TAX NEWS - 2010

US Tax: US Senate To Hold Final Vote On Tax, Benefits Bill Later Thursday

WASHINGTON -- The U.S. Senate will try again Thursday to pass a controversial bill extending tax credits and federal benefit programs, Senate Majority Leader Harry Reid (D., Nev.) said, warning that if the vote is defeated, the legislation will be dropped.

The Senate has been stuck on the bill for nearly a month and has been working on the legislation for around three months in total.

But Senate Democrats have been unable to win support from any Republicans for the package and haven't held on to the support of all the 59 lawmakers who generally vote with the majority party.

Moderate members of both parties have objected to the cost of the legislation. Initially, the bill included roughly $200 billion of spending, but over several revisions that amount has been more than cut in half.

The latest version unveiled by Senate Democrats late Wednesday would seek to spend $83 billion, with all but $33 billion of that offset by spending cuts and tax increases.

If the vote is defeated, as seems likely, the Senate will no longer try to pass an extension of federal jobless benefits, the continuation of a popular homebuyers' tax credit, substantial aid to cash-strapped states or a series of tax credits aimed at both businesses and individuals. These include a measure allowing businesses to write off research and development expenses, and one letting individuals to claim state sales tax against their federal tax burden.

Clearly frustrated, Senate leaders said they didn't know what else to do to win the backing of Republicans for the sweeping measure.

In addition to having reduced its cost several times, Democrats have made substantial changes to parts of the bill potentially hiking taxes on hedge funds, private equity managers and venture capitalists.

Sen. Charles Schumer (D., N.Y.) said the only remaining item in the legislation whose cost has not been offset by changes to the federal budget elsewhere is the extension of the federal jobless benefits. He said Congress has routinely agreed to pass such an extension in earlier times of economic crisis.

Reid said if the vote is defeated, the Senate will move on to separate legislation aimed at boosting small businesses' access to capital.

He said there would be no effort to strip out individual measures within the tax bill to pass them on a stand-alone basis, nor would any of the provisions be added to the small business bill.

The majority leader also said that Democrats wouldn't seek to renew the estate tax -- which expired at the end of last year -- as part of the small business bill. But he said he fully expected Republicans to try to do so.