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A Tax Break for Legislators, Whether 'On the Job' or 'Working'

House Ways and Means Committee Chairman Charles Rangel announces the Tax Reduction and Reform Act.
House Ways and Means Committee Chairman Charles Rangel announces the Tax Reduction and Reform Act. (By Mark Wilson -- Getty Images)

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By Jeffrey H. Birnbaum
Tuesday, November 6, 2007

It's nice to have friends in high places. Just ask the National Conference of State Legislatures.

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At the lobby group's request, the House Ways and Means Committee voted last week to add a tax break to a long list of other breaks known as "extenders" -- so named because they have to be renewed each year or else they disappear. Only this particular break -- for state legislators -- was not an extender at all, because it's not in current law.

No matter. Chairman Charles B. Rangel (D-N.Y.) was contacted by the leaders of his state's legislature -- as well as the national conference -- and decided to add the one-year, $4 million provision to his committee's latest tax bill. It's now pending before the full House.

The measure would allow state lawmakers to write off their state-provided per diem payments, even for days when their legislatures are in "pro forma session." The term refers to days when the legislature declares itself to be in session but is not doing any real work. That happens to be the case in New York for about half of every year.

Technically, a state doesn't have to give its legislators any actual cash for them to take the write-off. A legislator can elect to take "an assumed or deemed" deduction at the accepted per diem rate.

In fact, a state legislature would not need to declare every day an actual or pro forma legislative day to allow members to take full advantage of the benefit. The federal tax code counts as legislative days any break of four days or fewer between actual or pro forma days.

According to Rangel spokesman Matthew Beck, "The IRS began to more aggressively audit New York State legislators," contending that the lawmakers should not have taken deductions for all those days. Unlike other types of employees, state legislators have long been permitted to deduct their per diem payments for days that they are on the job.

The IRS and Rangel obviously disagree about what "on the job" means. Thus the legislation.

Republicans on the committee objected strenuously to the provision. Rep. Kenny Hulshof (Mo.) moved unsuccessfully to strike it, and Rep. Jim McCrery (La.), the senior GOP member of the panel, called it "a real stinker."

An official of the nonpartisan congressional Joint Committee on Taxation estimated that the yearly deduction could reach $55,000 for a state lawmaker whose legislature declared enough pro forma days.

Via e-mail, Beck said, "The Committee believes that Congress should review the matter and provide what clarity it believes necessary."

"Clarity," in this case, means agreeing with the powerful chairman of Ways and Means.


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