,"cora·br.aI<iftQ .uccw. 

With tn~ ""loire e<Onom<c _'IIf"_ now I, nol I"" tim. '0 aUow .".,d.,,, """,>1fY .I.mp, Un""" 

p<~"'<l.1I ,,,pin,,,,,, .... 201S, biDd .... Oi i< e.IJK,.d ,0 .~wort mor~ Inan 74.000 j~b>. $4 blbl"" In 

I"com •• and ....... $7.3 bill;"" ill GD~, .,"""ainllo tl>o. 0<0"","0: "ud~. 

TM' .'o .... n will be ......... Iv jo!OI>"'dilOd If (ong'", <:loR> not e ... nd the biod""" ...... "'c~n';"p. ",hl<h 

.,,,, ,pollo< 10 ftif>.jet and .... ow3blft dl . .. , ",,,.",,~on . 
135 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.108

Cha irman Tiberi and Ranking Member Neal, I appredate the upportunltv tu ,ubmit written le.timony on 

behall of the Natlonal Biodiesel Board INBB~ regarding the ecunomic impact of tJ>e bOodie.el I •• 

imen!i.e. 

A. produce" 01 An,er"'a'. onlV commercial',eale Ad.anced Biolu .. 1 Ihat', .old and produced 

natlunwlde, the U.S. bOodie.el indu"ry look' forward 10 working connrucli.elV wllh tJ>i, commlnee 10 

en.u, .. thaI ou' nali",,', Ad.an(~d Blufuel go.l, are mel. 

NBB applaud, your "Ho." to review ... pirlng ta. p,ovi,ion. to dete,mine how these pro.I'ions meaSure 

again.1 by metrico ,uch as cost, effectl.ene". and job creation. History ha. shown that well·crafted and 

efficient I •• incenlives can be powerful policy mewani'm' to achieve the nation'. '!nerKY obje<:live. Bnd 

le"""'ge p,J\Qte .ector in.eslment to pramOle the deplovment and uliII,allon 01 new ene rgv reSOurces. 

lhis is ce rtllinly Ihe ca,e with the tax credit fm biodie.el, renewable die ... 1 .. nd bio·jet fuel. As with 

evetV other major U.S energy re,ource, effectiv .. tax policy ha. helped create domestic manufacturing 

jobs a. w~II~ •• ignificant economic and ene,KY poliq ben~lIls. 

Before the biodie,ella. Incentive expired on December 31, the U.S. biodie.el industry had ~ r~emd Vt!a, 

01 production in 20ll, prodUCing nea,ly 1.1 billion gallons and crealing good·p:aying jQb. in nearly every 

.lale In the country. This .uCe"". i.ln part attributed 10 the stronslederal polide. in plare encouraging 

dumeSlic energy production. While we undersrnnd the preS5ure. facing Congre ... we believe economic 

eondition, are .imp1v 100 weak tod"~ 10 pull ,upport from a growing Ame,ican Indus1fY Ihal i. a rare 

bright .pOl In tIlj. "ruggling economy. 

The ,ecenl expiration of tbe $1 "'" galion biodie,el lao inc .. nlive po,es a .[gnificant Ihre~1 to the 

Indunry'. contlnued growth, econom", Impacl and job creatlon. Now, a, much as eve" the biodlesel 

mdullry need. ,t~b;Uty and support to continue 1\. remarkable .uece,. SlOtV. and we encourage 

Cungr .. " 10 provide a ,elroaOllve eXlen,lun of the blodie.el, ren ~w.bje die,el. and blo·j .. tla. credit. 

While we understand Ihere i. an inte,e.t among Som .. to delay processing tax exlende" until il un be 

done with in the context of brp:ader 1 •• reform, we are concerned that doinS 50 would Indefinitely delav 

an ".ten,ion .. rnJ continue to jeopardile the job., in .... stment and economic .ctlvlly 8eneraled bV the 

U.S. biodi"",1 industtV. Brodiese l production already ha, .uffered .ince the lou 01 Ih .. biodie ... II •• 

Imentive neafly , I. month, ago, and we urge Con8'e .. lo aCI expeditiouslV to eXlend provision, .uch •• 

the biodie~ltllX incentive Ibat enjoy slrong bipartisan ,upport. We would welcom .. thf QPponunlly to 

p.rlklp:ate in a broader discu .. lun of U.s. la. policy, bUI we believe Ihe U.S. blodie.el induSltV c.nnOi 

wail 1I>e month, and oonibly years il could tak .. fm CongreiS 10 reach a con.ensus on comprehen,ive 

tax ,elorm. Quie_IV reinSiating the expl'ed biodie.el tax Incentive would provide ne .. ded certainlv and 

prolect against future disruplio'l' and the 10 .. Oflhou.and, of much· needed job,. 

8ack'Jround and Industry O~"';~ , 8iodie,ei i. a renewable, low-ca,bon diesel replacement fuel. Th e 

EP4 has de1erml,,~d. ba ... d on the performanc" ,equi,emen" eSlabll.hed by I~e fn~'I1V Indep~nd~nr~ 

and ~writyAcr (EIS4) IP.L 110·140). Ihat dom~nj<aUv produced blodie ... 1 i, an Ad~anced Bioluel unde, 

Ihe AFS2 program. In fan , It i. the only commercial·.cale lu .. 1 ,old and produced aero" Ihe United 

5tale, 10 achieve I~I. de5ignalion. 
136 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.109

8iodiesel I. made ffOm w~st e ,rea.es .ud> a. recycled cooking oil, ~"lrn.1 fat •• nd .econd.ry·u.s 

a,rkultural oil •. and is felined to meet a .!>&ific commerdal fuel derrnitlon .nd 'pecifkat;on. The fuel 

meet. the 06751 fuel .pecification set forth by ASTM Imern"lIonal. the official U.S. fuekertlficatlon 

or,anl,alion. 8Iodi~,el i> One of the moSI· and ben·tested alternative fuels in Ihe ~C"n1ry and Ihe onlv 

"llernaINe fuel to meet all 01 the telting relluiremenl. of the 1990 am ndmem. 10 the Clnn Air ACI. 

There a re app,o.irnattly 195 domestic and foreign biodieoel plants e,i5~,ed w·ith the EPA. 

representing ~ ~ombin d produClion c~ "adty in e.cess of 3 billion gallon •. 

8iadie.ell, primarily marketed as .. five pe,cent (85) blending component with conventional dle.el fuel. 

but can be u,e.j in concenttatlon. UP to twenty pe"enl (820). It Is dlstribuled ullll:in8 Ihe e"sting fuel 

distribution Infrastructure with blending occurring both at fuel terminal, and "bel"w the racl(' bV fuel 

jobbers. 

SlaiU. and Background on Ihe Blod~.el TOM Incentive, The biodie ... 1 t.~ incentiYe w~, enacted in 20()4 

a' part of the Amerlean Job, Creation Act (P.L 108-357) and too k effect in 2005. The Incentive wa, 

,ub,equently e~t nd d through December 31, 2008, a. pan of the Enerev Poli<'l Act of 2005 (P.L 109-

1901. H.R. 1424, the £mergency Economic 5t.blli,alfon Act of 2008 (P.L 110-343), again e~t~nded the 

Incentive for one ""ar through December 31, 2009. m which time the credit expired. After being 

~~p ",d for.1I of 2010, Congren extended the a~ credit through December 31, 2aU (P.L. 111·312). 

It e~pired acain on December 31. 21)11. and i. currently lapsed. 

Whll<' the impact of t~i. ve ar'. e.piratlon are ju,t beginning to be ~een, the lalO e~piration 01 th .. t.~ 

cfedit had a . everefy det,imental impacr on ~e domellic biodie~el Indumv. In fact. the indu'try's 

decline resulled in the loss "I nurly 8,900 jobs and a drop in household Income of $485 million. 

The bladle~el tax incentive i~ de~isned to encourage the production and use of bladfe~el by maklnl the 

fuel pric@oCompetltllle with con~ntlon.1 d; sel fuel. In ~neral, cu"ent law allow. ta.payer. to claim 

the blodl" ... 1 t •• incl!ntlye~. either a $1.00 per gallon ~neral business income lax credit o. as a 51.00 

per sallon blenders excise tu [fedi!., To Qualify for th e biodlese l tn Incentive. the fue l must by Stolt ute 

meet hOlh the ASTM 06751 fuel . pecJf1e.Hon and the [nv]ronmentlll P,otection AgeJ>CY'. (EPA) 

,egiWatlon requirements under Section 111 of the Clean Air ACI. 

The Inlernal Revenu,", Code p.llvldes a gene,al bu!Jne., Income tao credit to encourage Ihe ptoduction 

and u.e of blad'e'el. renewable dll"~ and blO-jet luel. Th e credit is Ihe .um of Ihree credits - Ihe 

biodie'ei mlollue ned I!: t~e biod ~1 credit: and Ihe ,ma)1 a,ri-bTodlesel produce. credit. The bladie ... ] 

ml~lure credTt provide-; a 51.00 per ,aUon credit for ~ach Sallon of biodle-;el thaI Is blended with 

co,.venllanal dl",eI fuel. The biodle,el credit provid", $1.00 per ga llon for eaoh gallon of pure B100 

biadie.ellhat l. u,ed •• a fuel . T~e .mall agri-biodie,el produce. c.edi, I. a IQ cent, pH gallon credit fm 

"Ian'. with a production cap oTt~ of less than 60 million sallon, pel year. The cfedlt can be claimed on 

Ih~ first IS million galions of production_ 

8iodi~!<e' Public Policy BeffejilS.' The biodie ... 1 ta. incentive ha, helped achieve the worthwhile pollcv 

goal of erealing jobs while 'II-<,e •• lng the production and u,e of blodle.elin the U.S. In 2004, when thll 

ince ntive was initl.lf\> enacted, the U.s. pfOduced 25 million ,allon,. In 2011. with Ih~ tax credit 

,e.nn.ted and wilt. ~ 'trong RfS program, the Indu'try produced ne.rly 1.1 billion gallon<. There arll 

compelling public poIlc v benefIts a .. ""lated w'th the enhanced production and u.e al biodieselln the 

U.S. 

NBB T .. liroony 
137 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.110

8/oll/esel Reduces our Ot!~nde"ce 0/1 Fore/; " all: 610dlesel can playa milor rolf: In ~pandln8 

dome.stic refining capacity and red~clnl our re liance on foreign oll. The 3.6 billion gallons of blodleseJ 

produced III tile US. sillce 2005 ~'l\/e dj;placed an equl~a eMI amounl 01 dles.l luel With a clean-burnlnt. 

effltlenl fuel Iha l Iht EPA ellimale~ ,educe5 IIleeycie greenhouse gas emissions by is much a s 86 

perceTlt compared 10 peuoleum diesel lueland creates 5.5 unllS of ellerBY for every unit 01 Tlerg~ Ihal 

Is required to produce the fuel . 

8/oIllesel Is Good for the E"vironment: 610ditsel ls all ellviroomentally sale luel, and ,5 tile mOil viable 

trallsportatkm lUl'l when measuring Its tailpipe emissions, hlecycle carbon emissions and enet£y 

t>alance . Since 2005, blodiesel has reruced lifec~cle Ire .. nhouS<! gaS emissions bV 48,3 billion pounds. 

the eQuivalent 01 remolilng 4,25 mlll(on Pd55enger vehicles from Am~ lca's roadways. 

B/oIllesel ReduCt' Dll'sel Emlufo"" Tailpipe emls~lons ',0m IridlHonal d'esel - primarily f,om truckl~g 

f!een, school buse5 dnd Ol her vehicles - "e a ,!gniftC~~1 health "nd air qua lily concern. In an update 10 

Its Nallonat·'i.cale Air Tooks Assessment earlie' !hlS year, EPA ciled diesel e~hau'l a5 one of ,he nation', 

mOSI d"",gerous polluunts, 5aying II i, "among ' he substances that may pose the greatest risk 10 the 

u .s. population." Thousand5 of tI'\JC~S and buses hll the road e_ery day burning t'aditlonal diese l fuel. 

Subslltullns high er Imounts 01 biodle.s, ) for Iradltional diesel fuel Is the Simplest, m05t eff«!lve way to 

Immedlate)y Imp'ove emiSSions. 

The Blo</Ie, el /"dulff)l I, Creollng Jobs ond Mo.lng 0 Posltl .. e Contrib .. t /o" to the £conom,: NBB 

estlm~ es IhM the U.S, blodfestllndwtry supported more than 39,000 jobs In 2011, In all sectors 01 the 

econom~, and added mo.e than $3.8 bilion to the nation's GrOIS Domestic Product IGOpl. 

Biodlesells America 's first advallced b!<ttU@1andwhellCOmJ)<OledtOBasoline,diesel and etllanol, II Is at 

a fundamentally dllferelll stalle ol development and should be truted n it new fuel In the mar~etplace. 

The pelroleum IlIdu",,, ha. received a number 01 ~ fnCenliv ... for many yea,,; and the elhanol 

IlIdum.,. has been ~round lor decades and had II, la. incenlive .ince 1980, In contrast, Ihe blodk'sel 

InduSlry h., had commercial'scale pro~ucllon lor only ibout six yean, "nd hit' had lIS I .. cr...til only 

since 2005. The aasollne malketplilCe is app,o. lmale!v 140 billion 8allons, the diesel pPOI is 

approKimately 60 billion gallon, alld Ihf ethanol marke tplace ;s produclfl8 IoOme 14 b+ll ion galioM. By 

compariloOn, blodiesel production re;K~ed a record 1.] billion gallons lall year, BlodleS<!1 is an up'3ndcoming induslry and Is In a lar more !raclle stiSe 01 development, 

Conclu.ion: T~e od esella~ incentlv. has helped achieve the dtslrfd toal ollncrnslng the dome1llc 

proa~Clioo irlll use 01 blodiesel, and in turn has helped Ihe U5. ,nllle Ihe energy SKudty, econom" 

and en~irollmenl l benefits assoclaled with disp lacing petroleum with domestically p,odu(ed 

renewable luell, Tr>ese benefil., 1\0Yiever, will be jeopafdlled II (ongres. do .. s nOI act In a timely 

manner to address the imm...tiale inue fa""8 the Industry alld extend the lodiesel l~M incentive. 

AIKwt Nil: N88 Is th" n~tion,1 1'3d~ ~<""cl~tlon '''pr'''''nting II", blodl",el Indu,,,), 3< th ... 

coordina ting body lor reseiICh and development in Ihe US. It was lounded In 1992, and since that 

lime, N8B has developed Inlo a comprehensive Industry aSSOCiation which coordinales and interacts 

wllh a broad range 01 cooperalors Incl udlnilndu!try, government and "ademla. NBB's membl!rshlp Is 

made up pI biodiesel producers; stale, nat,onal and imernallonal feedslock olianlzatlons and fee<:lllock 

process." organllatlons; 'uel al~elersan.d dlSifibulors; and lechnoltlg'l provider!. 
138 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.111

Chairman Tiber! ~nd Ranking Member Neal, I again appre<iate having the <>pportunity I<> submit wrin en 

testim<>ny on this I .. ue 01 ,igni/kant ImpOnance tc the U.S. biodie",,1 industry, We look lorward I<> 

.erving as a re.ource lor the Committee on issue. related tc biofuels tax poliev as 1m. commilt"" 

p.oeeffis. 

I C,rdfl<l EHTRI~ June 8. lOll, Econ<>l'l'lit Imp'<t 01 R~mo';nl the lIiodle~ la. C'edit 10' lOW ~nd Implement.tlon 

01 RfS2 To'lea n.'OUI" 2015. 
139 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.112

Grrllt Public Scholl/slor liurry Swdrn' 

Testimony Submined for the Record 

US. 1I0use of Representatives 

Commillee on Ways and Means 

Subcommittee on Select Revenue Measures 

Hea ring 01\ 

Certain Expiring Tax Provisions 

June 8 , 2012 

Chairman Tiberi ~nd Members of the Subl·Qmmin ee. On behalf of the 3.2 million memlJers 

of tile Natio\l<ll Education AssociatioQ (NEA), we thank you for the opportllnity to sllbm[l 

these comments for the r&ord in conjunction with the hearing on certain e~piring tax 

provisions. These commenl'l foclis on two specific expiring tax policies - the educator tax 

deduction and the Qualified Zone Academy Rond (QZAB) program. 

Extend the Ed ucator Tax Deduction 

NEA strongly 5ullports all e~tension of the educator tax dedllctlon. This critical deduction, 

which expirE'd at the end of the 20 11 tax year, helps recognize the financial sacrificE'S made 

by teachers and education support profcssionals. 

Educators often reach into their o\\,n pockets to purchase classroom supplies because they 

want to make sure students have what they need to sucrE'cd. Studies show that educators 

are spending moreoftheir own fund s each year to supply their classrooms and purchase 

cssential items such as pencils. glue, scissors, and facial tissues. According to NEA·s most 

recent survey, 97 percent of educators surveyed indicated that, in 2006, they had spent 

some of their own money to meet the ne~s of their students. These educators spent an 

average of 5477 a year out of their own pockets La purchase classroom supplies such as 

books, pencils, paper, and art supplies.' 

According to a 20 10 report by Offi~e Max. s~vcn in ten tca~hcrs report their schlmls are nut 

able to pnNide them with all the uecessary tools to elTectlv~ly teach their students, and 

79% of crlilcators say their classrooms are in need of more Items that they currently lack 

such as essential d assroolll supplies, paper products, and arts aud crafL~ supplies. ~ 

majority {82%) of teache rs ,"ink It is their responSibility to ensure students have the best 

learning cxp~riell~e possibll' - 110 m~t!er the plice tag - speudlng their own money on 

supplies for their students each year. Everyday classroom supplies $1I(;h as pencils and 

pens (78%), prizes and Incentives (72%), and arts ~nd crafts supplies (72%) top the liST 01 

purchases teachers make using their uwn cash. 1 

Many educators are nndlng the need to reach into their own pocket has increased in thesl.' 

difficult economic times, as funding cuts lead to shortages in essential supplies and more 

students comc to school without basic learning tools. A large majority of educators als(I 

, NSI,ooal l,d""al;oro A,!Q<i.lioo. S",,~."JII"'''medm'' PMblic *"",,1 TCOK"I",,· !()(}J-J()(}6. M.rch ~Oll\ 

, Offit.~!ax Teach., S.rv.y. M~ 2tJ 10. hllf' ;b"ull""\I.p_~~ws..o "m nmo:'!">lTi« m .... ,.u'lJ:!01 
140 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.113

spt'nd an averagt' ofSl5 a month out of their own pockt'ts to feed students. {Status a/the 

American Public School readier 2005-2006, March 20 lOY 

The need for tht'se e~pendi tl1r es is not surprising. According to First Focus: 

2.7 million more children lived with an unemployed parent during a typical month in 

2011. compared to 2007 (an increaseof71 %), bringing the 201 1 total to 6.5 million 

children; 

3 million (47% of those living with an unemployed parent) lived, during a typical201 1 

month, with a parenr unt'mploy~d si~ months or longer; 

8 mi!lion morl' additional children relietl upon SNIIP for food in 2011, cOll1parl'tI to 

2007, bringing the total number of children rf:celving SNAP to 21 million [one in four); 

16 mllllol' childreJ\ (more than one in five) currently live in poverty" 

On~ in thrc..: waning families loday fintllhal em[>loymcnt dOCli not guanmtcc a dce<:n!living 

standard. Fony pcrc"nt ofull children - 30 million kids - grow lip in such hmlScholds.s 

The educator ta~ dedUCtion is a bipartisan recognition of educators' financial sacrifices ~s 

well as of the needs of students who lack even the basic necessitit's for success In school, 

E~tendlng it will make a real difference for many educators, who often must sacrifice other 

personal needs in order to pay for classroom supplies and inslmctional materials.. 

Expand the Educator Tax Deduction 

We also strongly support the Teacher Tall" Relief Act (H .R, 1738). introduced by 

Representative Reichert [R·WA). ThIs bill would e)Opand the educator deduction to cover 

professional development ... ~penses, increase it from $250 to $500, and make the deduction 

permanenL Teacher quality is tile single most critical factor in maximizing sludellt 

achievement. Ongoing professional development is essential to ensure that educators stay 

up·to·date on the skills and knowledge necessary to prepare students for the challenges of 

the 2 I" century. Expanding the deduction to cover professional development expenses 

would makl" a cr lit~ll tlilTl'rCnce in helping educators acc~ss qUiLlit)' training. 

Extend Ihe QZAO Prugram 

NEil also supports extension of the Qualified Zone IIcademy Bonds program. On average, 

the buildings that house Ollr public schools are more tllan 40 years old.h The American 

Society of Civil Engineers gives the condition of our schools a grade of"O" and attrib\lle~ 

the failure to upgrade them to "problems in the financia l sector and declining revenues for 

states and local governments."' According to Fix America's Schools Today {FAST!}, a 

project orthe Economic Policy Instilute and the 21sr Century School Fund schools need an 

estimated $500 billion in repairs and UPGrades. 

The QZAB program has proven to be an efficient and cost·effective way to help 

disadvantaged communities address pressing renoV<ltion and repair needs. QZABs assist 

school districts in rural and urban communities by providing a financing mechanism 10 

renovate buildings and invest in equipment and technology. Investors receive a federal t:IX 

J Ibid. 

• I~ Re/"alum ', Q' 'I.'''in1; I",f'''''' <HI A, ~.rI" ,' . Chl "'~~. IIId""",,,,. "!Chlld,.,,,, '. £""",,,,1,' iI '''/.fJ~m,~ 7lI"'''K~ 

.0011. Juli. t5a:l<;,. " "",kif\!!' r"<l il\~ , .. , Ik<omlk'r 2011. 

'UvinJl ~n ,h.' (:dg<J """'rQ '~ w .... E"'·"inI!lF" .. /r'., ~ Sopl>i ~ Parker. Tt., 1I."""lu.io" FauOOaU(Hl. ~"pl"m""r 

20 11. 

• NQ{ionaj ~I ' lor Ed.,col;or> SIO!i<lic. 

• R~pO/{ (<I,d lor Am o·. Irr/rrmrvcw,<:, 2009 
141 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.114 Insert 80206A.115

credit equal to the amQunt of interest payable on the bonds, thereby relieving lo(al 

t3xp~yers and municipalities orthe Interest burden. 

A school that is award~d 3 QZAB may use the funds 10: 

"",o'·Hte:rnd rcpair i;ltlildinlfj; 

invest in C<]uipmcllI and up-I("J-dnle tcchn()logy; 

dcvdop chnllcnt;ing cUrT,cul8; or 

lI1Iin qu~lily Il'!lch~rs. 

The QZ,AB program expired at the ent.l of the 2011 tax year. W~ urge COflgress 10 extl'lld 

this uiUcaJ program. 

Thank you for your cOl!~ideratiol1 ofd)es," OOlnmelll'<. 

Submitted on behalf II!: 

The National Educatinn Associatin" 

1201 16" Stret'l, NW 

Washington, DC 20036 

20Z·8ZZ·7300 

202·82Z·7309 {fax) 

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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.117
144 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.118

PRES ERVATION WORKING GROUP 

T~e Honorable Pat Tiber; 

("ai'mil" 

WaY'- and Meaos Comm'tt .... 

1102 Longworth Ho,, ~ Olflte SlIlIdlog 

Washington, DC 20515 

June 21, 2012 

Dea.Chalrman Tiberi and Member. ollhe5ubcomml\!ee on Select Re\lt'nuJ.> Mea~ures: 

On behalf 01 the Preservation Working Group (PWG). we urge you to (oMlde. Ihe modifications 

made \0 Ihe Low Income Housing Tu CrlMlil (~LlHTC·) program by th e HouSing and Economic Recovery 

Au of 2008 ("HERA") 3S 31ax e.tender. The PWG I,,, na tional coalition ofnonproflt and for profit 

owners, tenant ad~O(ate5 and nate and local housing agencle\ dedicated to the pres"r'IIation and 

improvement offede.ally assisted multifamily affordable housing_ 

PWG commends you on your effons to address this in,ponant issue by tnlrodudng H.R. 

3661 w,th Rankin8 Member ~eal. Thl~ important piKe of bip~rtis~n le81slat ion would provide 

slability 10 the 9% credit, ultimately ensuriog thallhe UH1C em~in ~o effenl"e 1001 lor ~ffordable 

housing production. 

Whli@thehearingheldlnyourcommltteeOlllycoveredtax utenders e~pirln8 in 2011 and 

2012, Ihe Impending e~pir~lion of the HERA provision has already begun 10 impact communities. 

The production time associated with developln8 a LlHTC property that Indudes application, award~, 

financestrUClUrlng and fin~lIy, conwuctlon m~y lal<e as long as two years. Because HERA requires 

thaI buUdings be placed in servke before December 31, 2013, the last proJecls to qualify lor the 

cred!! floor would have needed to apply for lIIiTC sometime during 2011 Dr urly 2012. Therefore, 

we believe thaI extending Or making the credit 1I00r permanent should be inCluded as a propo.sal 

lor the purposes of tax extenders. 

HERA's credit-lioor moclificaHon to UHTC WaS af] imporl ant chanKe thaI helped stabilile the 

lIHTC industry durin8 some of the mo" volatile times for multifamily housin8 developmetl1. Prior 

to HERA, the applicable percentage for determining the amount of UHTC under Se-ction 42(bf(l) 

fluctuated based upon interest rates. rhis created difficulties in projectioK the amount of UHTC. a 

properrv could (ecewe and the amount of inve~ or equit~ a property could rai§e, often creating 

large gap~ in financinK that needed to be fille-d through alternative funding lources. BV pro~;ding a 

fl~ed rate, HERA eliminated the uncertainlY of the applicable percentage rate and helped fill 

funding gaP5 by providing more LIIHCs to propertle5. Elctendlng tllis critical provi~lon in HERA does 

nor ~e any additional (osh to the go~ernment. 
145 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.119

PRESERVATION WORKING GROUP 

The UHTC program;5 the largest production prORr~m for alfordabh.' rental housing. Since 

the creation of the program, the UHTC ~as dey~loped or prf!'5eNed over 1 mitllon affordable 

apartmenH serving low-income families. 

More recently, lhe 9 percent (fedit ha5 been allocated to preserve "nd improve HUD and 

RHS assisted propertle~ that af!' In need of rehabilitation or at risk of being converted to marketrate. Wh.m rating competitive UHTC development propo~als, 48 stale and local allotaling agenCies 

prloritiH~ preservation of e~isting federallv subsidlled .. tfordable ren tal housing, further, Ihe UHTC 

is a crjllcal tool for rehabi litl'uing properties in wmmunitieS, retaining affordable housing cptJons 

for low-income filmil e~ and ~eNing as a catalyst lor additional development and growth. 

We respectfully request that you and your members con~ider 11\cludlO! the credit floor as a 

tax extender and extend it beyond the original sunset date 01 December 31,2013. Extending the 

credit l loor will enable the lIHTC to more efficiently provide affordable hOUSing to seniors and lamllies 

while stimulating loca) economies. 

Sincerely, 

ACTION Housing. Inc. 

Caill oroia Housing Partnership Corporalion 

CASA of Oregon 

Coastal Emerp'ises. Inc. 

Coalition on Homelessness and Housi'lg in Ohio 

The Community Builden, Inc. 

Emily Achlenberg, Housing Policy and Oevelopmenl"Consultanl 

Enterprise Communltv Partners 

HOilsing Partnership Network 

LeadingAge 

Lutheran SeN;ces In America 

Local Initiatives Support Corporation 

National Council 01 State Hous;ng Agencies 

National Church Residences 

National Housing Conference 

National Housing l.l3w Project 

National Housing Trust 

National Low·lncome Housing Coalition 

Network for Oregon Affordable Housing. 

Madison Park Development Corporation 

Maine Affordable Housing Coalition 

Mercy Housing 

Preservation of Affordable Housing, Inc. 

Ohio capital Corporation lor Hou.ing 

Stewards of Affordable HOusing for the Future 

\l0110" S" .. ,. N W" ~~0100 I'">!>,""",,, D.C. 20001 202-3]]·8511 
f 

146 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.120

~V.' '' Tl~'. 'HI UT" •• ~, ~h".n.. r".c:..-,._<4 ... e~", c_.,_, ... " .... _c __ ................ , 

Statement for the Record 

Of 

Dave Koenig, Vice Preside,nt, Tax and Protitability, 

National Restaurant Association 

For The Hetlring On 

"Framework for Evaluating Ce rtain 

Expiring Tax Provisions" 

Before 

SubcommiUee on Select Revenue Measures 

CommiUee on Ways and Means 

U.S. House of Representatives 

June 8, 2012 

"oc sr~£Oj!H~HI SI"HT OJ'''' • """"KINIITON DC 'l.OCle ~Q'I 

"I. lC1 311 5toO • '.A ~02 lJl '.H • WWW A('TAU~~N' OAIl 
147 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.121

Chainnan Tibo.--ri. Ranking M~mbcr Nl'ai. and membcn; ofllu.' House Way~ and M<'ans Select 

RC\ en ~ Meu un:s Suix'nmminec, thank you for the npponunity to submit this statement for the 

n:cofd on b<'ha!f Of the National R..."taurant A.$SQCI~tiQ . 

We ~ppluud the Chainnun, Ranking Member, nnd Suix'omminet:'s eonsidemtion ofl:l:( 

cxtendc~. The Subcomminl£s June Sill hcarin~ t" "_'p!On:.' pnncip!es and ",ctrics \0 cI'ah_mle 

tu e-xtenders imponantly ~dvane<'<I Ih .. dialogue Oil thl'S<' ta ~ polid.-s. The witllCllscS Iliscus><.-d 

possible frameworks to assess ta., e~tendcrs. nmny ofwhieh shared k~y criteria. Key .. :ritCTia 

induded: Ihe rationale for Ihe InJ( P'Jlicy: fel'emli'! 3nd dlicirocy; lIlId, lbe ITliSQn for the 

tcrnpor~ry natun: or llle ta.\ policy and its appropriale dUrJlioll. 

ThiS S13tcmcnt focuses on th!'\.'t'! e.\pil\.'<1 provisions tlfsignificbncc to the restaurant industry: the 

15·ye3f depreeiatinn "" hedulc Ibr kasciwld improv<'m .. nts, l\.'StHur.mt improvcmcnl.'\ and new 

c()nstl'\lctinn, und retail impr(wemC'llts; th~ Work Opportunity Tas Credit , "WOre"); and the 

dL"!uctinn f\:lr dlmations Qf tixx! '"'''nIOry. E"aluating thL.,.." tu provisiOns againstlhc ;,ey' 

criteria di$Cu s$Cd at the June 8th hearing denHmstrJtes th~t these important policies $houlll be 

mnde pennunent. 

Looking ahe3d, t3X refort!! prc5CutS an opportunity to provide tll.)lp.lYCT') with ccnainty. 

simplicilY. and fairness, while encClUr:lging economic growlh and job cn.·:uion. 1)!\Il~ properly, n 

cQmprch~nsi,e rt.'View orthe ta;\. system, induding tax ext"ndcr;;, W\luld diminate th ~ I"" 

policies thm delruel from Ihese objCl.'1i""s, while pWJnming those that ~dvance them. 110\\el'cr. 

in the interim, we urge inlm~-diate and Si:;1mlc!is cxtcMion of the IS-year depreciation schedule, 

wore. Hnd the ehari ~ble Mduction for donalions offood inventory'. 

The TeliIUUmlll industry plays a siJ;l ni!icalll role in our nation's economy. In 2012.lhc I\.'SWUl'lInt 

induStry is cxpectcd 10 gcnenttc PI! c,timmcd S632 llillion in :;ales. wilh on overnlil'tonon.ic 

imJXlct of more than S I, 7 trillion. Evcry dollllr ~pcnt in restaorants cncmtes an additiOnal 52.05 

sp.:nt in our nation' ~ C\:onomy. The reStaurant industry is one uf the' nbtion'~ largesl private job 

l'reaton.. employing approxim~(ely 12.9 mill inn people. representing nearly len pertent ofthc 

U.S. "urkfon:.:. We are truly tb~ COmel'lit,)n~ MthiS nation's L'(tl!h)my. 

Moreo"er, il is impor.:mt to $tress th t the n:stuumm indUSlry is ~n industry Msmall bu in~ sr.l:s. 

Thcre 911.' 970,01)0 restaurant and foods.::n.-kc outlcts in this country. Sc,'cn out often I'C$t3Urnnts 

are sin;!le-unil operJtors. Most euti"gand drinking c~t~blishmcnts, 93 p<'f'Cent uflhe industry. 

huvc fI.-wer thnn 50 /"mploy~/''S. Reslaur.lnts also sc rve as theconfen.1lcc rooms for many nfth,' 

sclf-cmpIQy~d lind other sm311 businCS$H. 

I S::l~ ~ f,> ec io n Schedule for Le3schold Iml!ro"clIlcnts ... Restaura nt InUII'!)\'cmcnlS 

and 1'/"''1' lr u~!lo.!!. ll od lalllml! m\'C ol~ 

Rationak for T~~ f'ul i~, · 

During tile June 8th hearin , l\ itnl'1s<:S discusst'd the n~"t.-d iii undL'fStand tht mlional" bt:ohil\d a 

tux prOl'ision. In p,,"ieolar, wi!n<'sscs l'CCommcnllcd consid<'ring whethcr a tax provision 

nddrcs>es II compelling ne.:d for go\'cmmem imcr.cmion und wllClhcr n tn~ prQ~-;$io n rcf1CC1s 

sound lax policy. 

National Rc.slaurnnt ASSOCiation Page I 
148 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.122

One principle orthe tn:>: cod~ is that costs of assets are 1l110C'Jt~'tl ov~r Ihe periO<J in \\hich Ihey 

lire uSC<.!. Assets with longer cXpi!ctcd lives HIl' depr,;,ciatcd Ol'er a longer pcriO{) oftim~, whllc 

assets with shorter liv~s ared~preciau'd !)ver a ~h()rt~r period of time, A, a rdlttliou <If this 

principle. Congress permanently provided for the IS-year dcpr<''1:iation schedule for retail mOlor 

Iuds outk1 stores in 1996. Congn'ss Sub~l'l.jue!l\ly e.xpamJed profl<'rty subj~tl() the IS-year 

depreciation sch~dule 10 inelud" I~asehold imflrovemcnts, reSlaUrdll1 improlcmmlS and new 

l'onstruetion, and relail irnpruv~l11ents. 

Wilh morc th:rn 130 million Americans palroniringl"l.'Sl3umnls cHeh day, reslaur~nl building 

Structun:s c..xpcricnce daily struclural and cosillelic w.:ar nnd Icnr I:tluscd hy custoillen; ~nd 

l"'mflloytts. National Restaurant Associalion research shows thai, as a result, mOSI rl'SlaurnniS 

reullxkl nnd upd~le their building Slrtl<:lUTC"S el'ery six 10 eight years. Consequently. IS ye;l!"S" is ~ 

mon: a~curnl~ limcframe for rl'1:overin!; the COSI of investments in rC~lh\lrJnt buildings and 

improv~n l'llts. 

'c nll ~ a nd F.ffidency 

Durin~ the Jun~ 81h hearing, witnesses discussed Ihe import.1llc<! of eva lUll ling a la ~ proviSIon by 

ilS r"venue cffect and its d1kicncy, m~u"inl!. whether the pnwisiun nCCQ11lfliishes ils gilals 

cITecliwly. 

JCT has e$limulcd Ihal ~n eSlen~;iln (>fthc IS-ycar depreciation s.:h\'<lule wOuld cost S3,3'!<) 

billion over len ycars. (JOI"'TCO~'MITTO ON TAXATION. eHIMATf:D BUOGf:T EHECTS OF 

F-V :.N\J~ PROVISIONS CONTAINEU IN PRl!..Srmxr's FY 2012 BUIlGE"r PROI,(ISAI.., JCX-19-11 

March 17. 20111. 

The 1'.051 associaled wilh the provision mliSI be viewed in light orlh<' c!Tl"'Clivl"'lle!;s of the IS-yt-ar 

dt"prceialion schedule. A I S-ycur deprecialion schcJulc reduces the cost of capil'll cxp<:ndilurcs 

lind incn'~,cs l"Jsh now. As denwnSlriltcd in Figui"t: I below, Ih .. annual tux savings and 

cOrTC:Spl!f1ding additional cash now re~I;«d by rc~tnurat"urs from a I S-year, rarb~r than a JQyear, depret:i~lion schedule are cunsid~rablc, According to a Nalional R~sluurant Associmiil(1 

sU"'cy, bel,," .. en 2005 10 Ihe cud 00011, nearly l\'O·lhirds ofre.llluranl o[lCralOrS ho:'nefilled 

Irom Ihl."" IS-year depreciation schedule, eith"r c.>:panding or making improvements 10 Iheir 

~Slat,rants. Oflhese reslauranl opcrallH"S, 52 pcrecn! said Ihal Ihe .~pa nsion> Qr improvements 

may nOI h~vc been undertaken if the 15-year depreciation 5eh"dule 1I"1IS not in place. 

Figure l. 

s ample c IllcuJlllions , or 15-\ 'ea r " ersus] , -Yea r Depredalioll 

Ann",,1 Annual 

TOI.) Capitol Ikprcrl~I;OI1 Ann".1 lkpreci3li". 

bpendilUre (3Q-y".U") T .. ~S~'il\g:: (l S-}.",.) 

SIOO.Q;J(I S1.532 '"'" S6.667 

~sa.ooo S6.J~9 $ I.SI9 $16.667 

$500,000 SI2.6SS SJ.OJ8 S3J,33J 

$100.000 $17.721 SUS) S~6.667 

SI.OOO,OOO S2UI6 S6.076 SM,6I>7 

SI.500.000 SJ7.97S S9.114 S IOO,()()O 

51.000.000 SSO.6Jl S12.1'i2 SI3l.JlJ 

F.'1'ond"ore Suuri ... 

Rebuild C",I,. Q~l<h.,,"ico - $,00.000; F"II.~ni~" - $1.500.000 

itenMO&Iillrl C(»I>: Quid,.,,,,,,,< - SU\I.OOO: Full><ni"" - 5500.000 

N(Hc Flgu'''' ..,.,! "",·e.I """ 14 """cot~1 .1fi.'CII,.., w'''f!.imJ ,,« mi. 

National Re>tnuront Associalion 

AOllu.1 

TnS",'np 

SI.WO 

U.f1Ol1 

58,000 

SII.lOll 

$16.(01) 

S:: 4,OOO 

~H.OOO 

Allnual 

UiI"\\:",""" in 

To.' Saoings 

S'i~2 

52\481 

S~.%1 

56,\14 7 

$?,O24 

I~ gil!> 

$19.&48 

Pagel 
149 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.123

Additionally, when rcstaUl'"Jnt5 in\"Cst in eQnstruttiun and renovations, the hnpaet sp.-cad$ 

thmughoutlh~ economy. Figure 2 providl"S s\;(lC'-by~sta e eslimales of the udtJiII'lllal spending 

on r.:sullIr::mt improvements and new constru<:tioll th ~l would result from an ext.:nsion of the 15-

y .. ar depredation prov;~ion. as ",cli as the ovcmll l"<:tlllumic and cmp [)ymL~ll impact w;lhin each 

slate. 

CunSl·qucntly. L'Collom;c llet;,,;Ly is ~;tling un Ihc ~idelinl'S in a f'-Jgi le ~c\lIlu111ic n.:-Ctl"l'f)'. 

Cutr'Cntly,)O pcrccntl)fm;taurantvp('f'3tQrs said they ha .. c put projecl1; un huld b«~WiC of the 

ul1c~rt3inly around Ihtll'.xwl1siun orthc IS-year depreciation provision. With single-unit 

reSiaurnnl operntors reporting IlI1 awmge I:.\pct:lcd project cOSt ofS40.000. and multi-unit 

vpemlor5 T\:purlillg an avemb't: cxpec1l'd project cost uf,sSOO,OOO. Ihe additiollal constructiun 

octi,,;ty "rtheS<" reStaumnl projects !llonc would exceed S7 billion. Based on economic 

multipliers fmm the !1urcau ofEcnnomie Analysis, the O\erall e.::onnmic impact orlhcSl.' 

Tl"Staunmt ct>J1struetiun prujc<cls would e~Cl'ed S2J bil1i(IIl, with a tOlal employment impact of 

nearly 211U.tIOO Bdditiollal jobs aeross all U.S. industries. 

Reh ~IHl for Tcmllonry "'.Iur" and Apprnpriate I)u rllt;oll 

The 15-year depn."<:ialion schl-du!c has been an integmllXlM of the tll;>; code f~\f sc~eral yca~, 

HIlWCI'('r. it is l('mpur~ry and musl 11<.' extended pnnually. MOsll'I. ... ·COlly. the IS-Yl'ar 

depreciation M:hcdulc ,~as elltended by Ihe Tax Relic!: Uncmploymcntln,urJl1Ce 

Reauthurization, and Jnb Crl'alion A<·t of2010 and expirt.'tl 3gain un Ot.'\!cmbcr J I, 2011. nle 

piecemeal und tempomry approach,o the IS·Yefir d('pret'latlon s.::hedu!c. requirin@extension 

every couple of years. presents taxp~ycrs wnh unnccl"SSllry uncertainty and complcllity. 

The pri)~I$iQn W8~ not designed II:; a temporary nlea~un". either as a stimulUS provision or 8 

pmvisiun requiring sunset re~iew. The IS-year depreda,ion schedule was put in pl~<'e II) 

oppmprbtcly reflect the useful life of certain properties and tn provide equity with the 1lI_~ 

In.·alment ofrctail mutur fuels nutlel stOfC!;. bnth of"hich dl'rnnnstnllc the need for II pcrmanclll 

policy. tlowewr, the IS-year depreciation s.:hcdlllc·s tClllpornry ~xtensinn~ continue I>eC~llse il 

has been difficult to identify rc,venue sourcc~ 10 olTs~( the cost of making thc pro, 'sion 

pcmtancnt. 

Th .. I S-Yl'ar deprecialion schedule is an clTteti"e and l'fficicnt tax policy that apprnpriJlely 

reflects coollnmie renlity nnd foslers economic and jnb growth. As part O(la:oi r<,foml, C:ongrcs~ 

.shuuld make perman~nllhe IS·year deprecialioo provision, In Ihis n:gard, "-e commend 

Congres~lllan G .. rlach ~nd COI,grcssnlun Neal for their intmduelion of II.R, 1265. broadlySllpported. bipaJ1i~'l11 It'gislatilmtha, would mak~ p~rmanen' the IS-year depT\:ciation s<:hcdule. 

Rationat ... for Tax Polky 

Another important. but largely expin:d. aspecl ufrhe lax CQd.;: is WOTe, a lax credit PrQvidL-d u' 

employer.; " 'ho hire individuals from sc"craltargeled gmup~ who fa<ce signitieanl burriers \0 

employment. E~amplcs of WOTC-targe1ed emplo~~e groups Include veterans who either aT\: 

food slamp rccii-'icms ur Hrc unempluyed and suflcring a scT\'iec-i:unneelcd di!>a.bility, formcr 

fdons, Ji.;;:onnc<:led youth, and m~mbC'rs offnmilie~ TI."Cciving bene fils under Ihe Tcmpomry 

Assistance for Nccdy Familics Program t''TANF··). 

Notional ReStDunlllt A;;soci~tion Page 3 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.124

WOTC was cn~ctcd to address the critical issue ufpI.'Tsistt'llt uncmployment amung certain 

sroup~ who face significant bamer.; to cnt~rins the workforce. The credit is pro~id~'lllo 

cmp o~rS!\l help off SCI the additional co.t ~ a5!>OCiated Wilh employing these work~r 

popuI3 ion~. WOTG cff~etivdy lessens the impact of the prod\lcti~ity g~p bctw.:cn!he target 

group members :md other workers. l"l1couraging employers to Lake a chance and hire workcrs 

Ihcy may otherwisc not. Allh~ ~me lime, the empluy~'C is given un opportunity 10 work. 

building skill SCl:i Jnd taking thl'm ofTpublic assi~lancc. 

RCHnuc and Eniciency 

JCT has cSliut3tOO lhat a (me-year e.xlel1siOOllf WOTC wuuld \:')1;1 $97 1 milliun over ten years. 

(JOINl CO~ ~II1" r,P ON T"XATION. ESTIM"T[IJ Il\JOO!C" EfFI:CTS OF RKVENUIi PROVISIONS 

COto.'TA lt-iED IN P~'HIl)~"NT S FY 1012 BUDG£l' PROPOSAL. JCX-19-11 Mar. 17, 2011). 

AI a relati,-ely low cost. WOTe works by effectively accomplishing ils goal of ending persi.tenl 

unemphJymenl among our nation's most "u\ncrable cilizen •. The rcstauram induslry employs 

close to i3 million people, many ofwbolll may Qol have been hin:d if WOTC had not bi..-cn in 

plaee. n,rough WOTC. more long-tern, weltllre reeipienl~, a hislorkally dilllcuh group to 

employ. arc being employed in Ihe pril'alc sector and 7 oUI of 10 ",clfan; I\'cipi~'ll S un: using 

WOTe 10 find private Srt'cur jub,. A 2011 study by reter Cappelli of the Wharton 8usin...-ss 

School at the Univ{"rsity of Pennsylvania found that indil'iduals hired undcr wore go on to 

become productive employees who are no longer dCp"nden t Illl public assistan<"l.'. 

In 201 I, lIIorc Ih8t 1.1 million workcrs found jobs through WOTe. at an avcmge cost of 

appro~ima!e/yS 1,300 based on Joint Cmmnillce on Tn.~ation dam. II is imJ>OrtOnlto nOle thm 

Ihis figure dOl'S nOI reflect any olTs.:ning savings from lower "clfarc. disability_ and social 

>ccnrily paymt'llts. 

Rennu for Tcmllurary Na lure ~nd Appropria te Duration 

WOTe and ils pred,·cessors. the Targeted Jobs '!"a.x Cn:dil ("THC") and thc Wei far..' to Work 

("WTW") Tax Credit. ha,'e esistetl since 1977. es~'tpt fOT a brieflnpsc in thc 1990s. Since 

worc "-!IS e~tablisbcd in 1996, it h~s bi..":'n temporarily c~l~nded nearly a dozen timl'S. WOTC 

has eO<-ctivcly be<'l1 pUll I)f Ihl' las code for Ihl"<'c detudcs. The ongoing ~te i\lns ofW01'C 

rdleet Ihat Ihe ta.~ poiicy el1i)cti\cly and cOldcnlly add ~Sl>l.."1; 3n importanl policy nced. As pari 

of tax. rerunn, Congress should make WOTC permanen!. Until then, worc should be c.dcndcd 

n::troactiH' 10 thc ~si ning of20]2 lind prospective as well. 

Dcduction f!lr Charitable Donation of F'md l'!r£!!!.0!.)' for Small ioes§es 

Ra tion nle for Tn Polky 

The d~duction for charitable donation of food invenlory is a critical 1001 in 9l1e~ialjng hunger. 

For nearly 30 yl:"MS sine,", its inl'Cption ;n 1976. Ihe tas deduction for contributions (If food 

inyentory was limited to CCOTfK)Tations. In 2005, !he pnJ~ ion was IcmpoTllrily expnnded 10 

include p~ss·through entilies (i.e., Snbehaplcr S torpor:llions, limil~d liabilily cumpani\.'s) and 

hilS bi.."'Cn extended on subsequent occasions. 

Without the pro~;s on. t:lxpayers get Ihe SlIme ta.t treatment for throwing out ,urplus food lIS they 

do for giving it to charity. The enhanced deduction inslead encourages donating thl' food to 

charilY. by helping to olI"'t the co!1iS associated wilh storing nnd tmnsporting the exl"~ food. 

Absenl the enhanced deduclion fOf IIle charilable donM;on offood inventory. IhcS<:.charities 

National Rl'Staurant Association Page" 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.125

wuuld b;: hard-pressed 10 me,'t critkal d~m<lnds, putting our natiun's most l'ul"~r1Ible familic~ Ilt 

risk for hungcr. 

Re"enue and Enicienc}, 

JCT has estimated thal a 011e-yc3T ellten~ion of deduction I"'r donatio11S ofl"ot.>d invenlOry would 

'OSI S13K million ol'er ten years. (Jrm<n COMMtrnm ON TAX-AnON, ESlIMMI!D IlUOOhT 

Em:('lsor RI!VE" UIl PII.OVIS10NsComA1N[(J IN PRHSIOENl" S FY 2012 Buool'.T PROPOSAL, 

JCX-19-1 I Mar, 17,2011), 

Wilh 3 small rt'venue imp!lct, the dedu.'tiun pl:l.ys a critical Ttlle in feeding OUT naliOI1'S hungry. 

Each day. 35 million Americans are 3t risk of hunger. There has bt...::n a signilicant positive 

impact on food donations since til.:. deduelion'~ enaetml·nt in 2006. The dedol"tion has rl!$uhcd 

in a 137% incrcDse in th,' amount offood donnled by rcstllurJnts. This is food that prior ICI 

expansion of the food donation deduction was being landlilled. 

AmCficl)'s rc tauroms gi ,c back to their co,mlluuitics in major ways, the mosl signilicunt of 

which is thruugh food donation. According to Narilmul Reslaurnnl A~soci~rion re~arch, 73 

percent of'TI,,;tuur.mts dnnate fOod tD individuals or charities, The National Restaurant 

AS>ocintiun ~trQngly en~"Qural:.es its members 10 donate more food ~nd h~s paftnef<:d with FOlld 

Donation Connection r'FDCP) to strcngth~n this d1"ort. FOlJnded by a ('lnm,'T reSl3umnt 

"xl'cutivc, fOC serves as the liaison between th .. rc~taumn S interested in d,maling food and the 

social sCr\'ic.: agencies IIdcpt at g~!ting lhllt food to people in need. FOC helps restllumlllS 

devdop and implr.:ml:nl progmms designed to p!Vvide un 31t~rn9tive to diseardingsurplu5 lOud, 

while Ctlpit~li;ling on the economic benelils ofthos~ donations 1hrough the tax ,;,win!!.:!. Sine.: 

1992, FDC has helped facili13!C Ihe donal ion of ovcr210 million pounds of food 10 non-proti!. 

hunger-relief ~gcncie>. 

Re ll.~o n for Templlrary Nalure nd pl'roprlll ~ Duralil'm 

The deduction for dona1ions of food inl'cntory is y~l another tall prol'i~ion that, although 

tcrnpor~'Y. ~ddresse~ a pcrman~1l1 chalkngc of hUnger. The deduction w~s put in place to 

add e~ this challenge aDd prov;,je equily wilh thc ta:>;. trcaln1cnt of~"Ueh donations for C 

C()rporJtions. 

Unfortunately. the uncertainty c~u,>;l"d by the expir .. tion of the food dunation t3l1 deduction 

cXK'nder has c~ used redUCTions in much nccdci.l food donations. The I~p~ Qfth .. food donation 

ta ~ deduction extcnder is 11 signilicant impedim"nt for sm~lI businessc~ th~t want to donBlc s3f ... 

nutritions food . mther than sec it end up in Inndfill. Studies h~v.: eSlimated upwards of70 billion 

pounds ofrcooVCf"Jblc food goes 10 waste eaeh year. Making pc!1H~lIcl1llhc now-Ielllporl:lry 

componem oflhe deduclinn 1I'0u)d make it more rrecli~e. while ud~nncing the objecti~e~ of 

providing lBxJl"yerS with implidty and p",diclJibility, 

Thank ),ou for the opportunity 10 submiT this statement on behalf of the Natio'ml ReSlllUr:lnt 

A$>ociation. The ~ l'xtl'nd~rs, including the I S-ycaf dl'Prcciarion schedule, worc, and the 

ch3rit:lble dc<luc1i{l[l for dona1ions offood inventory, mUSI be reviewed bnd Ihe JUlle 8th hearing 

advanced Ihe dililogue about po~sible WHyS 10 move f(!JV;ard. ~ re fonn would provide an 

opportuniTY 10 ol np",hcnsivcly re"iew the tas eSlendcrs und OTher tas polidcs and consid~'T 

pemlanenl SQluliolls. UnTilthcre is ~n opportunity for IlI.x re fom', we U1l:c Ihe immediate aDd 

Nation31 Rcstallmnt Ass<l<.·iation 
152 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.126

~t"~ml~s eslen~joo uflhe e.~pired lax provisions. As Congn:ss ~'Onsj en lhese irnpor1anl i~sues, 

we would be pi('!tSci! 10 s('rV~ as 3 re$l'lup:e f<)r th~ Sul;X'ommlu<,C, the Coml\lillcc. lind Cong:r<."\$. 

National R~'Slauranl AssocmliQn Page 6 
153 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.127

Figure 2 

''''"''11:.. .... 1< Imp"" '1', .. 1 Dnrkl)"""" I"""" 

• 

• 

D' 

~, 

." "" ~I IO 

n. 

SI17 

$lJO 

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SI7l 

i, . 

, 

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~2J) ". 

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m 

sns 

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Mol 

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S<>ut« ~ .. """" It""' ...... A ...... ' .. "'" "".,...,.. ""n. ~'" ~011 <It1pl<\."".'" ''"1_ ~ , ... 111", ... h'pl' ... 

,W'.' SM_ ""1-/1$"''' 00 "'_ ,_ Ie ,'''' U.s. 1_. ~,'Ioq <Jtti, /nd...J< ,.".." ~h,~ -" ""'" 

~t on 1 Rcst3UrJnl Association Page 7 
f 

154 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.128

Ohio Grantmakers Forum 

Serving G,ommOke'5. PromO'ing Philonrh,opy 

!>TATEMENT FOR THE Il.fCORO 

GEORGE E. ESPY 

PMESIDENT. OHIO GRANTMAKEMS fORUM 

HOUSE WAYS AND MEANS 

!>UBCOMMITTH ON SHEO REVENUE MEASURES 

lie~rin, on Framework for Ev~lu~tln, Certain upl.inS Ta~ Provisions 

June 8. 2012 

Chairman Tiberi. Ranking Member Neal, and distinguished memileri oflhe Subcommittee on Select 

Revenlle MeaiiJres, thank VIlU for Ihe opportunl"" to sha re with you Ihe perspect'ves of OMo's 

philanthropit tommunity a,lhe subtommittee tonsiders" Ir"mewo'~ to use fo r evaluating ""poring la. 

provision. thB! include Ihe IRA Charitable RolloVf!r. 

I am Ihe pre.ldl!nt of Ohio Grantnlak~ •• forum, a statewide assodatlon of private and <Dmmunity 

foundations and <D'porale givinS p.o,.ams. Ou, mt-sion I, 1a p'OIIide lead~ •• hip lor or,anlled 

phllanlhropV In Ohio and to enhante the abjIJt~ 01 mt.'mllers to fulfill their charitable soab, Tosether, 

our 206 members hoid roughly &3 pl"cfnl (510.9 billion) of the stalf'l charI13b eas~t ... nd annually 

award abOUt lhe ~ml! perl:elllag@olmestlte's grams ~S13S million). 

Ohio has a strong hlslO ...... 01 philantllropicgfvlng. startlns with thl' creation of the wodd's flm 

community foundation In Cleveland in 1914. Since Ihal day. Ohio'~ foundation community ha~ IIrown 10 

~.306, including 68 community foundat lon~ . Mil!lons of Ohioan! are helpl!<!- and lives changO><! - every 

day by irants slven by thes.e foundation" 

HiSh «hool senIor. 'l'cel"" «ho", .. hips Iha1 enable them to pu"oe the hl,her education they 

will need to be competitive in a 11~ century economy; 

Adul" who have be,," unemployed durlns the "'c""t ."cl'<sion receive job Iralnlng to hl'lp th~m 

find n~w jobs; 

Chlldren wilhoutd"ntal ;n",r<lnC1! get teeth deaned and repaired bv mobile oral health dinics; ,., 

Ohi!>ilOi of all .ge~ ar" enrlchO><! b~ vlsl ~ to mus.eums. lOOS, parks ilnd perlormlng aou 

orsanizatlons. 

The fouf\dallons are onlv .. ble to provide thes.e crltkal dolla'i due to the gene'OUi ~nt lbutlons Ihev 

'ece1\1t' from IndMduals: one·quarter of Ohio J~payers Itemile their lederillta~ returns and tilke 

advanuge of Ihe cllarlUble dedUellOn currentl'/ .. Uowed. The IRA Charitable Rolloyer, enacted as part of 

the ZOO6 Pension Proteelio" Act, allows indiyiduals aged 70 K to donate up 10 $100,000 10 charitable 

o'Ranllalians di,ectly from Ihelr Indiyidual Retiremenl Actounl without Ireatin, the diSifibullon as 

Taxable income, 

8ecaus.e of the Intent,ye provided bV this legislation. Ohioans have ~nt ribut ed thousand. of doll.,. 10 

the caus.e.thev car .. about, wllh slgnW.:ant Impac~: 
155 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.129
156 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.130

.. ______ ,..., ;:;;, .. ;; vd '~""'""''''< OH 44131 ._ ........ 'wcrIJ"II._ :;;;;:;;",., .... ______ • 

iu .. " 12. 201 ~ 

H~S"I><""'mIU""""~I""Il,, "" ... ~ 

'101 l< .. sworth II....., 01110< lI",ldini 

W .. """ ....... I.I.C.l()SIJ 

IJ<of ('M'nn". Tlbcn: 

On !JdIalr~rOn< Ynic., Ih"J'>I'" orr"" "",,.'00" ,1>0.' Nati"".1 T"""", and M .. ";"i"~ A.-iol"", 

(NTM .\ I l/Id lhI' P,.d."", M<tJlf",""", A"""'OUM II'MA I IIl«'d in Ohio, Il!Id .,..,. ... fly l.OOO 

."'''''''ide m<l" "''''';''i ....... 1>« ''''''.,.. ..... lhililk ~..., 1"(.- jour kod<t<b lp "lid ,_,in ..... elTon.' 10 

.,kl"",.'" n:f""". Pl ..... ...,.". ,1>= ..... m ..... 'n ""'p<>II>< '" )' ..... ,"""",,' fOf in"", r"'~'~lnM 

)'0\lI"!>e>";O\i "n I!>e F",,".,,,.;>tI. IN ( •• I .... "iAR CtNl. £~pifi"i T ... 1"",i.lOIIs"" iu'" 8, Mil 

1"1,,-, H'''''''''' h<aril\ll ~ 111<,., «IIl,,,,,,n" t'""", 011 <,pinos ptII\';"",,I> ,I><I"oro in 'f>< T ... RoHd, 

Unomrl"l'.'''" In ...... ''''. Ro.,,''''''' .. ,'''', .. ,d h>l>Cru"""A<I of:OIO "nd ...... ,ro .. p, .... , .. 

•• 

While: " .... ,11 ~_.lIr<''''''".'''''' <0.""","""';1'" II. ,of"",,;o! .101", ",lIn •• • , !hi, ,;,"< '"" ... ill .i.><Io • .,...,llkally on 1M 'ox ",.diu.".,. 1l<tl"",,,,.\S l/>o' our m...,,,",, <'Om"""i" .. ron ... ina 10 h<1~ 

,_ cmo" j.>M tnd ,. .. oin iklbollr <\)Ill"",;,i" •. 0.., ...... b<T rom~k>.", !'Ii ... " l) f, .. ily-

""'o>od .",.U 'nd .. od""" ri~ ",idUi< "" rt .. ","n"(""""",,, ",;1\1 r .... ~ ,b," ~o .mpko)«'S ""~, 

'.PIIly _ling. I""" and mh.... ~ponrn .. for m",,"fac'uring machl.....,. or ~ """';ni 1\1. 

""" .. ,,"';«, <kf ... "" 1tOfOOp3«. m<lIk.1. "II,k"I, .... d<c,,,<.1 .nd <f!<fV. "''''''''; <><Il<f ind....,; ••• II r«<111 OI/f\'q' "f "'" mrn,l><n sloo~ od ,ha, """hly 6(1 """,,<n! .'" """'Mod OS Sol. 

Proprl<\O<Sh,rt ond 0\10 ... "r-',.'h""'fIJI" "",i'in. 'Il<h •• S C<Itf>S.nd Ll..Cf "hi,~ >«0)(00' (or n 

1>"1"'"'1' cf _11 "".ll l:>u!oin.",.,. in ,II< U.s. ""ullO p<'I'C<'fI' "f . 11 ... ,,"fact" ........ , 

M;llWr",,"1'OfS. in< 'udi"l1 ..... 11 buw,.o<os. u,m, .• 'ox <mli .. and o.duc<i<t". '0 ... now ""'i, "~ 

b<>roI<-n, 1o"'OI"IIo,,;r .IT ... -,;,·. 'n ....... nd """"''' ilobol <Mtpcti'" ...... , I( ,.~ ",form i.,o) ... 

"I;",,,.,i'll , ....... " . and ....... »1 ....... W •• hi"~,,,,, "'''''111>'., .... '"' .... ." for III .""Ur.""", ..... !><Ihct 

C ('""""",kin<. S CO'I'""II"-. P ............. ,r< '" on)' "' ..... po<s.""""gh on,i,i .. 

0IlT .,cm~ UlW,. ""mrn>u> '"' I""""~"" not dl~ 10=. m",,)' or" 10":10 , ,. apflliubl< m""" .... o.:>Jl}' 1(1 N<JI""3'""s and N.4i .... ~ own ..... S""'.~ ... "II>.ft bti«l "" ftWO.,.,... in J.., .. ~ 2~1: 

r""" lJ I On. V.,,,. m.""f3C'"ri"~ """'I""~ ,·."'u'i ... . 
157 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.131

1+'"", 0'1,1 ,1/.,,,"- 7<,,' L<~I"''''' Ihwl~.~ 

'I,~ t, .. , C',,"''''.~r. 

Otl,er t"-~ pr<l\'isi\>115 imponnnt to OIlC Voice membt.'1'S induded in the Tax Relief, Unemplo)mcm 

Insurnne;, Reaull,orilation. and Job Cre~tion Act "f2010 (~" IUCA~) and rdated e,xpiring taK 

law but nol disc usSC'd in dct~il here include; 

OV"'lIlilimitUlinn en itfmi:t<'d dedU<lions unl! th~ pet'1iona) e~ctnplion phase-out 

Rcdu<;e<l rate on di<'i dcnds and capital gains 

AMT rdicf 

En.-rgy efficienl appli~nc~ cr<:tJit 

OedllCtion "fSlale ~nd Il>I.'al s~IC'!IlhcS 

AbovHhc-linc d~duction for qualified luition nnd related e~~ns"5 (,,"lploy~cs bcn ... fiq 

RcfundabililY \>I'unuscd AMT Cl\!di15 

Employer wage credil for employees who arcacti.c duty members o f l1 ... • unifonned ser-'kc,,, 

Enhancfil charitable dcdu.1ien f"r C(lrpordte ~:ontributions o f computer invrnlory for 

~ucational purpo<i<'S 

£.'<pensing ofenvironn1~nlDI remedimion C05lS 

!lasis adjUStlllem H) SL~~ ofS corps making "haritablc cQllLribut;ons ofpropeny 

T ~mpol'llry exclusio" (lr 100 I"'recnt of gain on certnin small business slock 

Tllesc COI1lIHC!llS focus 011 the fuliowi"i: tax dedu~tio"s, credits and provisiolls as e~amp!cs aud is not 

a comprehcn.;'·". lis! anI! i5 "0\ limited to thosc included in T RUlRJCA. 

R&D R~ Cr~dit 

St'Clion 199 Domc5Lic Prt)doctiOll Act;vity Deduct;Qn 

Bonw Oo!preciat;OI'I, 1(10% E~pcn~ing. and Sc~tion 17':1ln~ri:ased E'.\pl:nsing 

~SI ;n F;~t Out (UFO) 

Illlcn:., Char,ge Domest;c Im..-mational Sales Corporalion (Ie-DISC) 

EstateTu 

R&D Tax Cre<lil (R&D) 

As it is in many ;,tlltr indlls\rie ~, the R&D TaA Credit is an important component o f inno\'ation for 

small and medium·sizcd manufactu~TlI. f ifty·!hl\.'<! perc"nl of One Voicc membe .... who respomlcd 

reported using the R& D Tax Cn:dil. This fig ure is do,,'n st'>mc,,'hat over pri'vious ~ears a,; son,,, 

members cit ... increased audit. by stHt ... and fedcr~1 officials o~cr the uSc of the R&D Tu Credil. This 

hils di~l1adcd .ome small munuflicturers wh" IlCt.; ne..-essary 1\.'S\)(Irel5 from la~i ll ;k\vant3g""fth(' 

cl\.'\llt in order t" avoid costly audits. AB one manufacturer reported. "paying S20.0()() in B<:c"uming 

and leJ;~ltCt..,. tu ~uppon a S40.(I110 R&D credit simply is,,·t worth il.'· R&D is an impMant tOill 

which incenlivi7 ... ,. manu facturt'fS (0 conduct domestic Inl1ov~lion ;)o:li,'llie. and is a hi~ prionty fo.-

One Voice manufacturers. Further, tl,,· ability 10 claim R&D credits 3J,Cainsl AM'!' liability a.< an 

offset is an important tool fur manufacLurerS. 

S«I;U" /99 /J<"nt'Sli.· Prod",-licm Jk/il'if)' lJ"rlu('/km (SITli!)" /99) 

TI,., Section 199 dcductiun is qne of (he f~'W prvvisiQlls within Lhe, lax eod~ lhm truty f()C~"s nn 

manufacturing;n Anlcr;ca. While uot as ,',dl kilO"" by smaller m3nufact""'1'S as othcrcrcdils. 

"early halfofOne Voice m('Inbc:1l ""port daimin~ the Sec/ion 199 Deduct;oll. A ren<;wcd and 

(QoCused deduclion IS cr ti<;~l for helpin~ n,,"'ufacturers b 'dlhe ~lob~ 1 playinglkld_ For 

manufacturing c,","'panics thaI w;.:<J Ihe Section J 9() DeductiQll, Ihey "'J'Oncd a J.I ~ pl'lccnl effective 

(aX rate reduction (bllS"d on a 35 pen:~m r:H~) . Whell the majority of privately held manufacturers 

rCjl<,)rtthey invest mos( "flh"ir earnings back illlo the cumpany, paying a J I"'rcen' lo"crcffc>t:tivc 

(aX rate frc~s up resources (0 in""'st in equipmc" t Jud hiring workers. For lhose who usc it, Ihis 

dcdutlion is 8monl' Ihc mOSt eni:ctive in improvinJl Jllobal COltlpctilivcncss. cspl'Ciall), when lhe U.S, 

now has the highest corporate ta ~ r:lte in th., developed world. 
158 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.132

II .. , .• ",.1 II.w" T ... L)rc''''''-''"N·I''~ 

n". I.... { ....,."', ... ,' 

H,,,,,,s Ol!!,recioti()". !(IfIX. &fJ .. mi~g. am} SecliQ" 179 '''c'~''$fd £,t{ler!$I"g 

Members OrOnG Voicc arc hc~vy invcslors in capilal equil'!Ilclll wilh mnchinc" Ihallhcy purch~.c 

rC8ul3rly CI).!l!inG Qv~r S I million. While 99lJ'Crcc'lI orOnc Voice mcmbers arc classified as s11l~11 

busincss and nlOSI ofllJose make "sm~1I pans,· they use sophislicalcd machin,,·s which arc cosily 

invcslmenls. urch,,~;"gucw c~pilal equipmcnt is a major uTlden~kin8. for a small business who nUiSI 

hire additional worl<.crs 10 ()~rale the maehin~'S. In the 5urvey,.88 pcrC(111 orotic Voice ,m'mbcl1l 

rcp<)n USm!! tlw Sl'Ction 179 Espcnsing provision fur capital cquipm~'1I1 on which 78 ~n:<'111 claimed 

Oom" (Acccl:nllcd) Dt'prdiation. These numbers rt'inforce how critical purchhing e{JuipmL'Ot is to 

Ihis industry. 

A majority ofm~mbers rcpoorted mu;ng out Iheir Setlilll1 179 hefo", luming to Bonu~ D~rttiUlion . 

h,we~cr. most of the equipment purchd~d by Onr Voi(~ ml,nl'>ers eXel'l-ds Ihe Section I'N Iimi15 

00 e.\ptl\&illg which i~ ..... hy so many tum 10 Bonus D~pr«;ali(>ll. White th~se oosin",sst" mCellhe 

Smatt Bll\inej;~ Admini5tmtion·s ;nlem With Section 17<), II lO·~rsoll machln" shop .... itt purchase II 

S7~O.OOO machine h~n expanding opcnl1ions and onen ractors in tax iuccllli"e~ ,,·hcn deeidiug 

"helh.:'/' or nl'>tto nH,ke such a signifkant investment. Extcnding and increa.,ing the attowabk' limit 

rQr capital cxpcn~inl:l is critical forOn~ Voice members and this induUry. One Voice mcmbcfli 

dc~erihc Bunus Depreciation as!hc I"0~i.ion Ihat has Ihe grcalc'Sl innuenc~ O\~r their setivili",, -

such as whelher or nOi (and/or "hen) 10 purchase cBpilall,</uipmem COSlin!? S I ",illlol1 which often 

requin:s hirin8 mon: c'~pll)ytcs. 

La$/·i,,·Firs/·Oul(LfFO) 

Nc~rly onC·lhird DrOne Voice members rqx,"cd IIsi"l: LIFO as an invenlOry "cCQulllin!> mClhod. 

lIuwcver. resp"mdcnts in panicul~r industries rep'''' more usagc than olhers. F()r ex~mplc, LIFO is 

IIscd more frequently by nulomoti\'(' suppliers bUI il also depends on the stale of the panicular 

industry u\lr ment~rs supply. For Ihu!IC whu ulililx LIFO, it makes a s;lP\ificant ;mpaci. ,\ business 

with roughly 300 l'lllploycl'S supplying the 8U10l1lQ1i\'e and d~fenr.e induSlries fepOncJ huving more 

thM $750,000 in UFO "~pOsurc . 

""ereM Ciwrgc DamesrlC' ImCm(lli()n()/ S(lle~ Corpor<JIiQfI (Ie-DISC) 

As manufacturers increasingly look to increa.<e export 'ak~. they al'< esploring various opportuniliC'S 

and incemivcs to address fordgn markets. While only II Jl<!rCCnlllfOn~ Voi." members repoort 

claiming fe·DISC. 51! percenl ofrCl;pOndems report exporting par1s ~nd products abroad. _ 

signifkanl increase O'W prcvious yean;. As the economy impro"cs and small manufacI"'= learn 

more Hbout c~poniog l'>pportunities, ,,'e expect Ihe numba' of mnnufncturers " Iln IIllii/.c: IC·DISC 10 

increase. For those companies ",hu have 10llg thrived on e.xpons. IC·DISC remains 0 critical 

componenl of !heir SIT'dtegy to make their CmllS more Globally cuml"1itive wh~n selling their pUr\.'l 

nnd 1""ling o\'cr.cal;. 

f~<llIIe TI<r 

Tile va>l !naj...n\}' orOtic Voice m~1I1~f11 are stnretun:d as tamily·ownd .Sluall busiQ~"S5es , Many 

co"'p.1ni~"S nrc no\v conlrolled by!hc Ihiro and fourtll geneT'Jlions and oncn cnlploy gcn(·tl!tion~ of 

familie. un the sbop noor froln the grJ!ldchild(.:n to grandpawlts, hmily·owllcd busin","C, arc 

facing a crossroads. as many of the baby boomer's parcnlS "1\0 found~'d Ille companies are passing 

a"'BY "hilc Ihc current u"'n~'fS are planning for their llWn r.:lircme1ll5 in the nexlten yc~rs and are 

considcr;ng thcir <:stale pl~nning now. The E~tatc Tax rcstricts th~ ability of f:lIllily--owncd business~ 

to pa~s along Ihe.eumpaoy to Ihe nC~1 gener:ltion or manufaclurers pulling th cmplo)ccf rutures ;n 

jeopardy and ri~king a hu~ines~ simply closing its doors rlllhcr Ihan take out a l\ian 1<1 plIy the as~ .... 

One Voice m<lllbers slrongly believe Congri.:;s shoold I'!pealthe ESIUIC Tax entir<.:iy. How~"er, 

",cognizing the politit'lll und lir.cul I\'alitics\ we urgelh~ Con,nlince nOilo exceed the ellcmplion 
159 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.133

i4., ... ~ ,tU<,J .Ih .. " r .. , £.1",.( .. , I/""",Jo,' 

0 .... V"", c"'~'.,J'1> 

I~vel und ratl!S currenlly in plac<' in 2012 (i.c. S5 milliQn axcmpliQn indexed lQ inflalion. 35% la~ 

ronco with ~p<lu!<!ll 1r:lIlsf~r nnd !l~pl"'d -up ba'i~). 

Regardless orth~ OUlcome ofcomprchcnsivc ~a~ rcfoml, munulilclltr.!(s need slability Bnd 

lrunsparency in lhe lax cooe. A husincss eannil! e1Tcc~ vely pbn for the liJlure when il is unclcar 

whelher Congrt:1!s will eKl~nd a pm"i~ion before il ,pir~' , Or gamble Ihal the 11.&0 will IX' made 

rClrv;'~livc. Businc~s owners make decisiuns for the nl'XI year IX'ginning lh~ previuus ~umml'" and in 

many ~ases curlier. Ta~ credit~ and deductiQIl~ can Qilly succeed ifmanufaclUrer, tan lru.l they will 

slill exi!;l si~ months from now. The prime c~ample is BQnu$ DeprecialiQn. A small manufactUrer 

eannOI make a d~ci,iO!1 on whelher In purchase a $ 1 IIliliioll nlachine WilhllUI knuwing if they can 

depr<'<:ialc the cOSt oflhe cqllipmco!. A l~~ erroi! or deduction, ~ueh as Bonus Depreciation in this 

example, can mean lhe dirrcren~c b..'\wcen inve~ling in !hUI equipmcnl ~nd hiring "orken; or n.l! 

laking Qn me nl'''' b,tSin~'Ss. 

To runhcr delDo"male lhe impact of!ax reform on small manufacturing t>usincsscs. we have 

auach<'ll 35 Elo;hibil I a lax lemplale crealed by aecourl!ing liml Plame & Mornn in pa"m'rship "'11h 

Onr V<lic~. Th( .sample te'\lpl~!( was complele-d by a N(w England hascd manufacluring bu,incs~ 

Wilh mughly200 e'nployces ami ,lcmonslr:ucs lhe impact on Iha! pa" icular manufac!ul"<:r should 

Congre.'\ll climlnote ce"Mn lax dcdu~t1ons and credils or increase cc"sin rales. In this New EnglUnd 

manufacturer exampl e Bnd based on Iheir cU!Tenl claims and deduclions, Ihis 200-employee company 

will sce a 6% EITective Tax Rate Innca.;c in !OI3 compared Iu 2011 law as>iuming no Cungre~~iona l 

action (Ind will jump 15% under a worst case 39.6% scenario wilh no d~'<1uc!ions pcrmi"ed. Some 

smallcr'comlxmil'S have sho",n ~ 1.5% inerc~se in 20lJ, and a 7% increase under 3'1.6% "'ilh no 

deduclions. 

To sl~nglhen the competitivencss or~l11all and mcdium-siud munufacm~rs. we need 10 ~implify 

and stabilize the l,n code and implement policies thaI encourn~e inveS!menl and elimin81e lax 

diSHd\'an!3 c~. 1',c cU!T~nl la:< $Iruclurc ~ a myriad of high nlies, lempornry credits, loophole., and 

outd~!ed policics th~l slow growth and coml"'!i!ivcncsi'_ In order 10 compete globally under lhe 

cum:m U.5. lax SlruClur~. domeslic rnanUfaClUrt.'1'S must use as many lax inccntivl'S as possible 10 

low~r lhcir bunk 'fl. expand lh~ir busines .... 'S and hire more ~"'ployeL'S. 

Manufac!uring bu~incs>es employ ncarly 12 million Amcricans. reprc~cn! more lhan 10 pcrcC1H of 

our enlir.:: e.:onomy, Dnd BI"<: ~ vilal Po'" of America's fOlllre cronomic and no!!onal Stturiry. 

Comprchens;I'e lax rcfonn is tht single rnOSl imponun! ~!im" lu s Wa~hinglon eoold pro~idc 

businesses manufacturing in America. 

'!"hank you fQr your considcrnliQn and YOllr kad<."fShip on IX'half ofmc mel.1!working indu~lry. 

William E. Gaskin 

PMA Presidem 

Sincerely. 

II I 
160 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.134

STATEMENT OFTtIE R&II CRELJIT COAUTIO/,\' 

SU8M ITfED FOR TilE RECORD OF TUE UEARI NG 0 ," 

flL\" f. WORK FOR EVALUATI NG CERTA IN EXI'IRING TAX I'ROVIS10NS" 

IIEFORE 

SUBCO.\IM1TIEE ON SELECT REVENU E MEASURES 

CO,\IMITfEE ON WAl'S ,\ /'tiD MEANS 

0 , .. 

June 8, lOll 

Intruduction 

Th.e 11.&:0 Credit Cfl.llition w(:l.-om<.,; the <)p[lO"unily 10 pro~lde eomm('I1 ts lOr the re.:l>rd of the J"ne S. 

2012, Commit("" I)fl Way~ & Meau$, Sekc111.~, ""ue ~a!>U",s Subco""H tt~e (·'Com lllilli,e· ·l hearing 

10 examine ·'how COI1Srt'SS should eyalU:lte cenain IQX ro"isio"~ Ih~I cilh~r e~pil"\,d III 101 1 or win 

,'""ire in 20 I!."' 

llle II.&D Credit CooliliOl1 thanks Sekcl Rncnuc Mca~urt!; Sllboommiu~~ Chninnao Tihoerl all<! 

Ranking Me",""r Neal f(>r gi",ng Member.; lho., oppQn unily '" di St"u~~ ~ rr:ln,cwork for c,·aJUilling 

impor1:1Tl1 tax ~lcnder provi~ion§. such as 100 Rcst:arch & \)c,·clopmcnt I~R&D··J tax credit (also 

known as Ih,' Rl"SCareh & Experimentation lax erroil). In :KIdilion. we would lih 10 than k Ways & 

MeallS (ommillet mcmbcni Kcvin (jr~dy (R·TX) Slid John Larson (0-(1) rorthci, IC3d~",hip;n 

s[lOn,,";ng nil.. \142 le!!;slutinn Inal ,",,'oul d [lfoYide D Sirenb'lh.:ned .ud ""m'8n~'I11 R&D lax credit. 111<' 

~"redi1 c:l:PIn:d On Ih"'rnber 31, 20t I. and we I.-...,k fr>r ... ard 10 conlinuing ,,"r W()l"~ Wiln lh~rn 10 

nd, nnc~ ~ liClIml css c."(lcn$ir>n ln~1 would pro,ilk- hu,inc:lSl"S wilh lhe certainty and in~enl"es lh~y 

nC<.'!Ilo maintain and il\crc~St" K&D jutu. he" .. in Inc U.S. 

Th.e R&O Cr<:dit Coali1ion is D ~"P nfmure than 100 Inlldc anJ prnl~si(>nal a~ial;onsal.;ml! "'lin 

sm~lI. medIum and large tompank~ thai colle<:II,'dy !\Cpres~nl millillns of American ,",,\lO;CTS cngnJ;ed 

;0 U5i..·bast.'tl ~3rch th,,)ugnoul major seeton; oflne U.S. <.'(."()r1omy. iocluding 3l'l"Os"ace. agriculture. 

biolechnology, chemicals, d""lrunics, "n,,!"!:y, inrotlnJlion 1<.'Chnology, manuf~clu ring, medical 

Il'Chnol ogy."harmaccul;~al :l . sufl,",, ~rc and leieconmmnicati"ns. 

Allhough Ihe rnnkc' \lP of lh~ R&D Cledi! Coalilion i~ Jiw~, 11K' member com"an;cs ,hare ~ major 

"haNctc.".tic-Ih.:.y colk'Cti vely spt'nd billions of doll~r,; aOllually nn .... .-;eart'h and dcYrl pm t. 

which p .... l'" dc~ high_wagc and higllly--:<kiIlNlj.>bs;n Ihe UlljteJ$fate,;. TI,." , is signiJicanl global 

compelitiun for R&D jobs, "hieh m<.":Irn; t/ul! eompanii.'S ha,·" an amly oreh"ie ... on whe.,." 10 I""alc 

;;ueh jobs and whe«' to in,'csi re~art'h dollarr-hcre in the U.S. or llbrllad.llIc high U.S. WfTlOrJlC tlU 

raLe and Ihe l~ntllO""Jry Ilalure of the U.S. R&D las credit, <:\1mp"red to Ih~ 10wcrC<lrpOr.lle tU I1I1C"S 

~nd more ~Iable. rubus" and oftcn permancnl research inccbli,'es in hlost Ol~cr devc10ped rou,'lriCS. 

R'" key r....,IQrSlha\ C(ll1lp.'lni es cons;d~r in dct~.,.mi"in g WhL.,.., Ihey ~n' going 10 creale and ",ninla;" 

R&Ojr>bs. 
161 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.135

Even before the I).S. R&D credit 'pi~ at tl>< end of 10 1 I, on 3W""dg~ 3 cQmp:myciaiming ihe credit 

QIlly re31i~d an crr~cti\'~ ...... ·dit rot~ "f6%. In ad,I'lioo, th ... U.S. "''qu'''''5 th'll the cC>rpOr:nc in~om ... IlL\" 

deduclion fM 11.&0 t~pcnsCs be reduced by Ihe nmOllnl of any R&D credll. 

The ,nabilily ofCongn:ss til gre<' on 11 pcmlanClit in"""liv;: for U.S. n"S<.'llfch and d~, el""lTIi.'nt 

CJ(rcndilure~. induding Ihe failun: orConlll'l:SS 10 &camltssly eKlend 1m: R&D la ~ (Tt."tlil. rdl'()ll(;l;,'e IU 

January 1.2012. will Q,'er Ihe lung'l~nll have 3 drJmmic imp.:lCI un Ihe ntimber Qfll.&D jobs ere,lled 

and mainlaine<J in Iht U.S Giwilihe Comrnilwc'S focus 011 lin<Jing a 10ng-ICf11' 'M/luli()l1 runa.~ 

nlcIldcrs wilhi nlhe CQnleM ofla~ ...,for"" 11, ... R&D Crc<Jit Coalilion urges COI1g=s 10 pass a 

slI'cngihencd ~fi."tlil In the ,hnn-Ienn. w;lh ~ &camless ctf<!clive dale 10 enSure lhal R&D jobs .~m~in 

hcre in Ihe U.S. 

OISl: usslo ll 

The R&D I~ ~ r~dil , Nigin.lly en3~lcd in 1981, " 'a> dc'S'gn.,;! 10 be:l1l imJlOn~m in .. ·.:mi,·e in ~p urrin )l, 

privale S<!C10f in,'cslmem in ;nno"ali\'e n:st'arcb by cQmpan;o;:s <If ~II ;~CS and in a "uricly of induslrie!l. 

The enaelJllC!l\ oftbis ;nccl1li,c hel[XXI £;slabli;;b llIe U.S. as a leader in cUlling·edge research. The 

purpose Qfthc R&D laX credil is IQ cncou"'gc U,S. bas."tl rcsearch aCI,,"!y and 10 ensure that 

companicsereaic high-payin)l,j~ h • ...., in the U.S. In fact, Jurin~ !h~ 19S!ho.11>< U.S. WBS Ihe k-adcr 

among. OECI) C,JUnlne, In prol'iding Ihe besl R&D il1ccnt;, ~s Ibr companies. Howel'cr. In ,\:<:"nl 

yCUTS. mlllly othcrcounlrks hu,,, lnMlluted more generous and olkn pcrmancilt R&D lo.:~ti. ~. ASlI 

... 'Sull, 1m, U.S. today "'nh24'" in r~~drch inccnli,es ul1loog industrinlil,cd coumriesl

. 

In cQl1lraslto tile ;necnli"eli oIT.'red by a num~r urOlhc"l'cOllnlri,'S, the lemporary nalllrc oflhe U.S. 

R&D lax c,,:dil makes il a less powerful incl'TIliv~;n ICf11IS ofa company'! R&D budg<'ts and decisions 

aboul when: 10 locale new R&D ~ctivilics. l1lt: <'Crtainly or~ $lrcngthl'll<-d, P<'nnancm Crc<Jil, 

cspt'cinlly in a ta.~ refom1 cnvironmelll. is l"l';tic~1 10 m~inlain;ng U.S. le3denhip in adl'uneed =arch 

.nd o:nCUUI1IIIillg companies t<1 C(lIll;nuc 10 sl)I.'I1d R&D limds h.,.., in Ihe U.S_ 

The R&D credil has a ~igniticanl Impact on pril ~lc R&D spl:nding and IheCrenlirm ofrescarch jQb.." 

n:ccnt ,Iudy by Ih~ Cenler for "mcric:.n 1'rollfCSS Wllcludcs Ihat. "'he crcJil is cffccl"e In!/>c sense 

INII each dollar offurellont tn~ !"Cwnue enlISt':': bu.incs:I("s hl invesl al 1<!lI~t ~11 additionRI doll~r in 

R&D.'" In ~ddilion, according to n " . .'c~nt sludy!}y Ernst & Youug. "ll1tlltal. the 1I"crall policy ~ lhe 

'i~ling c~dil plus stn:nglh('I1,ng Ihe altCf11~ ive simplified credit - i$ ~'Sljm~tcd IQ intrease annual 

private r"""arch sp'-~Id;ng by Sl 5 billion in the sh,m·I.'1111 and S33 billion in Ih long.term . ...! 

ru nul~"tl aNne, m"IY olhcl"cuunlricsoITcr /NIh lower cocpurJtc 13X nHCb and more allrJcti,C) R&D 

inecnlivu4

. AccorJinsly. Ihe U.S. should nol cn£'ll>c in an "cilherlor" dcbate "ilh rciipect 10 IOller 

llI",¥inal T"ille"S and boo~linj; U.s. job crealmn ihrough R&D incenl;" .." ... h('I1 looking al "pl;()I1s 10 

rcfbnn Ihe COTflQllllc In ~ code. 

' QECO. "Scienec, ~'ClmolnJ;Y and Indu"U)' Senn'Card.- Deecmb.,r 2(109. p, 79. 

1 Ccnle.,. for "m.:ncan f'mgl\.'Ss. '1"he Cmp6rale R&D T!Ix C ... "tlil and U,S. Innovalion and 

CnmJX'I'tiv ... ncs~." by tQ~ra TYM)11 urnl Gr.!Jil Lindell, January2012. p.2. 

J Em~1 &: Ynung. "nlC R&D Credl'; An ell~t;v~ policy fllr pTIIl1lrning n:-search spcnding:," Scplelnhcr 

20Il,p. i: 

4 1)e\O'l1c. "GIQ\)al Survey (l(R..~D Til!( Inccl1li,·cs." July 20 11 . 

2 
162 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.136

.. 

M(If'Iffi'·eT. il I! inlponam to note Ihallhe R&D ~dn IS aJoN ""."dil- 70 percent of credil doll~1"$ ~re 

used 10 P"Y t"" .... Iarl...; of high ~kill~ R&:D ,,01"\;.11\ in lhe U~<;. TIt,- E&Y ~tu.:ly all'Q ~tN thal."1/It" 

,redil ond il. cnlanc<.·mcnl i. dlintal~"I1 \tI inerc."" rc""Qrd,·..,llIIC1l ~ml'loyrTl<."I1' by 140.000 in lite 

sItol1l~"fln and 300.000 in the long.lerm.~ 

The U.S. m~ 1 mainla in. globally eonlpl:lili,,; to" 5y~lem mal .uPfl"'u hij!.h·,killcd. hign·paytngjobo. 

he.., in the U.S. Failu,"" IO-"'aJnle..s\y ulc~ld Ihc erroil as won as possibl~ and fail u,"" 10 ptrmll1e,uly 

Sll"eflb"hcn Ih. R&O ... ~ credit will pUI eUrn'"lj,>b!i at .j!k <>f 'OO"lng abrood. ~"djtl~rd i~.11ItcSP<"I'dilureofR&D lilllib" in lhe U.s. Re,.c;m:h sod de,.I"""",,,1 ,,111 cuntinuc: th" ~Uo<"ilin" il; w""re 

willll>e R&D .\ub!l 11<.. 1""·aICll. 

While the Uniled Sialot!; nilJ offo",d an "'on-asaill, " I! .• g;"n ~ inl...,""" ('0" In,,'" than 2S years, the 

nurn!>.,. ofOECD rountr~ ofT""nr some 5<lrIIlfinrenlive for ~h hl' grown dramJli<;all y in 

"",enl )"c'arsl$ countries .uompllO t><..'QI"" 1000000'I"J in """''''''h. 'me U.S. sh ..... of globill R&D ~II 

fmm 39 p<.-m:1l! in 1m I,,)J p.: .. cell! in 2001.' In .ddil;lII1. I"" (011",,''''1,< OEt:D eh,n .oow~ Ih'" in 

2flOi"1. the Unil,"<I Slalcs rank."<I2.! among 38 illdustrializ,"<I countries olTe"';ng R&D I"" inc~nti\"l"'. ' 

OECll SCI<'I1,"", T~th "I~lD' .nd InJu<.lry..s.corebooni 2009 - OEeU C 2009· ISIlt! '17~92M06lJ I6 

1"~~ $u~idJiIlio!. R>r \JS!) 1 ,,( II.&D.larg,· tirm~ ~nd SMl's . 20ng 

._-

'E""t &: Y""ng. ··llIe R&D C",dit: It n dTccli,'c policy to, promoting rcse"4n-h SJlCfIding.'· Sq.1,"","'" 

21l11. p.l !' 

• OECD. Mm,slcria l Rcp<m II!Ilhe OECD 1"1IO'"'lion Slrnl"llY, May 201(1. P. 8. 

' OI,en. '"Sc~, T""h""'~ ~nt1 hldu.slry Sooi"=rd:' o.,,"tnl><·r 2009. p. 7~. , 
163 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.137

A =~nl Nalional Sci~nc~ IlOaN "-'JXIn eondud.,{! lhal the Unil~d Siaies' lead in scicnee lind 

u:~hnology is "rupidl)' $hrini;;ng" as R&D jolls aoJ ,wer~1l R&D ~pcnding l'Onlinue III ;ocrease faSler 

()ul~ide Ihe U.S. than hen: at h()me. The rl-por1 shows lhal .. lxl ..... ttn 1999 Dnd 2009 ... Ihe U.S. shal'(' of 

global research and dcvdopmenl (R&D) dropprd frQrn 38 po:,-c<'nllo 3 1 percent. whercas it ~w frum 

24 p"'«enl\IJ 35 pcrc • ."t in the AJiu ",,):;;on during the same lime.l!,· 

On 0 pos'I" ·C nOle. there is bmad and bipanisan suppon for~xtcnd;Tlg thcel'C'\lil. Ewry Administrul;on 

h~s supponC'd Ihe R&D IU~ c,,-"dil ~ince il w:as enaCIC'd. In 11 Mareh 2011 study. Ihe Tr<'flwry 

Dcpanmcn! ni:llM Ih~t. "ITlwn year.! iIg'" the Presidenl!\t1 an ambiti"u,; g!);ll of:..thieving a )""el "f 

,,-.,...,areh and developmenl Ih:11 is tile highesl sh~re ofth~ ~'C<)nomy Sinl'1: Ihe s)!lIce flOC( of the 1960'J_ 

3 percent orGDP - a eommilmenl he ~cmphasilcd in his SlalC of the Union address in 1011 . The 

R&D lax credil is a vital e"mpont ."t uf lIehicI'ing Ihis g",,1 and helping US nUI.innOl·ale our 

compelit;on. 'rhis is 'vhy. in add ilion I" makin)!: il pcmlaneh! .. the Pr~"Iid~'flt proposed ... to expand and 

simpl ify the credil. mnking il c:l.<i~r and more MlrlIelh'c for bUsincSS<."l' 10 claim Ihi~ credit for llIcir 

..... sca ..... h i!l\'C!;lmenl~. This propooal was wbsequ~ntl)' included it> the Pf'l:!;idC1lt'~ FY 2012 und FY 

1013 l.lud g~t(S) and ~hould ~ Il"n "flhe !1'form "r Our ~QrJII>r:lle t:l.'( sy~t~m ('urrenlly und<.'\' 

consid~rnliun ~· 

Morrol ~r. CQtlgres~ has c~IC'lId;.xlthc credil 14 timl'S ~;!IC" il "~s first aOOp\<!d ill 1'1111. In 20) I, 

Senale Finane<: COOlmiUce Chaimmn MH .• BaucLls (IJ.-M'I1:md Ranking MembcrOrrin lIalch (R·UT) 

inlroduced S.I 577. Th" Greater Rc.><:arch Opportunities With a~ lIelp ACL Similar to H.R.<}4 2. Ihis 

legiSlntion would prol ide il11ponanl ccnainly for U.S,·bnscd researeh spendinG, by making the R&D 

ta~ crcd i~pcrmancnt as well as sil11plifyingPlld Mn'11glhcnlng il. Iherehy incrca<ing ilS dfC'Cliv~l1Css. 

ond n 

The R&D'Tax Cn,dit waS ","'Signallu <'1151111: Ih~t ~u!lll"'nics comlucllhclf reS<.'lIrch 'dcli"i,jl'S ill the 

Unil • ..! Stales and c,..,at~ wdl'l"'ying. highly skil1edjQl,s here. Thai ,,,.igillal PUf'Jl'OSl' slill buhl" true 

Ir.day. although incre:l.,ing )!:1"b31 cUlllpetilion is making il more difticuh. It i,,,itally imponam Ihal 

U.S. p"li~')' lIIaker.! ~upJXln a strengthened and perm~nenl rcsc.1reh and tlcl'clopmcnl inerolil'e 3, pan 

uf any IBX r..:.-fnrm measure Dnd scaml=ly eMcnd the LTedit as soon as possillk. A mbust and 

f'l'rm~ne l1l re~1rch and Ih"I'clopm<'11t 1.1~ ,,..,d;t is CrillC:!)I/! C<)tllpe iti\'~neli~. ;nn<)valion nod U,S.j<lbS. 

In the i',l01l31 economy many companies have B chuiec B~ Ii) "here they are {loing tu d/! their researchand I~i h many othl'l' c"unlriCl; ofTenn!; /xlII, lower cU1'JXlrJt~ inc<)mc tax r~ICS and mure mbust R&D 

inecl1tivC/i, Ihe U.S. ta~ systcm MlUSI provide globallY comp.:ti!;I'e R&D incc!'\liws that c~n bce<)untl"d 

" n by bw;incsscs. The R&D C",dit C"",lili"n looks forward to ... isling memben; of the Commillce and 

Ihcir slarr. in gaining an""" delHik,{! undcn;landing ofthc compd;li\'c presslI"'s faced by companics 

as IIcli as orthe research 1'Ind dCI'elI>pmcnt ta.,"crcdil and ilS impact!)!1 U.S. jobs, We also look forward 

to working logether to adv~nce legislation \0 seamlessly e~tcl1d. 't,...,ngtllen~!Id onake rcrmune11llhc 

R&D ta ~ eMlil. 

' Nal'on.1 Science F<)undat;Oll press n:lea~. "New R"P'On Outlines Trends in U.S. Global 

Com['Ctiti\'encS$ in Science and Technology." January 17.1011 . 

• "/,,"fSlirlg ill U.S. CumMlillw.!/pus: Tire IJI!"ffil$ <!fEI'~u"<"illg (1//: Rl:Sw,-ch uml E,I'~rfml!l1Iulful1 

(R&E) T,tr CN!dil . .. U.S. Department of the Treasul)'. March Z5. ZOII. )!lIge 1. 
164 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.138

Links to Slu<.lics: 

Cmlcr tOr Ar))~ ... j;,a!l Pmgll'ss, "Tile C()rp<)flIl~ R&O T,,-, Credit and U.S. l(I,I1Q,alior' 3nd 

Comp"lili\'cn~s~" 

IIl1p :llwww.9 mericanprog.~ ... s.orgli.su<.~2011/ol curpor:lIc ~nd d.lllml 

EmSI & Young. "The R&O Cn.-Jil: An ~frCCli\"c polity for promoting rt"'~,jTch s~nding" 

!lnp:l/ww"., .11"1< e,tinall}fQnsfulull: .orgJ P[)f~"Y R&D Cn."\liUkWVO ILl!'! ~/i(!!Jf 

[)cIQilic. '"Glob;al SUI"\'ey IlfR&DTa~ Incenliw<;.·· 

ht!p:/I" W" .inycslin'l1ncriC$r uturo.org/I·[)f .... (j lub~I 20R[)%10SUT,c~··r.20Fi(la '/'.2{1..% 2020 II.pdf 

NRrionRI S"i"n"e FOlln,I,lio" P"'" n·t~~,p_ "New 1I:~1'''I1 nlllli"""Tri~"I, in I I.S. nl"h,l 

Compt.1ili\'cncss in Scicnce and TcchnolollY~ 

Itllp .JI"·"~''. '.if:g()v n.fM,<'W~ IIf''' ·3 _ "mm.jsp'!~·"/" _id~ I ::!IIS\l&r)rg '"'NS/l&.rl'Q"' '"' II~'''J 

DECO. Minislerial RellOI1 lin Ihc OECD Innovation Stroleg}'. May 2010 

h,IJg/I .. ,.. .... u"r, .( lrg ('(II<1'.!~<"d'} 1,l,2X!45.l16,l49.l'of 

OE!;:O. "Science. Tl-ehnology and Indu,try SC0f't'C3rd.·· Ilcccmbo:r2()()\,1 

irll/J:I/ .... "' .. ·.Uf!<:durgldocr«nt'ml llln. j746.1'''_ 2649 _JJ 7f11 _487/45/7_ ' _1_' J.OO,hlm/ 

U.S. DcpMlmcnt Oflilc T!"\:3SUry. "/rrvesli"8 in U.S. CUlllfWti1i'",,,ess: Th~ be"ajil~ a/Enhuncing lite 

R".lCfln:'l, (1",1 EXpNimell/tlliQlI (R&I::! Tax Credil " 

ht!ffilt"~ww.. ln} ~l imlm~ru:'I$ fulun: ,,''l!.ifQEsah'll.uryR LlRcWrtMurI;.l!ZS-,PD)' 

CO!'l'T ACT NfOR~ A H Oi" ; 

T:lfllllrnd$haw 

202-467-4306 

K&I) Cre<.lit Coalition 

1001 Pcnn'rlvania A,-enue. NW 

Suilc60! North 

Wll:ihingLon. DC 20004 

.. , 

, 
f 

165 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.139

It\OV\N 

STATUIK/Io, FOR TilE R ECORD 

OF 

TERESA BRVCE BAZ.El\IOIU; 

PRESlllENT, 

RADIAN CUAlI.ANTl' I NC. 

FOR Tin: HEAR ING ON 

"F ll AM~ Wtmk fOR E\'AU)ATlI":(; Cf:'fr/l.IN EXI'J\UNCl T AX PIW VISIIINS" 

BEFORE 

TilE U.S. Ho usror R EI'RESENTATIVES 

CmIMITTE.F:O VS ,,-~ I\11>ANS 

SUBCOMM ITTEE ON SF.LECT RD' ENUE l\h:ASURES 

JUNES. lOll 

160 J M:l.rkc! Street, Philade lphia, Pennsylvania 19 lOJ 

800.523 .1 988 • tcresa.brycc@rndi:m.biz 
166 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.140

Thanll. YOll for the 0Pi1Onunity 10 submit this statcment fOf tlJc record. I am 

T('rcsa ryc~ Bazemore, lind I am submiuing this testimony on behalf of Radian 

Guaranty Inc. ("'Radian"J, one of tile nation's leading privutc mongagc insul"t'l'$". Private 

mongagi: ;nsuronee ("M 1-) helps promote alld preseTvc the trudition of homeownership, 

while protecting ta.~p~yers from ddimlt-rdated losses tm residenti al tirst mongngcs. 

Radian urgcs Congress 10 extend Ihe deduction for private mongage insurance 

rrcmium.~ (the "private Ml deduction"). The priv3Ie MI deduction c.xpired on December 

31,20 11 , aJol1g wilh a oumber or oth.-r critical tax policies. Whel1 evaillatl'd against the 

key criteria discU!;5Cd at the June 8th hcaring. the private Ml deduction is an important 

tax polley that should be made permanent. In this re!;ard. we eommelld Congressman 

Nunes and COngressman Crowley for their introduction of H.R. 101!l, broadly-suppon<::d, 

bjpani~an l<::gislation thut "ould make pennanent the private MI deduction. 

Revi('wing tax extenders in the eont~.~ t of tax rcfom! wou ld p11)vidc an 

opponunity to comprehensively considL"'T the tax extenders ~nd other tllX policies. 

However. until such 3 review. we slrongly urge the immediate and seamless extension of 

the private MI deduction. Until there is an opponunilY to address ta ~ policy in a longterm ~nd comprehensive manner, extension of the pril ~te MI deduction is imporwnt to 

ensuring that there cOlllinue ttl be ineenti\'es aimed at stabilil.ing und strengthening the 

housing market. which is still undergoing a tragik fI.'covcry. 

For many families. the mos, common hurdk to homeownership is saving enough 

money for the down payment. The traditional 20% down paymenl is a hardship ror many 

IlI1d an impossibility for othcl'$". Private M I cnables borrowers with less !han H 20"'{ down 

- typically first-liml.' Dnd low- and moderate-income borrowers - to Qchiel'e the dream of 

homeownership. 

When a borrower places less th~n 20"10 down to purchase a home, the lender is 

fl!tjuirt-d to ubillin pdl'me Ml in order for Ihatlo;!n to be eligible 10 bc subsequently sold 

to Fannie Mal' (W Ffl-ddie Mac ("the GSEs"). Lenders are willing 10 make low down 

r~yment loans, and the GSEs are willing 10 purchase them. bcc:lUse in the even! ora 

homcownl'f'S default on lhe mongage, the private MI company p<lys the owner of the 

loan 3 claim thm is typically inlhe amount of25-35% ofth.:. vlI.luc ofthc loan. 

lllis amount of private Ml gcnerally e"v~rS COSls associated '''ith defaulted loans 

(intCTest charges during the. delinquenl and fOll.'Cl osul"C periods, legal fL'Cs, home 

maintenance and rcpair costs, rca! ,"Slate brokers' fees, and closing costs) and any los~ 

resulting from reselling tile pmpeny for less than the. oUlslnnding monguge loan OOlal1c,::. 

Placing the privlltt' Ml comp~ny's privutc cupitul at risk in u "IiThlloss" position 

alier the borrower's equity means both the insurer and Ih" borrowl'T have a vC5ted interest 

in making home loans that arc aOordablc not only at th~ time. of purchase. but throughout 

the yl:al"l\ ofhnmeuwnCTship. H1IVing Iheir own cupiUlI at ri~k also m~'1Ins that mortgage 

-2-
167 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.141

ins~ln:Ts have ~cry clear incentives to work with lenders, investors, alJd community 

groups to help borrowCTS in defaUlt stay io their homes. AI&O, private MI is automatically 

canceled when the loan reaches 78% of the Qriginal home value, and private MI may be 

canceled earlier. al the borrower's request, if an appraisal sh()ws that the bo;orrowcr's 

equjty has reached 80% oft~e original horne value. 

Over the past four ye~rs, priValC mOf1gage insurers have paid approximately S33 

billion in fOI"Cclosure IQsses that would have otherwise been paid by tBxpayers. Private 

mOTlgage insurers arc projl'Ctcd to pay approximately SSO billion in total to cover losses 

rrom the l"Ceent, unprecedented housing downturn. 

The history orthe privlue MI ilJdllSlry proves that privatc mOTlgage insurcl"$ have 

p;lid ,heir elnims through gQOd and bad L'<:onomic cycles. This is ","causc orthe rigorous, 

countereyclical copital nnd reserve requirements imposed by state insurance 

commissiQners. In fact, half of each premium dollar eamed gQL'S into II ~ntingeney 

reserve and generally c~l1not be.' touched by the mOTlgagc insurer for 10 years. This 

ensures thm significant capital reserves nre aceumulntoo during good times lII1d thcn 

drawn upon to ~bsorb losses during downtums. 

The private Mllllodell1o.s stood the test of time. Looking ahead. private 

mOTlsage insurers stond reody to play 8 critical role in the future of housing finonce by 

continuing to s.1rdy and soundly enable first-time 3nd luwer income families to purch~sc. 

homes while protecting 1JL~payeTS from losses that result from borrower default. I'lousing 

policies should encouragc the return of privutc eapital to the housing market and maintain 

u role for low down pJyment loans as long as they are prudently underwdlten nnd insured 

by private MI. 

The private Ml deduction was IIrst enacted in 2006 on 11 broadly,suppoTlcd and 

biranisan basis. Under Sl~lion J63(h) oftlte Imernal Revenue Code (""IRC or "t:I~ 

code"). premiums paid or accrued ror qualilkd pril"ate MI by 1\ ta ~payer in connection 

with acquisition indcbtedn~'S5 011 a q~talilioo residence of the taxpayer are treated as 

interest that is qualified residence interest ;md thus deductible. Tlte alltount ullowable as 

a dedu~·tion is ph:tscd out ralably. TI'e pdvate MI deduction was most re~>ently e~lended 

as paTl of the Tax Relier. Unemployment lnsurJnee Reaulhoriz~tion, and Job etl'alion 

Act of 201 0 {Pub. L. No. 111-312\ and has since cxpir.::d. 

Ev~luating the private MI dl-duetion underscores the importance and cncctivClK""S5 

of the lax policy and h~ need to mllke it pcrn13nent. This S1.'ction considl'rs thl' kcy 

criteri~ disl'us~d al Ihe June 8th hearing. 

- 3 -
168 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.142

RUlirl/lule/or Tu.x Polie)' 

During Ihe June 81h hearing. witnesses dbeusscd Ihe need to understand the 

ralionale behind a 131' provision. III parlicular, witnes>cs recommended cOllsidcring 

whelher a tax provision re1leels sound ta;» policy. 

One of the key I\'asons the private M I deduction was cnacted was to roster 

homeowncrship. Pri"ate MI is a critical factor for 1011'- and moocrolc-i'lCQme tamilics 

scckillg to becomc homeowners. as It allows borrowers to qualify for a mortgage with 

less thall a 20"10 down paymenl. The private M I deduclion makes private Ml premiums 

deductible to the taxpayer. assisting in offsetting the COSt ofpril'ote MI. Maintaining 

incentives for these borrowers is important to ensuring continued uecess to the housing 

market 

The pril'ate M I deduc[iun a lso increases the raimess o r the ta ~ code by equali;dng 

the ta.' treatment of pril'ate MI and mOrlgagc intcrest. which is deductiblt: by the 

t3;«paycr. Privme. MI premiums 3T!.' the ccon<)lnic cquivalent o f mortgag!.' int~n;'"S1. 

Paying premiums on mortgage inS\lr:ln~!.' h(LS a di='t aud qU(lIllifiable impact \In interest 

l·XpcnSC. Without the inSUr:lllCe purchased by those premiums, interest charges would be 

mUl'h high!.'r as II t·Ol1s!.''luenec- of the much hight'r ncdit risk. Conse-quently, the private 

MJ deduction ~ITeetivcly provides some parity to those homeowners who must rely on 

mort!Oage insurance by offsetting ~\l me orthe costs with those hom~"O"l1ers that ha';c the 

means to make 3 20% down payment. 

Finnliy, by encouraging thc L1SC ofprivntc MI, Ihe deduction reduces IQssc~ to the 

taxpayers. In the past, borro\\crs wert' circumventing private M I, whiel-t was not tax 

deductible. by instead prflCuring a "piggyback" or second loan, which W(lS tnx d~ductible, 

to make up the diffeT!.'ncc between the amount they were able 10 put down lind the 20% 

down payment required for loans to be eligible for purchase by the GSEs. Eliminating 

the tID: deductibility ofprivnte MI wil l incentivize borrowers to obtain risky piggy backs 

for which the il1!ert'Sl is a.~ dcduetihle, despite the fact that piggy back loans pennit 

borrowers to obtain a home with aimosl no dOWI1 payment and do not pl"Ql'ide protection 

to lenders, iuvcstors, or the GSEs from the risk oftlcfnuh. The dcduCli0n puts private MJ 

premiums on par with piggyback loan interest. 

R <!" I.'IIUI.' Ulld Ej]irirllt:)' 

During the June ~th hearing, witnesses discu,s ... --d the importunee of evaluating 3 

tax provision by iii; revenue eITeet and its effidency. meaning wheth..:r the provision 

accomplishes its go.1ls efii.'"Ctively. 

JeT has l'Stimated that a one-year estension ofpr;vale M I deduction would cost 

$739 million over len yeurs. JOINTCo,\IMITII!E ON T AXAT!ON, ES11MATIill B UOOET 

EFFECTS OF REVF.NUF_ PROVtSIONS CONTA!NED IN PRESIDr:NT'S FY lOl2 HUDOET 

PROroSAt, JCX-19-11 (Mar. 17. 20 II). The cost, howcl'er. must be considered in lighl 

oflhe signilk~nt bendilS ~ssoci3led with the pril'ate Ml dcduction. 

-4. 
169 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.143

111e private MI deduction has been an important tool in promoting access to 

homeoll'nership. By acquiring privme MI, [ow-lind mOlkratc-income fnmilies nre much 

ocltt.'r positioned to obtain the loans needed to purchase homes for their families. 

Acrording tn Internal Rcvcnue Scr~ice ligures, in 2009 ulone, the private MI deduction 

was cl;'limcd on 3.6 million tax returns. The m~jority orthe ta ~p~yers thut claimed the. 

deducti011 had annuu! incomes under S60,OOO. The provision has resulted in un average 

ofarpro ~imptcJy 5350 in aniwa! savings P"f fnmily. a considerable ~ULn for many 

families. Ofal! the ta ~ provisions which expired 3t the end of2011, only the private MI 

deduction was limited to low- and Lnoderatc-income tax.payers and only thc AMT pmch 

and deduction for Stnte and local sales ta ~es bcnefined more iodividuals. 

Mol"CQvcr. it is imponant not to overlook the impael orthe private M I deduelion 

on the hou>ing market, which is currently still undc-rgoing a fmgile recovery. With the 

!?raVe slUte orthe housing sector in recent year.;, extcnsions of the provision have ensured 

Ihat there conlinue to be provisions aimed al stabilizing und strengthening the housing 

market in a respollsible way. Maintaining inct.'ntil'es for this population orborwwcrs to 

access the housing nlarket is crucial to lL'ducing thc nation's c)[cess housing inwntory 

and !3eilitating a full recovery of the housing market. 

Rt'UlilmJ/J r Tempurary NUlllr e ul/ll Approprillft' Dllrllfit/ll 

Although the !egislation rim proposing thc privatc MI dt'duction would have 

mllde thc provision pennantnt, thc privatc Ml dcdul,tion wns PUt in place 011 a lenlp<lr~ry 

basis wh~n it was cnact~d in 2006. Th..: private. M[ deduction was not designe.d tl) b<: a 

tC111por~ry provision; illStl'od, it WHS intended 10 equalize Ihe tnx tn'3lmcnt of private MI 

premiums ;'Ind mortgage inkn.:~I , "hich i.1! a pcnnanent provisi(.ln in the tax code. Thc 

most likely reason for the private MI deduction's tClDpomry e~tCTIsioT1 S is due to budget 

constminlS. 

Takcn together. the private MI deduction re tlCCls C'ffcctivc mId effident lax poli~y 

Ih;11 fosters homcownership und equalizes Ihe tux cOOe trc'Jlment between private MI 

premiums and mortgage interest. As P;'Irt Uflal( rdonn, Congress ~hould mOlke 

permaucnt the priv~te MI deduc tion. 

"~C tON 

Tnli. re form would provide un opportunity 10 comprehensively review the tll ~ 

eNlenders nod other tnx polides and consider permanent wlutiolls. H.R. 101 S is 

bipartisan !egislationlhat would achieve Ihis objective, breaking Ihe COnSt31lt cycle of 

c)[pir.ttiol1 and ~tension. In thc interim. howcvCf, we S[wogly urge Congress 10 e)[ ~nd 

the private M! deduction Sl'amlcssly und ~pcditio1tsly . 

R~di;'lll greatly appreCilllell ~le opportunity to SLLbmil litis StalemCnt. We arc 

pleased to serve as a resource to lite Congress. the Committee, and tbe Sub<:ommittec 011 

lhese and related matters. We look forward to our continued work together on these 

imponant issues. 

-s -
f 

170 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.144

Rf

~ RUILD 

AMERICA'S 

SC HOOLS ,,,_r_ 

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.... ' ..... ,~_, ... ('to. 

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-,--", __ ',-"~"'"<01""""" - ,_ ........ , ___ - ,,-,- ,---- __ MM, ............... _ .. , ........ ____ ............ 

,.-....,-.-~ .. ~ ........ ,,..... ..... -.- ~ .. ,-".""-~ 

Juno R. 2012 

The lonora~ o Pm Tiberi. Chai, 

W.Y''''''' MoaMSut>oomm;lI~ on Sclec, 1l.,'.,,1.Ie M"""""," 

Unilcd Sl~I"" Ilou,", fR .~""tal;''E'S 

W~sb,ngl"". (I,e. 20SIj 

KE: IInring on 'rl m.,,'ork for " .,.Iul lin g C •• ,.i" f.'pi'in g Til> Pro. Is ... "; 

Rebuild Anw.i<:;,'. S~h<l<ll ~ ,pJ1'<C<"iul ... lhe <>Il!l"f1"ni,y 10 pro, ido • SIa~m""l '0 the 

Ilou;< Y' and M •• ns Subo."'\lOI,mill •• nO S<-Icct 11.0"""",' "".8$" ....,. rill" ,lie lI .arin~ 1)11 

F",me,,'Orl; 1<:>0- Evil""'li"~ C~r\.ln !; pirin~T , I't(>.isi()l", 

Rebu ild An\< ri£:1 '~ SCOOols i, wriling I<> .. xp"'" W' ,upI"'rl for Ih. '~ I<n ;io n of 

'he Qualilifd 7 .... u. AClld~ nI)' lkIod (Q7..;\ 8 ) .nd th ~ Qu.llflfd S< hool 

COn.llrtution Bond (OSCB) p~nom~ 

Rebuild A",,,riCll S<hools _<UPJ>Qr1S !he .,"ension orQlAB. originally ~n.twd III 

the T",pa~1:1" Kdicf A<:t of 1991 and C,\;\cnd!:d with bipanJ"'" "'ppnn ,1\ all 

... I>«qu,~' t Cnns "'"-"' •• inc •. 07.AUs allow ,,,:IIot,I, d",m<:I' In IlI<l<kmi7.., ""hool 

I""ilili •• • 1Id 10 imp"we <:unicnlu",. 07./\ n. "'" • elOS!. en""lho prouIInI beinH 

u..,d by """'<01 iliSltk .. in c'·""Y .Un~ W "'n',,"~lc , n.'l"it ."d n\l>ilon,j", ""h<x>1 

building>'.1Id d._""w., The (,1u;olifit<d Sth,..,1 COO>Iruclioo R,mll (OSCll) 

rro~ ", m pm"ides- r<>de",1 (,"ondON for 'he ,~""''''<1i,,,,. ,~ha"iH,"li,,,, . ""~ "'I"'i, 

ofpublil.' .\<'110<'>1 f"" lili~ . In 2010_2011 S<bQul d"trkl> \0 f(,ny.nin ... ."!al<.,, 11$«1 

SII hllii"" In QSC;U bi,1Id fi.undng '" Mild and '<00,'010 m"' .... orgy en"",,,t 

21" C...,tury 5<0001, in C<lmmllnil'cs """".Ihc 'OO"I"Y . 

QZAA, and QSeA, art hdping $ hool dOwietS 1'1""';& ",t:>d<m. mort "nCfl;Y 

om.im •. In. .... '' ond I-octl,'" ..:Il001<. lnpnl, n~ IN' I.~mi ll <:twln)I'U1Iml f ... ' ,u&"1$ 

"nd i.'1ihancing!he "'<>tkrl""~ f ..... ",don". lo..,h<n.nd ".f!: As mod.", ,,,Il001, 

.d,'.""" Sludc.'I.chio,'cnlcnl in umon. ",,,,I:md ""burba" OOlfliliUtliti", in c'.", 

,,"« '''''''' jobs ", impro,-cC<I"""u";ly ""hools will be. ge .... r.ned a. ,wi!. 

SupflQf1lhrough Q1.AII:I nd Q5<:1I, ~rc helping rcvair, ",",,,"10 ""cl """"--rni~ 

Alncriea·s .schools alld Slimulatl,,! and o",aling 11 "",,,,,,,<1$ (If jl>bs in Mkhigan . nd 

ewry <lo,e, ~ jobs an: S''''"'''tc-J in .he c-on.;lrUCbM ind~'I". 3m""~ c>lJPI'I ....... 

,.~ngin ~ from orthilc<:ts .nd en~ """l$ I(> roofinG «>nlract<>l'S and (lihe. <OnS11\ •• :1''''' 

wo,,"cl'S w .. 'm,,,\emile. 1'Cn<," 'ale a"d tt'flail' "'hool ~ Modem .• nergy effICient otlxlOl. 

...., htlring )"".1 en<n,n",,,,i •• incrca,c <lJIP"I"Iunili ... r", .JI ,,\/tkntS '" de"","P the 

""IIO'liional "'iii! •• :<C<""1"J' "' athi<"'l'. and "'tc«tl in IIH: 11" cc-n,ury "OI1<r"", •. 
171 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.145

QZABs and QSCBs ar.: providing Ohio school dislricts "ilh lhc capucity to mnke major 

uPbr.tdcs, I"CnQvations, and lO build new facilities. Ohio hislorically has ulili;(Cd lhl' OZAB 

program fully. l3e1o'" is ~ list orOhiQ ;;thOOI district usage of Qua Ii lied School COllSlrudioll 

BOllds in 2010·11, This illustrotcs hoI\' imporulllt Ihese !>nnds arc 10 schoollll00enli1Jltion 

cff<)MS in Ohio. QZAUs and QSCIJ oonds ~re il11pro~in !! schools and gcner:ningjobs across 

Ohio and in Cl'ery Slll1C. 

Communities across Ohio and in c"cry Siale are using OZAlJs and QSClJs to modlTTlize their 

local iiCtlOols prol'iding their SlUdents the opportunity 10 achieve and succeed in the 21 " century. 

Rebuild Amcricll's Schools a~1u that the QUlllificd Zone Academy Hond "nd Qualilied 

School Construction Bond Ilrogra ms SUllportillg school mndcrniZl1 tion nd j nb cn!ulion be 

includt'll a nUIn!:, ta~ c~lclI n pn.)\ i.~iull s eOl1 sidcred by Ihe Ways ulld Means C(Ul1ntillCe 

'hi.~ )·ear. 

Rebuild Amcrica's Schools apPI\...:iates the inclusion orthi~ ICl1~r in th.: prinwd rc.::ord of the 

H~~ring on Fl1Imcwork for Eva luating Certain Eltpiring Till< Provisions. 

Sincerely, 

Robert P. CanavllIl 

Q!!!9 

211 11 S77.4 mUllon 

~lTt" n Counl)' (l ebanon) SchOOl [}imicl, Ohi!) SJ.O 

Mail<.m;nJ; Coum)' (Boardman) Ll)Cal School Dis.rict. Ohio $l.5 

Summil Coun.)' IRccw) L(.ICal Sehoul Oislrict, Ollio S.L' 

Clinlon COWII)' (WilmingIOll) School District. Ohio SOJ 

Cuyahoga CounlY (Chlsrin FgUs Excmph:d Village) School Dislric •. Ohio 50.5 

Highland CounlY iUri\>htllocal School Di.,rkt. Ohio SOA 

tl~milt on CounlY (Cincinnati) Sch,)<)1 Di lric •. Ohio $3,1/ 

Champ<lilln Count)' (~kchanksburg) Exempt ed VillatiC School Di~lricl. Olli" SO.7 

Franklin Count~ (South. Western) School lli&lrict. Ohio $6,7 

Wayen Cuullty Il'Ionll"cstenl) u"".1 School Oi,trict, Ohio S IA 

rr:mklin Courny (Columbus) Sd1!)()1 Oi tricl. Ohio 59.9 

Ilamilloll COUnlY (Soll1h\\'cst) I.ocal School ()Istrict. Ohio S2.8 

Miami Coullt)' iq~ ) School Dimiel, Ohio Sl.g 

rtlnklin CQumy (I lilliard Ci,y) School Dislricl, Ohio $5.0 

I.akc Coun')' (WiI!<lugllb)'·EIIsllakc! Sc)l(.)01 Dist ric~ Ohio (2 is~U<.'S) Stl.'l 

tlamillon COUIII)' (5),"3"'0"" ('Qm"'U"il~' Schoo! Di5Ir;.I. Ohio .51.1 

Trumbull C""my (Ch~lIlpion) Local School District, Ol1io SI. I 

Columbinnn Exempted Village ~hool Diwlc1. Ohio 5 1.0 

Prebl. CounlY (E~IOn) Scllool District. Oh.!) $2.0 

Franklin COllmy (Dublin City) SchOO l Di~lrict. Ohio SL7 

Pick8Way COU nty (Cill:lcville)S~hool Oistric l. Ohi(l $7.0 

Slark COUJny (Pcl1,-f Local School District, Olli .. (1 ~S Il\" S! $5.4 
172 

f 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.146

2010 $293 millioll 

Lorain Coullty (Kcyswnc) Loca l School Disnict, Ohio 55.3 

Hmniltoll Counly (Sycamore) City School District. Ohio S17.5 

Stork Coullty (Conton City) School District, Ohio .$6.7 

Clark Cnunty (Sprin~ficld) City School District, Ollio $ J.O 

Henry CQUIlI)' (l iberty) Local School District, Ohio S:U 

Richland CQUllty (Madison) local School Disu;ct, Ohio $6.9 

Meigs Coullty (Southern) Loca l School District, Ohio S2.0 

Ashtabuln Coullty (Pymatuning Vallcy) Local School District. Ohio 50.7 

Harrison Coullty (Harrison Hillsi City School District. Ohio $0.6 

Lieki!]); COUllty (North Fork) Local School District, Obio $13 

Portage Coullty (Field) Local School District, Ohio S 1.1 

Fulton County (Evr:rgrcen) Lo~'al Sdlo()l District. Ohio S 1.3 

Columbia Coullty (Salem City) School Dis1ric1. Ohio $1.1 

Franklin Courlly (Dublin City) School District. Ohio 54.0 

CoshoculI1 City School District, Ohio 54.3 

Champaign County (Triad) Local School District, Ohio SO.8 

Scioto Coullty (Green) L{}Cal School District. Ohio 55.6 

SIMI; County (Northwest) Local School District. Ohio 51.7 

HHlI1ilton County lThrce Rivcrs) Loctll School District. Ohio S 1 1.3 

Columbiana Coullty (Crcstvicw) l ocal School District. Ohio $4.0 

Cuyahoga COllnty (Clcvl."Jand) Municipal School District, Ohio $55.0 

Cuyahoga County (Rocky RiI'er) School District, Ohio S 11.3 

Hamilton COUIlI)" (Princeton) School District, Ohio S 11.3 

Licking Heights Loc:lI School District. Ohio $4 .0 

CuyahogD County (Mayfield) School District. Ohio $4.0 

Mahoning COlllllY (Austintown) Local School Distric t, Ohio SII.3 

Ri chland Coullty IMadison) Local School District, Ohio $9.5 

Worren Coullty Vocational School District, Ohio $0.9 

Ashtabula Coullty (Conneaut) Area School [listrict, Ohio S 1.1 

Frankl in County l Wonhington) School District, Ohio S 1.8 

Hamilton County (Mariemont) School District. Ohio $1 1.1 

Sunnnit County (Springfield) l ocal School District, Ohio S 11.3 

Marion Count)' \Elgin) Local SchOQI District. Ohio S 12.0 

Lorain County (Firclands) local School District, Ohio S 1.1 

SClll'CO Coullty (Hopewell· Loudon) Local School Distric t, Ohio 56.3 

Preble County (Ealon) Community City School District, Ohio S3.1 

Cuyahoga County (West lake City) School District, Ohio $11 .3 

Ca lumet CoulllY (Appleton) Area School District. Wis. 52.J 

Summit Coullty (Twinsburg) School District, Ohio 52.6 

Cuyahoga COllnt)' (Bcach"ood) School District, Ohio $1 1.3 

Pickaway County (Circleville) School District, Ohio SII.3 

Akron. Ohio SIS.I 

Warren Coullty (Franklin) School District, Ohio SI.O 

Stark County (Alliance) School District, Ohio 52.3 
173 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.147

Statement of the Residential Energy Efficient Tax Credit Industry Coalition 

before the 

Subcommittee on Select Revenue Measures 

Committee on Ways and Means 

United States House of Representatives 

DO 

"Framework for Evaluating Certain Expiring Tax Provisions" 

June 8, 2012 
174 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.148

As the trade associatiorls represerlt]rlg marlufacturers, distributors, retailers, remodelers, 

(rlstailers .. rid wrltractors brll'lglng energy·efflclent products to homeowners, we ~re seeking 

the restoratiorl arid extensiorl of the residential energy efficiency (2SC) ta~ credit. The 

residerltial erle'gy efficiency tax credit was drastically reduced at the end of 2010! and expired 

at the end of 2011. Our member companleJ acti~eJy promoted and theircustomef5 benefited 

from the higher tax credit levels that were in place from 2009 to 1010, sustaining jobs in our 

industries during the otherwise dire new 1I0me and retrofit construction downturn. Pri~ate 

residential investment was 2.6 percentol gross domesti, product for the fltn quarter of 2012, 

well below Its historical a~erage of 5 percent. Many of the product s that Qualify for the 25C lax 

credit are manufactured-and also installed-In America, unlike alternative energy sources that· 

have benefited from other federal incentives. 

We are seeking a robust energy efficiency tax credit for qualified produru, as outlined below, 

of 10 percent 01 the purchase price up 10 $1,000. We belie~ that a $!,ooo tax credit is 

generally the minimum incen l~e needed to mott~ate consumers to improve their homes by 

purchasing these hlgher-peo1orming prodUCts, and to do so In sizable enough nlimbers to 

pm.itlvely Influence residential energy consumption. 

We are seeking a uniform lax credit across most product categories to mlnimile consumer 

confusion, include labor cOSU for all qualifving producu and maintain consumer choice in the 

improvements they wish to make in their homes. 

Economiu mpaCl oOhe Energy T.ax Credit 

Using the 2009 IRS tax data, we can demonstrate that the net economic impacts of the 2SC a~ 

credit programs from a remodeling perspec l~1! are significant (selling aside the long-run 

I.'flergy efficiency benefits for homeowners). 

With respect to the 2SC credit for energy-eflklent remodeling of existing homes, the IRS data 

Indicates a total of $25.1 billion of qualified expenditures in 2009. Overall, in 2009 xpilyer~ 

claimed nearly $5.9 billion in 2SC a[ld 250 tax credits. for ~e two tax credits combirled, 93 

percent of 1011 credit doims were m(lde by I(lJlpoyers who hove on (ldjus.ed gron income of 

no m(lre th(ln $200,000, which is Ifldicative of 3 middle class tax program. 

Because the tax credit in 2009 was limited to $1,500 per taxpayer, not all of this actfvity 

generated tax credits. In fact, according to the IRS data, just a little more thaf! 71 percent of 

these COS15 ($5.404 billion ~e sus potential $7.';'39 billion) were allowed In the :/.SC calculation 

due to the $1,500 limit. Moreover, due to other lax fules, only $5.172 billion of the $5.404 

billion were allowed as realized 2SC ta~ credits. 

The foilowing chart plots new home sales (left axis) and private residential Improvements (right 

axis). The data indicate that remodeling expenditures fared beller over the 2008 through 2011 

'b. R~lier, l!n.mlllovmont 'n,U ... nC. Re.~ hQri, .t on, 'nd Jotl c:re. o~ Ad ol2010,Sec. 110, ' '''Oil lOr 

Nonbull"" .. {no'BV P'DI!e"y. 
175 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.149

period than new home s~les, The ~~ credit program prOlllded a floor on remodeling actiVI\'i, 

which has declined only 26 percent since Its pea~ compared to 75 percent for new home sales. 

New Home Sales and Remodeling 

~ -----------------

• • ~' \ .tI', :..' '..,---

., , '-" ., .... ... .... ,1, \ .. _,~.,-, ," ." ~- , ..... 

~IIIO OOO 

$160.000 _ 

$140.000 j 

SUo.ooo 1 

Sloo.«KI f SIIO,IJ(IC :j 

$W~ i ooo j -SlII,OOO 

The first portion of the ISC credit usage is related to energy-efficient building envelope 

improVi!ments, with 13 percent of the 2SC claims associated with insulation, 34 percent with 

windows afld skylights, 9 percent with doors and another 9 percent with qualified roofing 

matenals. The second part of the credit dealt with energy-.saving appliance Installation, with 16 

percent of the tolal 2SC claims connected to qualified heal pumps, air conditioners, water 

heaters and blomaH-burnlng stOlles and fireplace Inserts; 17 percent with qualified natural gas, 

propane, oil furnaces or hot wa ter boilers; 3 percent with advanced main air circulating fans· 

used with a natural gas, propane or oil furnace. 

The National A!osoclatlon of Home Builders has developed an economic impact model that 

enables estimating tolal emplOyment and economIc Income Impacts from home building and 

remodeling_

2 The model uied Bureau of Economic Analysis (BEM da ta and BEA Input-output 

lables to gef'e(ale l'(onomic impacts by sedor. The follOWing table presents till" impacts that 

result from SHlI),OOO of remodeling activity. 

, h IIp;i1,, lOW nahb.<lfW~''''''ic ."'1" ?wc,i""ID><7H& K~ "OI1c C" ""'~"u I) ~ I 0) ~3&cb.o",, 1l1) ) I 1 

1". Diled Ionpi><iOFII Dm. lJu,ldhl8Md R.m9dcII"~ on ,he to.s.l"ror.,mv. 1'\AlIlI roo""",ltJ. 

2 
176 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.150

The jobs are meitsured on a fulJ.tlme equivalent (FTE) basis, T~us, NAHe estimates that every 

$100,000 of remodelll'lg actiVity creates 1.11 jobs on an fTE basis, 48.6 percent of those jobs 

are i/\ the construCtlOI\ al\d remodelll\g sector. 

Il\come illl\d Emp 0 mel\t impacts 0 Remodelfl\g 01\ the U.S. Etol\om 

Numberof Wages 

FuU-time oed Proprietors' Corporate Tolal 

Jobs Salaries Income Profits Income 

$100, 0005 I'll on Remodeling 

AlIll\dustrles 1.11 $52,109 $13,810 $16,141 $82,667 

Comtl\lttio/\ 0.54 $25,573 $&,601 $4,232 $36,406 

Mal\ufacturjl\ 0.18 $8,136 $824 $4,529 $13,489 

Wholesale and retail. 

Transponation and 

warehOl>sing 0.16 $6432 '''' $2,307 $9,588 

f iJlaJlce aJld insurance 0.02 $1487 S71 $1 459 $3017 

Real estate and rental and 

leaSing 0.01 $315 $1,652 $758 $2,125 

Professional, Management, 

administrative services 0.12 $6,970 $2191 ,," $9924 

Dlher services 0.09 $3.797 $1,623 $2,098 $7,518 

Sellrte_ NAHB estlmotes, bosed pnmoflly on the dOlo from the U.S. Bureau of Economic 

Analysis. 

Pl>ttjng all the data togetner. the IRS data and the NAHe economic inlPact model ifldicate that 

lor 2009, a total of 278,610 full-time jobs were in connection with the 2SC credit. 135,S40 01 

these jobs were in the connwction and remodeling sectors. The program supported 

approximately $13.2 billion +1\ wages lor these workers ,md $7.5 billion 11\ net bl>siness Income. 

Conclusion 

The program has created and preserved America Jobs and promoted energy efHciency by 

helping OWl\ers of existing ~omes afford higher efficiency wil\dows, doors, HVAC systems, hot 

water heaters, roofil\g and 11\$l>latiol\. We are deeply concemed that Ihe loss of t~i$lncel\!ive 

before the hOl>sinS market recovers would lead 10 Sl>bSlantial job losses. 

The residel\!;al enersv effkierlcy la"(credit has broad support aCloss the remodeling and 

retrofit mar~el. A 10lal of 34 businesses and associations sent a letter in December 2011 to the 

Committee 01\ Ways and Means sl>pporting a robust eXlension of the 25C tax credit, knowing 

the $1,000 level would effectively leverage consumer activity and lob preservaliol\. A cop¥ of 

the letter is Included In the appel\di. of this statement. 

AS the COmmittee 01\ Ways al\d Meal\s evaluates the merits of Ihe 25C ta. credit, the dala 

illustrates Ihe prosram has had a powerful and positive impact on employmel\! and e.tel\ding 

the incentives ul\tll the housing market funher stabilizes will prolect Americal\ jobs. 

3 
177 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.151

~~l!cOrtj!!l: IQ!ll!~ID A!~!lti!!ti !l~ 

Air Conditioning Contractors of America 

Air-Conditioning, Heating and Refrigeration Institute 

Asphalt Roofing Manufacturers Association 

8iomass Thermal Energy Council 

Insulation Contractors Association of America 

Hearth, Patio & Barbecue Association 

Heating, Air Conditioning & R"frigeration Distributors International 

Metal Contractors Association 

National Association of Home Builders 

National Association of the Remod"ling Industry 

National Electrical Manufacturers Association 

National Lumb"r &. Building Material Dealers Assodiltion 

National Roofing Contractors Association 

New England Fuel Institute 

Oilheat Manufacturers Association 

Plumbing-Heating-Cooling Contractors-National Association 

Pellet Fuels Institute 

Petroleum M'Jrketers ASM)ciation of Ameriu 

Retail Industry leaders Association 

Roof Coatings Milnufilcturers Association 

SprilY Polvurethime Foam Alliance 

Tile Roofing Institute 

Window & Door Manufacturers Association 

t.or More Informal'l9.!!.So.!!,.tag 

Ben Gann 

Director of legislative Affairs, Natronal l umber ilOd Building Material Dealers Assod,n lon 

(202) 367-2346 

ben@dealer.org 

• 
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Appendh( 

Residential Energy Efficient Tax Credit Industry Coalition 

Ikcember 8. 101 1 

The Honorable Jnhn Bochner 

Speaker of the Hou~ 

H-.H2. United Statc"s Capitol 

Washington. D.C. 20.515 

The ()r~ble Dave Camp 

Ckainnan. Commilll'C on Ways & Mean~ 

1102 longwonh House Ollice Building 

W(LshinglOn. D.C. 20.515 

The Honorable Non.::)' I'elo,;; 

Ilou~ /I.·linority l eader 

H-204. United States Capitol 

Washington,0.C.1051.5 

The Honnrable Sander levin 

Ranking Memb£-r. Committee on Ways & Mean~ 

1139E longwonh l'louse Ollie.:: Building 

Washington, 0.C.10515 

Ikur S!><,uker Boehncr, lead.::r Pelosi, ChaimlM CIIHlp and Ranking Member l evin: 

As eomp.1nies nnd associations n:prL""Senting ntanufactllrers. retailers. builders nnd contractors in 

the housing (md residcntiull,nt:rgy retrofil induSlry. we aru WTiting to urge your suppon ror an 

extension 81 the S 1,000 !C\·e! for the rt..""dcntiaJ energy ellkienc), (25C) ta~ <:1\.'<Iit set 10 eXpire at 

Ihe ('nd of the y<'3T. The 2SC ta ~ credil creates and pl"\.'S(.'r~cs American jobs and promok'S enL'fg)' 

emeicney by helping owner.; uf e:<isting homes allord higher efficiency windows, doon;. I-IYAC 

systems, hOI waler hemCTS. roofing and insulotion. We arc deeply CLlfICCmt-d Ihut thc los.~ oflhis 

inccmivc befofl: Ihe housing m~rk<:t n:COV~T$ would lead (() ~ubstanlial job JoSo"'-":;. 

Residential rentodeling aClivity spurred by the 25C lUX credit in 2009 and 2010 was critical to 

ntaimaining our economic vitality. In 2009. Intemal Revenue Service data indicates American 

taxpayers report .. d spending $25. 1 billion on rcmod~ling costs assQC:i8ted with the lax credit. 

MorC{)vef. Ih ... progmm sllpportl'd 278,61 0 jobs (135,.540 of which were in thccvnstruction and 

remodeling sectors). uppro.wnatciy 513.2 bilHon io wages UQd 57.5 billion in ne! busin<:ss 

;neome a('cording to anal)'sis by the National Association of HOI11(' Builders. In uddition. 2SC is 

lruly a middle-class ta:l: credit. In 2009. over Iwo-thirds of the households claiming the cr~dit 

had adju.slcd gros§ income ofS 100,000 or less. 

FurtIH'r, private Tt..'5idClltial investment as a percent of gross dornc~tic product set lIollther Tt..'(:ord 

low tlf2.4 percent illihe third qu:m~r of2011-in comparison \0 its historic a~('rage tlf 

approximately 5 percen!. The 2SC t3)( credit has providcd a needed floor on remodcling acti,·ily. 

declining 32% since ils peak compared to 76% for new home sales, It creatc5job5!l11d benefits 

homl'Qwn,-r.; by reducing.lheir l'nergy usc. lowering their ~n,'rsy bills and improving their 

homes. 

Again. we urge your support for a robllSt elttension of the 25C 13.' credit. kuowing Ih ... 51.000 

I('I'd would elTeclively leverage consum('r activit)' and job pTCS<.... ·atioLI. We belie,,(' thul the 

pwgmm has had a puwl'rfu] and positi~c impacI on empl(l)'m~nl and cxwndint: the inc.:ntil·c$ 

nntilthe housing market furtheT stabilizes will protet:1 American jobs. 

, 
179 

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TIlan\( you ror your ~un,id~mtion, We look fOf\\ ~rd 10 working with you to include an ~1l'n,ion 

ofth~ resjdentiall.'1l~rgy i!r1iciency crediT in tll.X legislation before Ihi! end of the year. 

Sincerely. 

Air Cnlluitioning COl1lmelOrs uf America 

Air-Conllitioning. He~ling and Rcfrig~ration Institule 

Andl'l"S~n Corvorati()[1 

A.Q, Smith 

A.'ptmlt Roofing Manllfactlln.."fS Assuciution 

Champion Windo>, M~nulac llring Company 

(vurleil ofNonh Ameri~all Insulation Mal1uta~tunTS Assuciation 

Fonune Home and Security 

Guardian Industries 

Ilcating. Air Conllitiolling & Refrigeration Distributors Intemotional 

The Home Depot. Ine. 

Ingersoll Rund 

Insulation Cunlracto!'1 A~sociat;on of America 

JELO-WEN, inc, 

Lennox In1emational. lne. 

Lowe·sCompanics. rn~. 

Nutional Association of)·lome liuitders 

N<lliollul Association ofManufaeturcr5 

Nntional A~iQ ion of the Remodeling Industry 

National Electrical ManufaClur~r.s Association 

Nutit)nal Lumbt'r ,lIld Iluilding Malenal Deale .. AS!<I>Cbtion 

National Roofing Con lraClol'!l ASSQI'ialiUtl 

New England f uel III.o;tilut,· 

Pella Corpor~lion 

Petroleum Mu",ete .. Association of America 

Plumbing-Heat ing-Cooling Contrac1ors--National Association 

Regallicloi1 

Retail Indus1ry leaders Association 

Rhctm M3nufaeturing Company 

RoofC()atings Munufaclllr.:rs Associlltion 

Spray Polyurelh:mc Foam Alliance 

Tile RoofIng Instit ute 

United Teehnologiel; Corpomlion 

Window and Door Manulac1urers Aswcialion 

ce: I rouS<.' CommiUl.., on WaY!' and Means mcmhcn; 

6 
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l!CongrtSS of tbe mnittb ~tntts 

J)OUSt of IlrpnsrntatibtS 

maslJlIIgton, .in€: 20515 

June 22, 2012 

'/Oe ! IOl\Orublc Dave Camp 

Chairman 

Committe<: on Ways and Means 

1102 Longwonll Hous« Office Bulldio\: 

US. I louse of RcprC5Cnlalil'es 

Wash,nglnn, DC 205 15 

The 11()11<)rablc Pal Tiberi 

Chairman 

Suocornmincc on Select Rt''''enuc Measures 

Committee on Wmys and Means 

U,S. Jlollsc of R"prcscnlati.,oe, 

Wa~h;nglon. D.C. 10515 

The Iionorable Sander M. I.e";n 

Rankin&: Member 

COllnn;l1cc on Ways and Means 

1106 LllngWQnh IluuS{' Office Buillling 

U.S. Ilousr of Rcp=ntal;ve,; 

Washington. DC 205 15 

The Honorable Richard E. Neal 

Ranking Member 

Subcommiucc 011 Sciect RCYCIIUC Measures 

Commince Oil WaY5 anll Mean5 

U.S. Iiouse of Represcntatives 

Washington. D.C. 205 15 

Ikar Chairman Cump. Chuimlun Tillo: ... Congn:;;smull Levin. and Congressman Neal; 

As Ihe Committee continues its wurk on legislation w amt'ud provisions of our tax t"(klc. the. 

Members "nhe Sustuiooble Energy und Env;ronm<'nl CUJlit;on (SEEC) strongly urge you 10 

reios!Jtc tlle-clellIl energy and ~netgy efficieno;ly lall il"lCenlives Ilia! cJ(pifl:d 31111c end of2011 

and to CXt~nd th~ provisions tllat will expire 3t thcend of IlIi~ )'Cur. 

Tilesc provisiol1~ OO(1trillule grC3tly ta tile ecanumic wcl1·bcing ufour nation by cn:ating 

tllousands ofjubs_ assiSling small strut_up oosincs5Cs, Inwering ~nergy bills for workil1S famili<'S. 

and driving c(nerging technologies IIw will provid~ Americans with a permanent S!llution 10 our 

long-tcnn energy challenges. These provisions are essentiiLl to ooilding a strong domestic 

rencwnble ,m~ industry Bud cTeatingjohs. 

According 10 teslinlony giwn by Rhon<: Resch, I'=idcnt of the Solar E~rgy Industri<'s 

Association, before the Committee on Science and Technology in April, the enactment oflh .. 30 

percent comm<'rciall!lld residential solallnvcstm~nt Tax Cr~"(\ it in 2005 and the 160J Treasury 

Progrpm in 2009 spurn.-Il a seven-fold increase in domcstic deployment of solar technologic.! and 

The development ofp dom<'Stic induslry value dlllin that ~mploys over 100,000 i\mcric~n 

workCrll. A~ nl'.other e~ample, (he expired Efficient Appliance Cr~'!lit. CI1l1C\cd with strollg 

biparli9lLn supperl in 2005. is an imperium faClOr in muintainillJl,jobs ill Amcrica's appliance 

manuf&cturing industry. According to The Association ofl lomc Appliance Manufilctu",rll. th~ 

number of jobs in the UniTed Statcs alfected by Ih<' incentiv~ is on ihe scale of 40,000. which 

accounts for at !calit 17.000 Ilirect mantJfaeturingjobs tilat supper! Ihe manufacturing ofthc 
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appliance produels eove r;::d by the incenti ve. These i:lre ju~t a couplc of examll!cS of the. 

Ircm('"f1dous bcncfilthcse tax irn:cmivo programs provide to our 1:«Inomy. 

We have reduced our imp(lIts offorcign oil below SO 1)(."=11t (If our demand fot the fi rsttirn e ill 

decudes. FUrlher diversification of oUI· energy supply and broader deploYlllent of energy 

emciency nJClISUl1)S is needed ir we arc to conlinue. this positive trend. Expanded deployment of 

renewable tiler!:), and efficiency lochnologies is esscntial 10 uccomplishing the goul of energy 

illdcpcndence. 

The spccilic provisions \<'C urge the Committee to reillstlUe include the following: 

Sec. 25C(g); CT\.-dit for certain non-business enef~ property 

St<:. 30J3(i}{4): Conversion credit !or plug-ill electric vehiclc~ 

SC\;. JOC(&)(2): Credit for alt ernative fuel vehicle refueling property (non·hydrogen 

p1opcny) 

Sec. 45L(g): Credil for construction of new energy emdcnt homes 

Sec. 45M(b): Credit for energy efficiellt appli~ \;es 

Sec. 48(d) and ~ec. 1603 Qf Pub. ~ No. III-S: Grants for specificd cnergy properly in 

lieu of lax credits 

Set. 132(1): Piltity for exclusion from illC()mc for employer-provided mass lransitlllld 

pa rking benefits 

Tho specific provisions wc urge you to extend include tho fol!owing: 

St<:. 142(IXS): Qualified I:~n buildings and sustainable design projeet bonds 

Sec. 40{b){6}(11): Cellulosic biofucl llToduct:f credit 

Sec. 4S(d): I'luced·in-scrvire date for wind faeilil ~s eligible to claim electnclty 

produclion credit 

Sec. 4S(aXS): Election 10 claim the energy <,redit in lieu ofthc elc<:lricit), produclion 

credit tbr wi nd facilities 

Scc.168(\): Special depreciation allowance for uellulosic biofuel plant propomy 

Withoutthcsc tax iucentiws, we ri,k losing thou.'Rnds ofl'xisling Amcrican jobs, and growth in 

lhese domestic industries will come [0 a grioding hill!. Other nations lire making significant 

invcstmcOis in rencwtLble cnergy technologies lind energy ~mckncy. We opcr!lte \1l a glob~1 

c<:unomy. If we are unwilling 10 invest in domestic industries, theSe bu~inessLos and t!w: j[)bs they 

support will OIove cbcwherc. Our na tion has been a le3der in the ll'Search and dcvclopm.:nt of 

many oflhese teehnolol:ies. We must now ensure these put re.~wrch anti devclopment 

invCllunents pay dividends here 8t home in .he form or a strollg. domesl;c rcncwnble energ~ 

seetof. 'Therefore, we slrongly urge you to reinst~t t or extend thl-os!>' im]X)I1U1\t U\.1(. iuccntives. 
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'l1lank you for your aHcntion and consideration oflhis maHer, 

Sincerely. 

THE MEMBERS OF THE SUSTAINABLE ENERGY & ENVIRQNMENTCOAUTION 

Rep. Steve ISl'lIei. SEEC Member 

SEEC Co--Chair 

Rep. Paul Tonko. SEEe Member 

SEEC Co-Chair 

Rep. DoOris Mntsui, SEIlC Mcm~r 

SEEC Vice Chair 

Rep. Rush Holt, SEEC Member 

SEI:C Vice Chair 
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R m Ungevin, SEEC Mo:mber 

~-~ :J:CI: Speier, SEEC Member 

%W.~ Rep. John 0Iva-. SEEC Manbo:r 

Rep. MIte Honda. SEEC Member 

~K.~ Rep. Mazic Hirono. SEEC Member Rep. Ruu Camahan. SEEC Mo:mber 

~;Wr Rep. Georst: Millff. SEEC Member 
184 

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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.159

Douglas Kridler 

President and CEO of the Columbus Foundation 

(m behulf (If 

The Council on Foundations 

ill /jl'PQrt 11/ 

Extension of the Charitable IRA Rollover 

House Committee on Ways and Means 

Subcommittee on Select Revenue Measures 

Hearing on 

'''Framework for Evaluating Certain Expiring Tax 

Provisions" 

.Iune 8,2012 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.160

Chaim13n Tiberi. Ranking Member Neal. end members orlhc Sd.:ct Revenue MeasuI'CS 

Subcommit1ec. thank you for thi~ oppol1 Unj ty to present testimony on bch~lr of the Council uf 

Foundations rqmruing how Congress should cvalum~ ccna;n expired and expiring. tax 

provisions. and why sound cril~ria slrongly support eSlcnsion of the ~h"ritable individual 

rtlirement plan rollover. 

My name is Doug Kridla, and ~i n~ 21102 I hn~c s.:rvcd O~ prcsidenlllnd ~hie eJ(t-,::uli\~ 

officer of the C.olumbus Foundation. a community foundalion ser\'ing Ihe cCllIral Ohio r.:gion. 

During 2010, Ih" Foundation awarded mor" th~n S 100 milliun in gr.tnts Iu l11or~ Ihan 2.000 

ehariroble org3nilations in such fields as cducmioll. health, soci~1 scrviC\!s, community 

development.. urban allj.irs. and rhe ~rn. Since its founding in 1943, the Columbus Fouudalioo 

has grown 10 bI:eomc the tenth largesl community foundation in the United Stales. The asselS uf 

the FOUlld~tion und our affiliates totaled SI.Ob billion us of December 3 1. 201 O. These M5etS ure 

held in nt'arly 2.000 ti.ll1ds. 1'1 supponing organitalions. ond one stille-wide aniliale. The 

Columbus FO\.Iudaliofl, and olher commUflity fouodatioJ1~ in ewry regiol1 ofthe country, provide 

,'rilical as..istnneo;, to the communities \\" ~rve. We ar.: engaged in cVI."ry aspect of the liv~ of 

ihe cities. lowns. and nmll areas in which we IlI"C localed. and often wt' llI"e the first plact' our 

ndghbors Ium wh~n in n"cd of help. Thai is parTicularly \rue in limes. such 3S no"'. II'h~n so 

many individuals and organizations in our communities Face increascd need amidsl diminished 

resource,. We 01 the Columbus Foundation have responded to tbose increased 'leedS by slepping 

up our own elTor\>. We BTC fully eommillcd to continuing to do everylhing we ClIn 10 provide 

"sS\."oti~1 SUppor110 the celllnli Ohio region. and I know Olher community round~tions arc funy 

~"Umnlillcd to Iheir cunllllUnil;c.< as \\"dl. 

2 
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I am testifying today on behalf ofth .. COll tlci! on Fo\tndations, {)fwhirh th(' Columbus 

Found~ti on is u member. "111e Council nn Foundations repr=nL~ o\"cr 2,000 gmntmaking 

foundation s Dnd cOrpQration~ \\l1h aSSCI5 of OI'cr $31111 billion, As ml' miceofphitanthmpy, the 

Council works 10 ~reate 3n rnvironm~nlln ,,·hich the mOI'emenl CHn grow and mril'e. and to 

promote poli cies Ihal enable Ihe phibnlhropic seclor to W{)rk most c1T,:cti~ely _ A key compolmll 

{)flhl' Cc,uneil's miS5ion is l(J ad\'Ocat~ p<llicics which will pennit i\.'i 111t!mbcrs to beSt serl'e th .. i, 

<'Ol]1munitics. A":L'ordingly, my (L"Stimony t\]Cus~'"S on VlIe oflhe CotJ1leil"s major policy 

prioritics~stension of\h~ Intern"1 Revenue Code provision which pennitted wspaycrs \0 make 

tax-free distributions from imlividu"1 rct.ircment plans for charitable purposes, popularly known 

as ml' "tharitable IRA rollol'eT--. 1 

J applaud Chuirnl3n Tilx.'ri for holding: this hearing. The Council on Found~tion~ wry 

much agree~ lhal e,~pircd or expiring wx prul'isinn$ sh{)uld be further estenfled only ifil is 

condusil·e)y d~l11 stro ed IhallhoS<.' provisions cfl'c~ ivd)' SCI"\ ~ worthy poli~y gonls. Based 01) 

~u~h evaluation criteria. thc charit.lbk IRA ro IIQv{'f vcry much ",crill; further CS1en$;Qn_ 

13)' way or background. prior to 1006, taxpayers wishing to tr:msfcr Imlil'idWil Relirement 

Account (" IRA -') asselS 10 charity first had to rccognilC Ihe ~mount as incumc, make a 1ransfcr. 

and then cla;m a charitabk contribution d~'dllCli{)1l Ii)r the amOllnlllilled, This ollen resulted in 

• .II~ l/It l'hllirman', anOOUl1<:t"",nt of 1M Mmng nmoo, amoog tho "\'A ~xre"d.~" 10 "" lIddres.cd by \he "",,"nQ, 

.,,' """"'<\~Itndru ,n Tilk VII ,,(Publio l Qw N", 111-312, 'h" ''1""" k.lid: U""mpluY"""'llnsuno« 

k.'a"l1lOOI.:ItK .. , .nd Job (",cal."" "'" or 10\<)", The IRS "'"0Wr ..... ;mJI"~ lhe pro.i,i,,,,, "~I.'f\d.'<I ,n Ihal 2,)111 

) 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.162

tn ~ linbility, c~ell though the dllllor ultimol<.·ly tr:m,f;;!TTCd thel'lltire IRA di~tribution to ch~rity. 

Ttw P~nsion rrot~"(:tion ACI of'2006 partially SQI~(.-d this proolcm oy allowing illdi~i duals UI 

trnnsfcr amount$ frum their IRA accounts dil't.X!tly to charity without lir;;t h3~inl:lto rcc()gni~c the 

distribution as income, Since its initial C11~ctment. the charitable IRA rollover ..... as "xtend~'d 

multiple limes with bc-oad bipanisan suppon. 'nle mOSI recell! cxtension of the prol'ision Ci\pired 

31 the ""d M20 11 , 

(;ommtmity loundalions nre the mCDns through which mnny of our ndghbors ch .. }Os~ to 

g;,'e back to lh~ir communities. through both volullteer service and financial supp(lrt. 

Community round~ti()ns rely on many illdi~idual don()r;;, most of wh(\m c()ntribu\c m.>dc~t sums 

sa~etl o~er a lifdime of work. The sur ron of individual dunllrs. nil mOlter h()w smUll. is 

essent ial to our mission. We belicve that applicable law should acknowk-dgc the I'alue oftht'ir 

contributions, and remove any unll('X!css3ry i!1lllCdimellls \0 giving from whateverm;5c\S a 

pro~pccti\'e donor rna>' havc. 111c JRA roIlO"cr has drnlCjUS\ tba\. pro,,;ng to be a \'cry imponam 

tool ior donor;; " ho" ish to mukc a posit,,'c ditTC'!"Cncc in their commllnity, but ,\,1'00 may not 

ha,'e substanlial DSSC~ beyund th~ typically sn,'ed by B family ol'er the course ofn lit"i:timc. 

sueh as a n::w"I:"!1lent account. Umil its cKpimtinn al the end of:WII. Internal Revenue Code 

s;."(:tion 408(0.1)('8) pl1>l'idt'tl such dtmllr5 the opponunity to milk;;: tax-fn::e distrihuliolls fmm their 

indi"idual n::lircm('fIt plans fur ch~rilab1c pU'J'XlS"s. For that reaSl)ll. the charitable IRA mliovcr 

has pm\'cil popular with donors. resulting i'l in='3scd giving. from IRA aCct)lInts. That is 

l"lniculmly tru~ fur lIu OI~ urr\!lalivcly nrod~t nrc~rl s. "hu oJi~llr<JJ.1U tiuuUlcly hu"e utilil'~oJ IIle 

provision. 

, 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.163

Thruughoutthc very difficull-<'conomic circum5tancc5 or [l"C<'nt y~an;, the rec~1nly 

~xpirt.'d ~hnrit~hle IRA rollover has proven HI be immensely helpful in I.'lIsurinp: that 

philanthropic Org:lI1il.lltioIlS hnve the RlCllnS and fl\.':l;ibility to addre~5 <.Ir~m('lic3I1y growing 

n~"Cds , Further ~xtensinn nrthc provisi(ln r~gar ing IRA rollover:; will provitk dOIl0f5lhe 

gr~at~1' I.'cnuinty nt'l...,j~d for prudl.'nI charitahle gin plannin.:;. ,U1U Ilill ensu~ future donors have 

the ahility to usc this cfficienlmeans of giving. 

The members 01' the Ways and Means Commillee arc right to insist that any expired or 

expiring tax provision which is funher e~tend~d provide tho:: m3..I;;111\)111 '·h;.)ng for the htl~k". thot 

is. that the prmision confer thl.' m(l~imum possible public bend,t whilt' USing the least pos~ible 

tasp.'l)'\.'f Tt.'SOur<.:e~, The charitai;l1c IRA fl)liOVCf has dOlle just that_ It provideS a critical Impetus 

for private donors, using lh~ir own resour\:I.'S. to step up Dnd hdp mect their community'S nc.,dq. 

MOI'l"QYCT, their assistance is ch~nnd~-d through private charitable entities who gel\emlly do nol 

rt.'ly 011 govcnllllent stalT or funditlg 10 accomplish their missions. ~nd whoSl! .>truC1Uft.-S alTord 

them thc ne~ii;lility to conler benclib to peuple in tK-eQ in a Ili);hJy innovative and cost dTcrtivc 

mannl.'r. In shon. pre!;CTVing thc IRA !Ullovcr will help cnsurl- tl1m community needs will be 

eOlllinuc<i to be mc! through philanthropy, ~nd will hclp avCT! increased demands on alreadystrainl-d gOl'l.'mmcl1l budgets. 

Thc Council ')11 Fnunduti0ll5 I'l-cogni~es that. in view Mthc cUm.'nt ji."tlcr~1 budgl1 

simatlon, !he lOp priority is simply e~tendil1g the expired provi~ion. However, Ille Council 

suppons fCvisinns to Imemol Rc\'cnlk" Code Sl!ction 408(d){S) Ihal would make !he provisinn 

, 
190 


joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.164

mort: errc'Ctiv~ . At an approprim<: timc, uch a~ in th .. contc;>;.t o(ta.x ~(unn. the Council usk, 

thal consi<ler.uiol1 be givcn to the rcfonns to section 405(d)(8) proposed in H.Il2502. "Thc 

Public Good IRA Roll,wu Act of2011", inlroouc<:'.:! by Cong~sml\n HergeT. COllJ:.1"'ssman 

3Iumcnaucr. ~nd 0I11CT5. 

ILR. 2502 w(lul<l e;>;.tend pcnnancntly the pmvision authorir.ing charitable rollovev; of 

lRAs, and make it more effective byeliminatiu!\ the S I 00.000 cap Ull rollovers, allowing donors 

to make !\1llovers beginning at a~c 59 \1,. and p;:rmining rollovcrs 10 donor·adviSC<J fund$. 

supporting orgDl1i~ations. and pri"ate foundations. 

Making the-charitable IRA rollovcr-available f!'lr gills 1<') donor·advised funds. supporting 

()rgani~a ;ons. an<l private foundation> will cnabk additional <lonors. parti"ularly aml)f1g !l1;ddl~ 

inwlTle Americans, to utilize-charitable rollowrs for the benelil of ofgani~mions Ihat are 

parlicularly well·suit~ 10 dcih'crin£ philMthropk reS()ullX's quickly and d'fectj,cly 10 

cllmmunllies in na:li. 

By expandin~ th;,-_charilnbk rollo,'cr 1() all philnmhropic tools, including donor~advi5ed 

funds. cliaritable Ilil'ing 'n>ulll incfl.'ase cwn more. In panicular. community foundalions. which 

make as !Uuch as hVU-lhird$ oflhcir gmnl5 from dOlJor·ad\'ised li",d~ , "oold be ablc to aumCl 

neW sourceS of supporl from wilhin th~ir eommuni1i~s. These new girls arc parlicularly 

importltnt for ~11lall community foundalioos-thllsC with less Ihan S5 million in u~S<!ts which 

are JXInicularly dep;:nlienl on donor·advh;ed funlis lQ provide Ihecharila\:llc rt'S<.\UTCes-Ihcir 

communities need. Studics by thl.' Coullcil Oil Foundations fOllnd that, in 2007. donur·adviscll 

funds accounted fi)f ,~""r om'~'lhird of all community !oundalion D,Si,'ts and 62% oflh.::;r 101111 
191 

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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.165

gr~nllnnkjng. 

Thi! Colancil also ha~ found that dOn(>T-ad\ is"d fundS arc a pHrticulnrly l,rr"cl;"" lool lQr 

middle-income Americans 10 engage in philmllhmpy. Wilh mOSI communily foundations 

accepting II donor-adviS<.-d fund in Ih.: r~nge ,)f S5,OO{J 10 $15,000, donor.ntlvisctl fund3 arc a 

philanthropic "chide thm cau go to work immediately. a particularly valuable troit given currelJl 

demands. I.!ttauS<.' dlOnl'r-.advis..'Il funtls arc w crilicalto the IHlrk lOf c(:n)muwity IOllDdmions 

and 10 the philal1lhropic St:>:lOr generally, it is "l'ry important Ihal found3lio ~ and donor-adviscd 

fund~ be able 10 put a~scts from IRA mllowrs to 1I'0rk for Ih~i r communitll"S. 

For thC'S<.' reason." and more, the reforms proposed in the " Public Good Rollover A~I of 

2011" merit c\ln;idcrntion in la:( reform dist"\lssiuns. They wil! pmvidc philantl1rup'...s with 

1'IIII,abieadditionai tool, ne .. dcd \Il fulfi ll their missions, and help m~-.:: t the growing nced~ of 

lheir l'(lmmunities. 

In sum, the Council on Foundmion urges this Committee, and Ihe ConSreis, to net 

promptly to extend the ",,,,,m ly "xpircd charitable IRA rollOver and. in the lonl:er teml, to enael 

ne.::ded r~fonns to Ih{' charitable IRA rollincr us propo~cd in Il,R, 2502, "The PublicGood IRA. 

Rollover ACI of 20 II". Thank you again ror this opporlunily to pre~nt testimon)'. 

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Teslimonyof 

William C. DuoIT 

Vice President 1'01" Public Policy & 

Direclor of the Washington Office of 

The Jewish federations of North America 

House Ways and Means Subcommittee on Select Revenue Measures 

Hearing Oil 

Framework for Eva luating Certa in EXI)iriug Tax Provisions 

,Iune 8, 2011 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.167

TeS1imon)' of Willipm C. l>arofT 

Vice President for Public Policy & 

I>ireCf(,r uf the Washington Offie.· 

Tht'Jewish Fedt'fPtitllls or Nllrth Anwricu 

U OIlSC Wa,.5 and Means Subeommille-e on Select Rel'enue Measures 

Framework for E"nhmting Cerla;n EII,;ring Tn Provisillns 

.Iune K.2012 

Summary: The Je\\ ish Fedcrations ofNonh A!1l~rica urges the House Ways and M~ans 

Committee 10 make penn~nent nnd expand the cUlTent incentive in thc tax code thnt 

pennits tax-fret' rollover \If indi\'idu~1 retirement aceountlloll~n; to eh~rit es (Ihe "IRA 

Ch3ri abl~ RoHowr"). As one oftbe nation's la~1'-li1 philanlhropic nelworks, we knoll' 

rU'S1 band Ihaltargeled tax ineenlives such as the IRA CharilOble Rollover result irt 

irtcreaS('d eOnlribulions thaI tmnslote into more dollnrs Ihal can be spend for Ihe overall 

social good. We strongly bclie"e thut if the IRA Charitable Rollover was made 

rennanent ~nd \.'xpandcd as tiisCUSSl'd below, il would result in even larger amllutlts of 

support 110wing imo Ihe nonprofit sector. which would be cspecially beneficial a~ the 

NatiOn's tharili e~ seek 10 fill Ih" void 1\.'11 by dtereilsing government runding and 

incr~nscd dcmands for social services during Ihis time of economic recovery. We beli~l'e 

thaI if Congress reviews Ihe IRA Charitable Rollo~cr usirtg the obj~'Cti\ e criteria outlirted 

allhe hearing held on Sune 8, 1012, the provision will bcjudg~d worthy of indus ion as a 

pcrnmncnt pan oflhc income 111.;0;: code. 

Background: The Jewish Fedenllions of Nonh AmeriCll (herein referred 10 Il,'; " JrNA ") is 

the national organi:altilln thot rcprcSCnlS and serves 157 Jewish Fedemti()n~. their 

allilia\l'd Jewish community fOUl1dati0l1S and 300 iodq)l'ndent Jewish cUmll1unilics in 

more Ihan 800 tities and towns across North America .. The Jewish FedCJ'3tions and 

Network \'o[untccrs (collectively. the "JFNA 5)">II .'m") arc the umbrella Jewish 

fundraising organil.11lions artd Ihe centr.ll planning lind coordinating bodie, for an 

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extensive nctwork of Jcwlsh health, education ood social servkcs in their communities. 

Thus, the JFNA System rcpresents over onc thousand affiliated agencies and serves 

several million itldividuols throughout the cuuntry. 

JFNA conducts on annual fUndrJising camp3ign th3t collectivcly r.uscs almost $ 1 billion 

systcm-wide cach year from almost 500,000 donorS. In addition. tht" t"ndowment 

departmenLS of Federations Of their afiiliatcd Jewish community foundations raise in 

l°.'(CCSS of another 51.25 billion each ycar through charitablc vchick'S induding donor· 

3dviscd runds. supporting organizations. (togethcr referred 10 a "p:micipatory fUllds'·). 

which supportulle Of more spt."l:ified public charities or programs through all aClive gnmt· 

making program, as well as maintaining charitable income plon~. The conlhincd 

endownll'l11 assels of the JFNA system is in c.~ccss (>1'5 14 bi llion and anllual endowml'nt 

grallLS rrom Ihe participatory funds and other elldowment assets is approximately S 1.5 

billi(m. split between Jewish organi7.alions alld those ()fthe wider charitable sector. Thc 

IltA Choritnble Rollover is anothcr rc lativdy recent incentive added 10 the ioron1e tax 

code which Ims materially incrcasillg giving!O FedemtiollS throughout the country. 

IRA Charituble Rc>lIon : A qualifk-d 13x ·free distribul;oll from indil'iduul retirement 

al'coullts provisioll dcfilled in Code section 408(d}(8) was added to the ft'dcrnltax luw by 

the Pension Proteelion Act of2006. Unlortunately. the provision conlained an I!.'\"pirulion 

dllte of Decemb.!r 31. 2007, and, as such, has joined the growing list of so-called "13.'" 

c."tender" items that muSI be renewed by Congress. The current version Oflhc IRA 

charitable roHol'cr, ",',iel, expired f ill December 3', 10' f . pcm1iL~ indil'iduals Age 70V, to 

make H\.'\"·frce charitable gifLS ofup!O $ 100,000 dil\.'CIl y rrom their individual retirement 

aceOUllilO eligible charities. Amounl$ roHed over arc 1101 token into incQme by the IRA 

owner and arc IIOt eligible for a charitable contribulion deduction. Howcver. sueh 

rollovcT$ qua lify as an nnnual required minimum distri1;Jution rrom the OWller's IRA. 

II is importanl to 1I0te that the IRA Charitable Rollover isol1e of the few provisions in the 

ta ... code that provides an incentive to give to charity to those taxpayers who do nOI 

ilcmize their deductions. As noted above, amounLS tbat qualify for Ihe IRA Charitable 

3 
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Rollo,ler do not qualify for a charitoble contribution deduction. Such amoums, however, 

do not have to be tak~ into ineomc. which Clln bc equi\'lllcnt to a charltobll.' contribution 

deductiol1 for the mort: than two-thirds of allt9xpoyers who do not claim itemized 

deductiol1s. 

Crit<'ria for EI'alulIting E~ pirin g Tu ov ion s: JFNA applauds thl' Subcommitwe 

on Sekct Revenue Mea~ures lor conducting the hl.'aring on the Ihlllcwork for evaluating . 

...... pinng tax provisions. We lind mud, to agr~e ,vith in the testimony provided by Dr. 

James While, DiTl.."'1:tor of Tax l&sueS for the Government Accountability Office who 

outlined thrl>;: mujor criterill for cvaluUling ~piring 1:IX provisions. In addition to the 

revenue impact, it is essential to judgl\ !ax prOl'isions such as the '1<1X ~)(tenders" by 

criteria such as equity. ccol1Omic efficiency and simplicity. tmnSparl'ney and 

admillistmbility. Although it is important to measure the cost of rcvelluc foregon~ for 

each provbion, it is also esscntialto etemlin~ ir tile proviSions are fair or cqui(oble. Are 

similarly situated uupayers treated cquolly under the provision? FU"i"lemlOre. docs the 

proviSion promote ceonomic benefiLS 10 Ihe society as wdl as foster growth? Is it 

comprehensible. and docs it case recordke.!ping or filing burdens? Finally, does the 

pro" ision make the t:\)( syst..:m simpler? DIl<.:s it IOlVer compliance co~LS ror tOlxpayers ur 

ease tile IRS burdl·n in admillistering the tax 13w ? 

l\1 erils of the I RA Cha ritable Rollove r: JFNA believes that in the sill (ax years ill 

which it has been Pll" orlile Intcm91 evenu~ Code.lhe IRA Charitable Rollover has 

proven success as tI tllX incentive that has greatly increased cilarit3ble giving. In tile 

words of Donald Marron. Dir\.~tor, Urban-Brookings Tas Policy Center, the provision 

has satisfied tile ··burden or proof' or del1lollstnlling its merit. 'nle e.~istillg IRA 

Charitable Rollover has been all overwhelming su":c<:sl;: for the charitable sector ill 

g..:n~-ral , and Ihe JFNA system, in particular. The IRA Charitable Rollover helps charities 

provide needed social servit~s at II time when there is both an increased demand and 

fewer rcsouree~ available from go,'emm<'1ll sourecs. In II relatively short period of time, 

Jewish Federtuions Illlv..: recc1ved more than 530 million in contributions from IRA 

cllaritable nlllol'ers, through targeted c3mpaiglls, such as one to attf'dct rollover gins from 

4 
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grondparents to support Jewish day schools by reducing !uitian eos!s and funding 

opcr:llions, Charitable rollover gi lls have niSI) en3blcd ewi~h Federutions to accelernte 

capital campaigns to finance nL'W construction projects. e.:'lp:md or fully-fund e.~ tin g 

social services progrums, among other worthwhil~ projects, a\ a time when other !;(lurces 

of charitable giving havc been on Ihc decline. In addition. many donors ha\,\: tllken 

advantage of the IRA Ch;'\ritable Rollover provision to fund un endowment for their 

unnual FedcrJtion campaign giil. These gills arc pl!rhaps the most impoflillll as th~ annual 

Federation campaigl1 representS the life-blood of giying to the lFNA system and the 

source of annual allocations to literally thousands of social service ;\gcncics throughout 

the country. Each year since thl: pl'lwisioll has been cna~' tcd and renewed, severnl large 

Jewish f edcrntiOIiS hllVC reech'ed rollover contributions in e};Cl'SS ors I millioll, 

Federntions have come to rely on IRA Charitable Rollover gifL~ as all important Snur(c of 

anllU:li budgcting for needed on-goiug operational costs. 

When evaluated against the cTit'::ria describl.-d above, it can be seen th~t the IRA 

Charitable RollOl'er provides charities with a significant source ofrcvcnue without ;) 

large re\'enue cost to the Fcdernl government. IJl addition, individu~l s \\1'10 all: over age 

70 V, arc able to make gifts dif(.-cUy to a charitable inSlitution without an)' adverse (IIX 

conscquence, and in somc easc~. are relicved a r ming additional t3 .~ fonn s such 3S the 

Form 1040 Schedule A for itemized deductions as \VeIl as f orm 8283 for nonensh 

chllril3ble contributions in excess orS500. Further, the funds thllt fl(\w dil'L~ ly from 

retirement aerounts lire often u,ed to pay salaries and other operllting e.~ p~nses for 

charitable organiZlltions. It is impofl8nt to remember that the nonprofit sector is 1] 

Significant source of jobs in the u .s. economy. It is reported Ihut o\'cr 1.6 million 

nonprolits in the U.S. employ oyer 13 million workers, which is almost 10 po:reent of the 

total worl:forc.:' in the country. Nonprofits "'3g~'S and bl.'tlelits ilnnualIy exceed S67() 

oHiinn and represent 9 PCIWnl of salaries paid ill the cQU11Iry, The nonprofit sector 

accounts for almust 6 percent of the country's gross domestic product. Direct gifts from 

IRA Charitllblc Rollovcrs reduce the nced for ta;o;pay('r recordkccping and are casily 

ad01ini t~'1"Cd by the IHS thrOllgh ~xi tin£.reportin g by investment brokerage linns and 

others that (ulTemly handle IRA acu,mnts. 

s 
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FirSI .1 FNA ReeOlllmcllIl,lIilln: M a ke Ihe IRA haritalJl ~ RuiJ(I\"f.'r p~rrllane nl. We 

I'CI:onllllcnd that. 9t a minimum. Ihe IRA Charilable Rollover be made a pcrman;:11l part 

of Ihe Federal lax cooe, Wc advance scveral argumcllLs in fUI'or of making Ihe provision 

permanenl: 

I. TIle CUrTCIlL law Ih31 allows Ihe IRA Charitable Rollovcr to c:o.:pin:. and be 

rcenact~'tl add$ unlll'Ccssary confusion 10 laxpayers. Iheir linancial advisors, 

and the charities that can benefil from such tl1lllsfers. 

2. Bel·3u~e multiple p~rties arc involvt"d in allY qu~Jificd chalitable distriblilioll 

ull(kr COlIc scclioIl408(d)(8). (the IRA owner, brukcragc firms and otlH':rs 

thai m~in ain or act a~ trustees of such accounls, alld public chanties that 

qualify to m::eive direci distribution$) thc I1l'\!d for permanence is magllified. 

3. The inttraclions bdll'i:en qu~lificd ehanlabli: distribulions and the quiri:d 

minimum distribulion requirements make it cssel1liallhallaxpayers know th"" 

la\\f with certaifllY. Potential confusion Qver the inleraclioll oflhesc 111'0 

provisions call be e:o.:aceroaled \\fhell Congress fails \0 eXlend Ihe IRA 

Charitable Hollover pro~ision before expiration and is forced 10 do so 

r.:tTOlIclively, as was the ense in 2010 when Ihe statute e.~umding the pro~ision 

was cnacted ill Oe<:embcr relr03ctiv~ to the prior January. 

Second JFNA Recommendation: £~ Il and currenl Jaw to include p rovisions 

cont a ined in the " I'ublic G(lod IRA Rollo\·er Ac t of2011." Bi-panisan legisl8lion to 

make pemlUllcnl and ~pand the provisions of the currenllaw IRA Churil3blc Rollover 

has been inlrodueed in the Senatc and the House. S. 557. introduced by Sens. Schumer 

and Snowe, wilh 12 cosponSOI"$, and H.R. 2502. inlroduccd by Reps. HergeT and 

Blumenauer and 18 cosponsors. The major provisions in the " Public Good IRA Rollo\'er 

ACI of2011·' would (I) make the rollover penn~m:nt; (2) remove the eurrellt 5 100,000 

annulIl cap on qua lified charitable distri butions; (3) allow donor advised funds. 

supporting organizations, a nd privah: fOllndnlioll5to receive qualified charitable 

distribulions: ~nd (4) provide IRA owners at 3ge 59V, with u pl.lIlned givin)! oplion such 

as using Ihe rollover to fund a ~p ljt-inl erest (Iife-incoml.") gift lhrotlgh u charitable gifl 

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annuity or c\writ3b1e remainder nrllluily lrust. Although JFNA urges COllgress 10 cnact 

the "Public Good I RA Rollover Act of20 II" as introduced, we wish 10 provide specific 

comments regarding IWO of its main provisions: 

o AU!!w dllnor s~d fund s, sUPPllrting organil utions. nd private 

foundatiullS to receive qualHied charita ble distributions. OVl,. the past 

sevel<Jl decades. the lFNA systcm has bc<:n proud ofthe growth in charitable 

giving that has tx-.:n generat~-d through planned giving vehicles. Ofspl"dal 

importance bu\e been partieipaliJry funds. such as donor adviSed runds and 

supporting orgllni7.alions, which arc c.~cOlial in creating n broad tl.'lSC of 

support for the Jewish community to fulfill its social services mission. 

especilrlly in times of economic distress. Participntory funds have bc<:nllll 

indispensible tool in enc()umging inh:rgelllT.ltional inv()lvcrnent in Jewish 

d\llTity through family philanthropy. In addition to prMiding financial 

rcwlln::es for criticul human scrvicl's in local Jewish 3nd general communities, 

these cll3ritable vehicles alSQ advance Ihe valucs and go~ s of the JFNA 

Syst«m through nurturing rcl~tionships b<:tween Jewish phiJ~nthropistS (lnd 

Fedcration lay and profe$sionallcadership as well establishing priorities that 

consider the fllture needs ofth!.' Jewish community. 

Such pnrlicipnttlry vchicles pTO"ide II reliOlble pool of dollars to fund a vnricty 

or sociol servin" activities. in parlicular support of a Fedentlion's annual 

cmnpaign, which remains the most importaot fundmising activity carried on 

by Ihe Fedcl<Jtion movement cach year. Pennining. indeed cOl'onraging, 

participatory funds to c)(iSI for ~x nded periods provide grealer opponunitics 

rnr ~pon~oring organ17J11inns such a~ JC\vish FcdC'mtions to h(,ild a 

eollaborntive philanthropic relationship with the donor Dnd Ihe donor"s family. 

Onc Qfthe grc3te~1 swnglhs orlhc JFNA System lies in its unique ability to 

match donors intereSIS wilh funding needs in the Jcwish community. BcClluse 

dOllor advised fund s com l"OntillllC for an c~ endcd period nftime, including 

the lifctimes o rthe donor and spous.:, hcirs und additional SUCCl"SSQrs. this 

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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.173

relationship continues to grow ov('r time and sllecceding g('nerations of Je\~is h 

community leaders can be- fostt.'Tcd, This provides the JFNA Systc:m with u 

\·aluahh.· tnol \() educate fULure gc:ncrations of donors so that Lhey can bi!COOlC 

erfecti\'c flllldeT!i in the future. As th.: lIol1>;c W3YS and Means Commince 

continllCS 10 consider lax rcfonn options in general. und ·1a.~ extenders" in 

pani(;ular, JFNA urges IhaL growth in pal1icip~lory vehicles be ul10wcd 10 

nourish and urge Ih311hcy be illl'\luJed in the definition uf charilil"Slhat are 

emitJcd to rt."t:cive qualified distributions from IRA Charitablc Rollovcl"!l. 

(} Provide IRA owners a l agc S9Yi wilh a plnllllcd gh'ing oillion such as 

using Ihe rollover 10 fund a splil-inIHl'!l1 (lire-income) giflthrough a 

charitable gin annuily or churilable remainder annnily IruSI. Expansilm 

of the I RA Charitable Rollover 10 pc:mlit tho~" age 59¥.. 10 fund life-incomc 

charitable gifts could also provide: udditionul resources to America's churitics, 

a~ well as provide a Sllfl:. and reliable return on invc~lIncnt fur donors who 

chose this option. Gift annuItics hJH.' a long history as:I II'cll-regul:lted amI 

popular method Qf fundraising for ch~rilahlc iru;lillllions. E~;slin g state and 

federal rl~ul~t;\lns \\ill assure lhal proper i>cnctits nccrue to oolh ihe charity 

and dOllOr. Morrovcr, expansion ofthl' IRA Charitable R(lIIOl'er IQ cover such 

gift arrangements ~hoUld not resull in any additional rc~cnu\: loss bl:cau~ the 

annulIl pnyments 10 donors would rcmain la:mble al ordin~ry income rates. 

Tlll' lm porl anee ofTu Incentives in the Inlernal Re"l'lIue Colle: Similar to mony 

other bl)!c national charities. Ihe JFNA syslem has a sophiSticated nuJt.i raising operation 

liS well lIS highly-organized proccduJ'C'S for allocating such collected monies to fund a 

brolld r.mge uf social servi~e programs in theircommtltlitics. Pemaps till' prim:lTY missioll 

of lFNA is 10 as!list Federations as Ihey inspire Jews 10 fult1lJ their Te:ligiolls duty to be 

charitable by ~e<:tlring th ... I1nancial and human rc.sources n ... etssary to care for those ill 

need. rcscuing.Jews in d~ngcr, and ensuring fhc continuity of the Jewish people.l'his 

erilical fundrJising task is l'SSC1ltial to prnvidc the stratl'gic rcsourecs and direction tl) 

help local lxlerdlion~ fl.llfillthcir individual and collttti\'c r;.-;'ponsibilitid to improve thl' 

, 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.174

world, build community, ~nd foster Jewish renaissance, As noted abol'c. the two key 

clements of such fundraising is a higl1ly-recognized nnllual emnpaign supplemented by a 

sophistiC1lt('d planned giving opernlionlhat ulili7.es a number of established and highlyli!guloled charitable giving veltides, including tile IRA Ch~ritabie RollolICf. 

Because IIII' JF"NA &)'stem. is one of the largest pbilanthropic networks ill the nation, Qur 

perspective on charilabl(' giving and th~ impol1ance of tax incentives is grounded on 

years of experience. We see tbe impact of ccollomic and tax fatiors on cbaritable giving 

every day, At a lime ,,'hen our social service Plll1ners arc being asked 10 llIeet increasing 

demands for services and govcrnmcm funding atlhc federal, stale and locallel'el is 

shrinking. we know Ihat charitable incentives in the lax code art.' mort.' important today 

than ever. 

JFNA applouds the House Ways and Means Committce and the Subcommittee on Select 

Revenue Measuf\'s for its dcfibcnnivc process and year long study oflhc many issues 

wbich need to be consider<:d in contemplating fundamcntaltD.x relbrm such as the issues 

raised by making "lax extenders" a permanent part oflhe tax code. JFNA remains 

commilled 10 ensuring that federal tax policies continuc 10 encourage private 

philanlhropy and urge tbal the IRA Chariluble RQllover be made pennanCrll and 

e!tpanded as outlined abo~ e, 

I thank the Subtommiace l'or the oPpol1l1nilY 10 presenlthls tCSlllllon),. If you h~ve MY 

questions regarding this submi:osion, please fecI free 10 cuntacl Wi1li:nn C. Daron: Vice 

President for Public Policy and DiTtttor orthe Washington 01Tite at 202-736-5868 or 

willi:un,daro\T(tliiewlshfcdL'r:ltions.urg or Stn'en Woolf, :;enior tax policy coun:;cl al 202-

716_5!o:63 or .'Itcven.,U)(lll@je" ishl;:'oJm iflns.or~ 

9 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.175

T RUE B L U ESTATEMENl' FOR Till:: JU:COlW 

J OANNA S. M 01'lrWE 

VICE PRESIOEl'o'T, DEPUTV GEI"U:RAL COUNSt:L 

AND C HIEF COMPLIANCE Ol'nn:R 

TIWE BLU.:. INC. 

r;'QR Tm; U F.ARING O N 

"FRAMEWORK FOR EVALUATING CERT ALN 

EXPIRING TAX PROVISIONS" 

BEFOKi! 

TIILU.S. HOUSE OF R£PItESENTATIVES 

COMM ITIEE O N W AYS ANO M EANS 

COM~II1Tn: ON SELECT RE"F.NUE Mt:ASURES 

JUNE 8, 2012 

1015 A , Tacoma, WA 98402 

253.383.9 10 1 • "rQC lm hlul·il1c .~() 1T1 
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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.176

On behalf ofTmtHlu~, Inc. ("'rmeBlut"), thank you for the opponunilY 10 submit this 

st3tement for the record. We applulld th~ SlIbe()IIunitll'e ami the Comminre for iUi lead'-'l'Ship on 

the imponant issll~ oflllx extcndcrs. 

The Subcommil1 iX"s June 8th IJearinft ttJ e.~plore prin~iplcs nnd metries to eval1l8te tax 

c.m·nder.; was panicularly helpflll in advalleing lilt.' diak'gui.' on Ih • ."e tax polii.'ii.'s. 1111.' it n<'~scs 

di.';Cus5~'<l possible fn:lIneworks to assess tnx extender.;, many of\\"hieh shurc:d key criteria. Key 

criteria included: the rdtionalc for the lUX policy; I"C'wnllil and dTieiency: and. the reason for thi.' 

tempomry nature of the 11l.~ polky and its nppmprinte duration. 

A provisioll of signifieanl +nt~Sl to TrueBluc, and the focus of this statement, is the 

Work Opponunily Ta ~ Credil ('·WOTC··). Along with a Illlmlxr ufother tn,-,ri«)riOIl5 ta.\ 

policies. WOTC largely expired on Ik.:embcr 31. 20) I. As discussed ill fllnh~'T deta il in this 

statement. WOTt. When i.'\·a lua1l'd against Ihe key criwria discusscd at Ih .. Jlln~ Sih hearing. is 

all imponanttll.~ policy thnt should be made pennancnl. 

We welcome a robust revie .... orthe TaX e.(tendl"TS. including wOTC. Sueh a I"C'vii.'w in 

the context of lax reform would prt)vide an opportunity to "omprehensivcly review Ihi.' lax 

extenders and oth~'T Ia.~ policies. However, ill the Interim. We strollgly " I);e Congress 10 

seamlt'Ssl}' extend WOTC ",ithl)uI dclay. AI a time of intrJnsigcl\I unemplI)YM1(.'nl. partieul~rly 

amllng WOTC's Ill'l!CI groups, lhe lapse in WOTe is 0 significant s.:thnck for job cremioll in our 

nalion. C:onsequl'luly. e)(lension of this important poli!.·y simply cannot wall. 

TII.Ut;BI.U[ 

TrucBllIc i~ u leading supplier oflemporary work. In 2011. Tructl!U<" connected 

npproxhnatcly 300.000 people 10 wmk. paying nearly S600 million in wlIgcs ~nd s.:rving nearly 

150,000 businesses in the seTvice. rdaii. wholesale, m,mufoclunng. lmnsllOrtotjoll. and 

cOnstruction industries. TrudJluc ali\O employs 2.500 regular headquarter and brdneh SUItT. 

TrneBlue prtwides ti.'mpllrary blue collnr nnd skill ed work thmugh five lines ofbllsincss: 

~bor Relldy; SI'Mlan Slaning; ell' Resources; Plane Tcchs: and Centerline. The TrucBlue 

family ofcompallies is comlllilled to providing individuals with opportunities lor growth and 

CU$tOllll'TS lI'i1h Ihc help Ihey 1I~'ed to succ ...,d in tooay's CQIl.pelit;'e cn~i ool1lcnl. 

A~ a lcaJing supplier oftempomry work. Truclliut providts employment opponullitics \0 

:\lid n lNidge to pennnnclIl jobs for mallY who othcnviS\: face barriers \0 entering the W()rkfoTCe. 

Anllllully, approximatety 40,000 applicull\$ an;, eligible and appTOXJmalcly 8,000 arc ul timately 

npproved for WOTe. 

TE II 'OII.Aln· WOIHo; 

Temporary employment plays a critical rulc in the economy by providing employment 

l1exibilily lor workers and busine.'iSCs. Temporary Slaning (,mls employ more than llllllillion 

IWQPle each y,'ar. These jobs offer millions of P'-'Opk Ihi.' opponunity 10 wurk. iXlrtil-ularly as the 

lX:ooomy continues its fmgile ret:O\i.'ry. 

. I . 
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TelnpQr~ry ... mplQyment is crilitpll<,) miligating un~mployment. while Mlcring p 

significant npportunity to find !X'n1Inl1cnt cmplQymcllt through temporary jobs. Temp!lrllry 

emplQymmt also provldc.s !",,-'Opt.: with on-the-joh tmining. Hllowinlillh~m to leam ne" skills and 

expand th~jr kn{)wledgc base. whieh can lat~r ~ tr~nsfel'Tl:d IU other employers and 

stTCngthened. 

Atlhe sume lime. tem[)Orory employmem provides busjness~"S with Ihe opportunity to 

support {)f supplement their wQr\.;force in variQu5 work Sillialions. sueh as emp[oye.: absences, 

skill shortages, 5Cllsonp[ worl;lo.1d~, and special assignme.Hs or project .•. Moreover. in the 

eum:nt eronomy. ICmpornry employmeut is leading the jobs rcrol'ery by allowing cmploycl"Ii to 

gauge bU$im.'ss ~nd ~-':(!I){)mk ~"()nditions bo.-fore ~'()ml1lilling to p~."l1nunem hir~"S . 

In Trucl3lut"s eXp'-"lienn'. the aV~'I1Igc 1C11UI"l' Qf a tempor~ry employee is appmximately 

one month per year. Howe"er. e\"en ifsomeone works for us lor On" doy. Iha! person is an 

employee oflhe ~"Ompany r.UhlT thun an independent eontrnctor. Employel' stmus intcyrntes 

I'>'orkcrs inlo the lJ.S. economy byen~uril1g Ihm they are eligible to ... or\.; in the lJ.S., that all 

workers' compeosution. unemployment. and incomc taws ~ as I'>'eli as any court .. onlercd 

gontishments - nre ,~i hheld and colil'Ctcd, lind thm W ·2s repon income aCl.."'IIr.ltely. 

WOtUo; O~TtlN T A."\; r. utT 

WOTe and its pl\.'ileecssors.. the Tario:eled Jobs Ta;x Credit ('1'JTC") and the Welfare to 

Work (" WTW~) T~ ~ Credit, h3\e c.~is ed sil1~e 1977, eseept for a brieflaps.t: in Ihe 1990s. Since 

WOTC ,,"ali eslablish~-d in 19<16, il hall bcco lemporurily e;xlcnd~d nearly a do"cn limes. WOTC 

wns last ~ignificontly com.idcred in 20M. when it was lnodified nod extended through August 3 I. 

20 11 in the Smalll3usineS$aod Work Opportllllily Tax ACl of2007. In 20 10. WOTC was 

cstl'oded through December 31. :Wll by the h~ Relief, Unemployment Insurane<, 

Reaulhnri ~.ation, aod Job Creation Acl 01'20 10. WOTe for moSt tario:et groups c~pircd a~ 

scheduled at the end of201 I. thuugh WOTe for certain ~~ ernns' populations was extended 

through O;..'Ccmbcr 3 1. 2012 by the 3% Withholding Repeal pnd Job Cr.:'ati{m ACL 

EvaluDting WOTC llndcrscorcslhe importance nnd cffectil'eness of the lax policy and the 

need 10 make it permanent. 'n lis seclion considcn; Ihe key criteria discussed at lhc June 8th 

hearing. 

HulifJtlQ/ejor Tax Policy 

I)uring Ihe June Sih hl·aring. witnes~es discussc<.lthe need 10 uudc'l"SUllid the ralionale 

behind a tax provision. In p.lnicular, witnesses recommended consi<.lering \I h~ther ~ m~ 

provision addrcs:;.cs a compelling nc.:d for goVl'mmcnt intervention and ..... hclher a I~.~ pro~isiun 

reneets soullillllx policy. 

WOTC and its pl\...!CCCS~lrs, TJTC 811<.1 WTW. were ~'Ilactl'<lto 3d<.lrc~s Ihe critical issue 

ofpcl"liislct1t vll1:rnploymcnt among c~"11ain grovpti who face sisnilkant baffiers-to cntering the 

wQrkfQrce. The. cl\.""'Ilit is provided IQ employ('rs t(~ help OITSl:1 th<' addition,'l eo:;ts associ~t<,d with 

employing these worker pt'pulatiQns. 

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W01'C focuses 011 worke~ perceived to have relatilcly low skill levels, making th.:m 

le-ss 3ltmetil'e co employe~. nics.:: groups surrer from lIighcr llnemploymel1l and lower wagc.~. 

E:mmpl.:s orWOTC-targClcd employee groups include vetcmn~ whQ dlher arc food stamp 

reeipicnlS Of aTC unemployed ~11,j $Urrering3 servk e-C()flnC\:INI disabililj, fomlcr felons, 

discnnn(Cletl youlh, and mcmhl'r5 of families Ten'il'ing h\'ndilS under Ihl' cmpor~ry Assisl3ncc 

for Nl"t:tly Families i' ro!;r~m ("TANf'"). 

WOTe ~ strtlCIUrctI as a tall nedit for l'mploycrs who hire individuals from the largcted 

grOlJps, providing an inc ... mive for 11Il' employe r. W01'C cO'cclivcly lessens tlte impact of~ 

prOOuclivily gap between the tari!~1 group membcr5 and nlher worh>fs, eneouragilli! employers 

to lake a chance and hire workers they may otherwise not. AI the same time. the employ<"\' is 

given an opportunity to work. building skill sctS and taking them olTpublk Iissismnee. 

WOTC addressL'$ a compclling nero thai requires SOllle gOl"ernment inK'TVMtion and 

Il.'tkcts SQund la)( policy. 

Rel'pl/lIl' III/II £/Ikiel/tJ' 

During Ihe JUite ~th hearing. witn~~es tliscu~scd the importuncc \If evaluating a tux 

provision by its r\>vcnuc c lTcet and its emcic~cy , m"aning I,hetl]cr the pro~ision acool11pli.i1t) 

ils goa ls elTe.:ti\'cly. 

Je T has eSlimated th3111 one-year ~tcnsion of wOTe would cost $97 I million o\'cr 10 

yf.'ars. JOINTCOMMIITF:f.OI'l T",'<ATlON, ESTtMI\Tlm BUD(,ET EFFP.C"N OF REVENUE PROVISIONS 

CONT,oIINW IN PflI:SHJt:N'r's FY 2012 BuOVt:T PItOI>QS ... L, JCX-19·11 {Mar. 17, 2011). The cost, 

howl'l'er. must be co~sidered in ligln of the signitieant benefits associmed with WOTC. 

wOTe works. eflccli vcly a~'Complislling its goal of endm!; ('ICrsiMcnl unemployment 

umong our Mtion's most vuhlcroblf.' eilil\!ns. O"CC in the workforce. worker> in Ihe largel group 

gain experiC11ec and on-Ihe-job tnlining. allowing them 10 subsequently "climb Ihe ladtlcr" 10 

higher-skilled and lIigllcr-p:I}'ing job!;. Through WQTC, mort' long-tcnn welfan: rccipicnL~ - thc 

most difficult ca~ - are Iwing emp]{)ycd in the privatc sector and 7 out of 10 welfare l'!.'Cipi~nts 

arc \ISing WOTe to lind private seClor jQbs. ;!ccording 10 a 201 I study hy l'elcrCappel)i oftlw 

Whart{)n Ru~iness Selmol at the Un;ver5ily ofl'cnnsylvaniu. 

In 201 1 alone, nHm: Ihnt I. I million workers found jobs lilrougil WOTe. Furtllcr, lhis 

important ~ polie,y l'l'lablt's these " 'orkcrs to move inlO Sl'lf-suOicicncy as they cam a steady 

income and become contributing taXp3yers. nle Cappelli study found thaI individuals r~d 

untler WOTC go on to tx...,{)me productive cmpluyC'Cs who an: no longer dependent I)]! public 

assistance. In thi~ monner, WOTe provides a r..:lativcly less C1.'I$tly ml'Chanism 10 as-ist J)<.'Ople 

II'ho may otherwise rely on public assistance. The Cftppcl1i study ~Iso found tllol \VOTC is one 

oflhe mOSI s uccessful and e<lst err~-.:tivc fcdcrJI cmployment progrJm~. 

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joloto on DSK67XMDP1PROD with HEARINGInsert 80206A.179