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Tax-cut legislation includes $55 billion in benefits for a host of industries

By Dan Eggen
Washington Post Staff Writer
Thursday, December 16, 2010; 3:51 PM

A host of industries, from Caribbean distilleries to Hollywood producers, would gain billions in tax breaks and other subsidies under compromise tax-cut legislation now moving its way through Congress.

The $858 billion package approved by the Senate today is focused primarily on continuing the Bush administration tax cuts for two years, extending unemployment benefits and other large-scale expenditures. But buried inside the legislation are more than $55 billion in other giveaways and tax reductions for some of Washington's most influential industry groups.

The energy and agricultural industries, for example, would continue to receive a generous ethanol tax credit at a cost to taxpayers of about $6 billion in 2011. The 45-cents-per-gallon credit goes to fuel blenders - including large oil and gas companies such as Shell - who count it against income tax owed to the United States.

U.S. technology companies such as Microsoft would continue to benefit from a tax credit for research and development carried out in the United States, costing taxpayers about $6 billion. Rum-makers in Puerto Rico and the U.S. Virgin Islands would benefit from another two-year extension of excise tax credits for their products ($235 million), while movie and television producers would enjoy special deduction rules for U.S.-based projects ($162 million).

Owners of NASCAR tracks and other motor-sports facilities would benefit from two more years of a tax policy making it cheaper for them to fund capital projects. Estimated cost to taxpayers: $40 million.

These and numerous other deals are part of a so-called "extenders" package added to the tax-cut legislation in hopes of attracting broader bipartisan support. Many of the provisions, such as the rum excise tax, are temporary fixes regularly approved by Congress every couple of years, usually by adding them to major legislation.

Steve Ellis, vice president of Taxpayers for Common Sense, a watchdog group, said many of the breaks had stalled under House rules aimed at ensuring that new spending is paid for with cuts or revenues. But the push for tax-cut legislation, he said, has "opened up the floodgates."

"Most of these are sweeteners that don't get vetted or reevaluated," Ellis said. "They're just sort of on autopilot."

The group is particularly critical of the ethanol provision, which has cost taxpayers more than $21 billion since 2006. The Government Accountability Office recently concluded that the credit has had little impact in encouraging ethanol use or production, especially since the government already mandates rising levels of ethanol use in gasoline and protects the corn ethanol industry through tariffs.

"This tax credit is really just lining people's pockets," Ellis said. "We're not getting any kind of bang for our buck."

But ethanol boosters say the credit is needed to ensure continued growth and encourage other kinds of biofuels.

"While this extension is not as long as we had hoped, it is a common-sense approach that will ensure American ethanol production continues to evolve," said Bob Dinneen, president and CEO of the Renewable Fuels Association.

Some of the goodies benefit regions rather than industries. For example, companies in American Samoa would enjoy two more years of tax credits worth an estimated $15 million.

In addition, residents of Florida, Texas, Washington and other states that don't pay state income taxes would continue to be able to deduct itemized state and local sales taxes from their federal taxes, at a cost of nearly $3 billion to the U.S. treasury. (This deduction was eliminated as part of landmark tax reform legislation in 1986, only to be resurrected years later.)

The tax break for TV and film productions, first enacted in 2008, would allow producers to write off up to $20 million in expenses if the costs are incurred in the United States. Other provisions extend deductions worth $73 million for charitable donations of schoolbooks and "apparently wholesome foods."

The motor-sports provision stems from an ongoing dispute between racetrack owners and the Internal Revenue Service, which concluded that racing facilities should be subject to longer depreciation schedules - thus decreasing tax benefits for owners.

The motor-sports industry, including the popular NASCAR series, argues that a shorter, seven-year depreciation schedule used by amusement parks and similar facilities should apply instead. Congress has periodically approved the accelerated depreciation schedule since 2004; the tax-cuts bill would extend the provision again through 2011.

The main beneficiaries of the provision would be large track owners such as International Speedway Corp. and Speedway Motorsports. But other racing organizations also support the change.

"For us to be able to run our events at the track, you have to have quality facilities," said Ramsey Poston, managing director of corporate communications at NASCAR. "Being able to provide the track owners the opportunity to invest more in their tracks and make them better and safer is important for us and our fans."

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