Framework For Evaluating Certain Expiring Tax Provisions: Hearing

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. 112SRM07

Printed for the use of the Committee on Ways and Means
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DAVE CAMP, Michigan, Chairman
WALLY HERGER, California
SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas
CHARLES B. RANGEL, New York
KEVIN BRADY, Texas
FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin
JIM MCDERMOTT, Washington
JOHN LEWIS, Georgia
DEVIN NUNES, California
RICHARD E. NEAL, Massachusetts
PATRICK J. TIBERI, Ohio
XAVIER BECERRA, California
GEOFF DAVIS, Kentucky
LLOYD DOGGETT, Texas
DAVID G. REICHERT, Washington
MIKE THOMPSON, California
CHARLES W. BOUSTANY, JR., Louisiana
PETER J. ROSKAM, Illinois
JOHN B. LARSON, Connecticut
JIM GERLACH, Pennsylvania
EARL BLUMENAUER, Oregon
TOM PRICE, Georgia
RON KIND, Wisconsin
VERN BUCHANAN, Florida
BILL PASCRELL, JR., New Jersey
SHELLEY BERKLEY, Nevada
ADRIAN SMITH, Nebraska
JOSEPH CROWLEY, New York
AARON SCHOCK, Illinois
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, 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
ii
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CONTENTS
Page
Advisory of June 8, 2012 announcing the hearing ................................................
WITNESS LIST
Dr. Jim White, Director, Tax Issues, Government Accountability Office ...........
Dr. Donald B. Marron, Director, Tax Policy Center, The Urban Institute .........
Mr. Alex Brill, Research Fellow, American Enterprise Institute ........................
Mr. Aaron Gornstein, Undersecretary for Housing and Community Development, Department of Housing and Community Development, Commonwealth of Massachusetts ......................................................................................
11
32
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52
SUBMISSIONS FOR THE RECORD
Honorable Richard Neal ..........................................................................................

Honorable Doc Hastings ..........................................................................................
ABM Energy .............................................................................................................
Alliance to Save Energy ..........................................................................................
American Cleaning Institute ..................................................................................
American Council for an Energy Efficient Economy ............................................
American Farm Bureau Federation .......................................................................
American Public Transportation Association ........................................................
Business Council for Sustainable Energy ..............................................................
Center for Fiscal Equity ..........................................................................................
City of Cleveland Department of Law ...................................................................
ClearStack LLC .......................................................................................................
Efficiency First .........................................................................................................
Feeding America ......................................................................................................
Financial Executives International ........................................................................
Food Donation Connection LLC .............................................................................
Fuel Cell and Hydrogen Energy Association .........................................................
National Association of Manufacturers ..................................................................
National Biodiesel Board ........................................................................................
National Education Association ..............................................................................
National Governors Association .............................................................................
National Preservation Working Group ..................................................................
National Restaurant Association ............................................................................
Ohio Grantmakers Forum .......................................................................................
One Voice ..................................................................................................................
R and D Credit Coalition ........................................................................................
Radian .......................................................................................................................
Rebuild Americas Schools ......................................................................................
Residential Energy Efficient Tax Credit Industry Coalition ................................
Sustainable Energy and Environment Coalition (Congressional Coalition) .......
The Council on Foundations ...................................................................................
The Jewish Federations of North America ............................................................
True Blue ..................................................................................................................
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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:]
(1)
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Hearing Advisory
FROM THE COMMITTEE ON WAYS AND MEANS
Chairman Tiberi Announces Hearing on

Framework for Evaluating Certain
Friday, June 8, 2012
Congressman Pat Tiberi (ROH), 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 Subcommittees 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. 111312; 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 Committees 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) 2253625 or (202) 2252610.
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 2022251721 or 202226
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/.
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
couldnt 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. Neals 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 todays 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 Presidents 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 dont 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 hearingthe 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 wont 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 couldnt 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. Neals opening statement?
Without objection.
[The prepared statement of Mr. Neal follows:]
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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 jo bs issue. The New Markets Tax Credit
(NMTC) program has led to the creation or retention of
about '3 00,000 jobs in some of our most financially troubled communities . In Western Massachusetts, the
Massachusetts Green High Performance Computing Center
is being built thanks in large part to the NMTC - and this
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project is creating about 600 construction jobs.
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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.
Todays witnesses bring both tax policy and oversight experience
to us. Todays 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 GAOs 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.
Marrons 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 Presidents 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 Presidents Council on Economic Advisers and
has served as an adviser to the Presidents 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 taxpayers tax liability from what it would
have been under a normal taxunder 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
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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 IRSs 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 un-
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10
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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-....-a __ ancIlIIitrUoIing ~R. latloto,hlp to OlIo.. Policy T_. T"" Ol<pe<ldjwrH

ord """"""'" aoc-
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13
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
la~ IiaDMy, and preferenUal tax rat8ll .' Ta~ ... ,pendilure.s a re ~
that are o):9p!ions to too ' n<:mI3l s\rudure' 01 the indivldtJal and
COrpot8i.e fncome taJe . Other provisIorts trnI1 redOCOl lax U8bitit~ . 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
s lIIInding prog rams. such ". enoour3g'lIQ IIC:OIlOmic devBlopm8t11 in
di .... d~antaged
promotlllQ _rg~ etrrciGn<:y, or sl imulating
ate"".
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. _ . , . . V1 I "' .... T.. ~_,~I".....-.ooR~ ..... _

~"""oI~ala . p ... l No. 11 1..)12, 12.StM , ~(o.c.l7 . 1010~ .. ~
_
... _oI_)'O.,:roll ....... . . , . o I _ y...'2CI2,_IMrr""\"
of... 64 .... "!..)'2 .. _",.
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- ' _ p o - O V I _ _ 26U.S.C 60109

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.... '
VerDate Mar 15 2010

08:41 Apr 19, 2013
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15
Faclors lo Consider
When Evaluating
Expiring Tax
Provisions
Fa.cta~ commonly used to 9Valuato lrut policy in !iI'""",1 can be IIpplled

to oecislon$ 01 whether and ~ to e~teM e~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 f9IIulat!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 t a~ $ystam. Ta~ e~panditures
can De V.ew&d this way because tl>ey grant Sj)6Cia1 ta~ reHel for certain
~inds 01 behavior by a taxpayer or lot taxpayers In !>peCia1 CllcumSlarICEIS
Revenues tOlllgOOO t~rough tax e'plnd~u res either redUOllluool1"\g
avai!!lbie. for mhor f~1 adivilies or rt>QUir<l hi;Jhe-r lax 'otB$ \0 nn..e a
IIl\Ien ortlOUr1t 01 rewmue Li~e dedsions abOUt &peflCllng. cI&cIcIlfIg
whalhe< 10 o<tend an expiring!alC axpenditur"
oonsiOO-rjng
whet"'" the benefit or the intended outcome il worth the offect DO IlihEU
pIOglillll$ or tax ",tllll. Rtwenue the lIO"ernmen1 WOUld hllVft ~
abSent a tax IIlCpenOltUfll could ~ave De&rI used lot other ledetBl priontlM.
~ficjt reduction , or tax rata reductions.
,,,,,otvor;
'''''''9
Thtllongterm fISCa l dlallllnge

the Unltoo Stale$- makes n a ~ 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 t e revenue tosses
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'.'
16
wert! en estimated $ 1 t,inion '" Jlsca l year2011, 1 For the past I~'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 p rovisions being
CO/lsiOtlrea 1Oday, ca~ Iltlp poIicyfl'ake~ 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'la luate true po4lcy--equity: economic effk:ier>ey: al\O a

combinaboo of simplicity. lranspareocy, and admi~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,
OPln\on~ regarding the faima~ 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
Equity. There Is 0 wide range of
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 1fls18~ral'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 o f 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'
_ _ _ ""'_"""""'"""- _ _
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GAO-II-''''-'
17
g!tln lllat IS saId to ImpnMI ec;o/>OI\IIC elfodef>cy. Tt>ese galns lm?rove

peoples' weltbelng In (I ~ariety 01ways, iroclUding illC18Cl5O/d Income
ana c.onsumpllon opporM,it;es.
E5~""'ting 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 l 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)
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18
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 l ax 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 h a 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
__
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19
,wl<am,r>eS1 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$l.l1lve!y mandated to col~ or rePO<1t11e
1I'lbmallOfl. In some """"', IRS may combOne rePOt1ing requ~"""'nl" to
.... nim l ze~. _1QaII a<KI tax""\",, Dlin1en. and as II m""~. tile
Inlom,atlon COII&Cted may nOllclenl~y s peo!ic 1lefIIIIicIa.fes, or acl,.mo.s
largeled by a lax a~pemf~u,a . Also. lhe innuance of OIhaf economic arid
social lactorlI can wnfoun<! eIIorU 10 mea"""''' tax e~pondil"""s effects
on err""en.:y 8<"1(1 equily We and 11\8 Off,.,., of Managemelll arid Bud<]eI
(OMB) have noted lhall.he des"rt1ld CNlcomefI ofa 1a~ o.xpendilu",or
OIttar IIOIIC)' 1001 a", oI'I&n !he oombinatior> 01 ellacls 01 the program and
al<l8mal faclots. "
II poJicyma~enJ eonclude thai additiQnalda18 wovkI facn<lata reexamining
a Pl'rticula' lax e. JIeIldilu .... ~ions would be mquif"l)(t on
UOla
al"& nee.ded. wno Sl>OOid prollide tile dala . who should cot~ tile 1!8I.a,
how to collect lhe data, whalll would cost to collect the dala. and whel'lhe tlenelils 01 co6iJc1ir.g aIkIibonal dala wDmlnl the cost 01 do4ng st>.
"""at
I\r1QI1\ef facto' 10 CQrI$<OO' i$ IIOW to laci4i\ale 0818 l.I,p,inll an(!

coUaboral...-o eVllllual<m efforts 8monllsl tede<l.Iagenciss .
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.... ,
20
Illus trating These

Fa ct~lr'S Using
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 ~ ~
Examples !'rom GAO's
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*: (t l' IaJI cred~. Ih6
""'0' _ _ $ion 0 1 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
bull5 ' " ' fTlIXNI,n, now lor _~ Ihe
iMusuy ~ most of \tie c.pol9l ~ lias 8/tudy _
made
We b.Ifld thal eongteH. 01lottl1O .uPfMX1 ob"nB5Iie.tl"lanol ~
IIIfOugII a Ia. aedd _ ...-....."-1 $I~ _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
Pasl Work
_ 'aciIiIle&.
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 _ I n \a>:~" maIolng dB<:iI.oonI
"W.O _ _ _ 2!lI'Rowr.SI_ " , _ r_

~_ f_-"
(W~ . D .C
..
_n..-._C_Rl_
__
f Olo". Z012 ).~"'
_~
GoIoQ..'~~
~~
_ _ r .. _ _ E _ R o _.(.lAO.ll-3l eSl'
IW_.CC. II!.- t . 2011l _ _ _ *_ItIIl~'"
"-/UIIM_" _ _ _ - . ~ ~ . DC . 1'wg Z',
~"""",
-,
-_ _-""""'-----II>I_.f_Y_:I!l" ....
~_ ConwnoIo .. "" T..__~E_I"'II>IRo_"Pro_

c...t_
~
JCT "
.........
_
_.._ _.t ..
__
' __.......
_...-.~
F" .....
,...JCT _I~
........
_ _ ....
,O'_~~._
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GAO-....... ,
21
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'" rl~1 years 2012
"". ""'...: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
of lhe lax", pena,!"." unoe. $t""y Irom otnllf chaligllS-'J>a1 have
HIOhe<
elf.,,, d,l!icuh ,,, " ......CCIOII.

prcYlll1
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 aonrs
_Nl __ COIiI-..
"GAO I1If1NtE<lo_.II/utIolIeHrfIIW_ T.. _o..or.~

lot
r... _ I 0 _
~11rr-~W."""'.
"'_Sl__
D,C.. '-loy
t , lOOII).
~r,.._ - ~_"""'f:_""
-""""""""--_.... ._.
.... IVsr._..IW_
r _.~IIO<y"",_ r ~~o...g,. _ _..."",
e.,,90 """""'" GAO-IG-'J&(WnNI>gIoo, DC, _
G. 1OOi)" t ... PbIOy. _

{W"""",,,",. D_e, !.Iojo 10
""""'_ ~ T...-~ GAOfT~'el
_
,~ ,
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'.'
22
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~
$OJlPOfl .",tho OOf\Cepl 01 a cred~ fOIlncf!l8S'rIlI resaardl actillit;es,
canoe,"" have been raised abOut the IlOsl-<lffe<;tiverutSS oI.ho deBl9n of
lhe cuI"",l Cledit alld i\$ admlnis\riltiva alld oomJ>liance COSIO. We foulld
lhat the res&arch t8!C creoi\, as CUI'.ntl~ deSigned, dis[fibutes Incentives
unevenly acros. talIpa~ .... alld p"",<l95 man~ fllCjpOenlS with windfall
beP'lefits. eamed lor lesearclllhat they would have done anyway, for
a~.l'I'Iple, .... o fOUIld that lor tllOSe claiming the regular cred~, mora l!\Ion
halloflhe cred.t such d8lmams .... ,ood was II wind'all TIM! dispa<ilills it,
inGeot,ves can load 10 an loeIfrcieot allocation 01 iovestment '8SOOJIC&II
acro!;S b u s - ' , lind tJ>e willdla~ benefits rep<Blienllor!lgone ta.
revan"" noat ooes flO! contribute 10 the credit's obleCIova Aooord'ng~. we
Sll9ga.led that eo..gress nKXffly lhe ",,,,,,,rclt Ia. Cllldit 10 redlJee
ecor>omlc irreIfIcienc:ies and 'm:e",iv.. ""',,"00 0051 . JCT B$~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'ed it 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 Tre3 51Jry nreasury) to reduce It>e uncerlll1nly thai
SQITIII l axpa)"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.
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New Markets Tn C, gdil (NMTC). OUI pasl work "" the NIATC provi<le~
8lI<KflPin hoghlighl iog iesullS cI simplicity and the need to consider l3X
23
el<jlend~ules '" ligMt Of OIha, POlIcy 10015. I, Coogress &nllCled tha NMTC
on 2000 as pari of a n ongoing effort 1ment 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 20 12-2022. "
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 IOUkI 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 Iowincome

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$SllS com~ 10 me NMTC, Or!e opIiofI would be Io!
Coogla"" to sot as"", a por\Jon oflunds to be U5IId as grants and a
por1ion 10 be used 1IlI ta ~ cred~s \H"Ider me IlIJrmnl NMTC program 10
IXlrMle a comparison 01 tile two Pf09famS.
Revi~llza tion Prog " m" Our I)8$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 1 ~~_.'''''~'''''_ .... 1IV<><Ig/120.~
....
" _ _ .... _
.. -.2012_201J, r"" _ _ .. oo
mr>ddjoll>Om.1rc"'_ ........ _
...
r.,""""Y"""'_' t ... er-~,o _

... ""-"-O!'_
__
'GIlD,
"'~~buI~ E!<JoI "'
GAoOl n!l I W _ D .C. _
~,
31 , 2007)
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,_"
24
measU<ement c.ha 11enll"" _

8V~luati"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 20122022.
001 prior wo,k "" found Imp'Q'iomenls in ee,,,,,n measures 01
community de9lopment 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
_ r y lor cleta<ml,"~ whethe< the laX benefi1S !lfll6ffeclMlIn
adl"'WIIIllfog,am goa ls '
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.

_ _ .... CI<cwnIo'
"~ ""'I""E_oI"..Ptt>qnomI.o_ .... G.\O-OI-l?'!~ D _ C
__ 12 200IIt
_
_
Rovlal_
~
:IO,gj,E_ZDt.._~~"'~
""",",,-"-~
_ _ DM..... fI>ou..oI7.... _
o C__ S, 20001_
' 'GI\O .~~-.--..
.....
~. ~ _!WUhrogIDo ,
_ _ '"'",.u... ..
Jd~oI
'"'~.... CauI<I80~lIItoofIIoetwvo_'l<t""'. G40-!l~2
(W_DC
~ob , N. 2C'l ) .
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Insert 80206A.016
G",,,,,....,
25
''''''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$' IfI\IlISlIlrnt in 8fl8Ill~.oooseMng rmprav<tm&flts,
~ur.h as ;""ulat"", s~st""'s . eA1fmor .... ndows. and met~1 roohI. b~
reduoing l~' e~f)ftax costs. The cred it mcpirQd on Dooamba< 31 . ZOII .
JeT estlmalliS me I)IJ(Ig8Ia<y effect althe Presidanl'l propo$lll a~~nojno
a nd modifylog ,"i's prllYis"", throogn December 31 . 2013. would be abouI
$2.4 boIIion In fisca l years 20122022,
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$. Tha
noob\lsirIMS _ .gy properly CTedjI s cost.tJased in mat lhe amount of
credit claimed i. dl.8dIV lIfOPDflional toa taxpaye<'8 '1ualir..:l spendIng . It
is perfonna ......... basoo in IIlat only tAlftain lIua1ifyiflg pu.co"""" M"
eligible. In 2012, we repof1ed Ihal bolh tile perfonnance-based end costbased aedilS h...... ad~ aotag"" a nd disadvantages W~h neither d8lligo
OOlng unamblgoous1v the berulr opIJon bfl98d on ClJrr"lIl ",!ormal"'" F..."emple. a performaoee-based credil is mora likely 10 effectlwly reduce
energv use aod cart>ort dioxKle emissions lleC8use ~ lewilldS energy
""""llIs I,om the InYe&lment .Dlhe. than the cosl.lJase<l CfOO~' 5 .ewanlonll
01 spending l&gardle-ss of whelhe.lhIs Sl)8nd.'l9 ItrlUIts In 8<1&f'11Y
uvlngs. Howevef. the perlonnarlC&-tlaSll'Cl crec!Jl may MlMlllignfficant up.
fronl COSIS!or 808Igy audits, not .aqYlm<! b11fm cosl-based cmdil, whid>
could reduo:e Ib alfwli\lene57 by d<scouraglng investment
Too
cred~'5
dMign also can aflecl:ts aam.nostrnbillly and aqully. For
tallpate~ 10 1>0 do ..... e<;t. Ih9s6 up-I""'I costs ma~ me"" that II
p&r/OIllIaf'Oll-b3sed cred~ may ha.... signifantly higher ta)Cpa)'ef
oomptiaflO8 and IRS administrative cosls "''''' a 0051.tJased cred~,
V........
on What is II tair dlstnbUllon oIthe CflKI<f$ DOSts and benefits can differ
drAmatically acr056 indIViduals. However, WMlevet one's v~ws of
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"",,"'MM'
26
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 l ~ ls """",ion i5 another

e<ample 01 how mea-su'amenl challenges COIn hirldet evalualior1 01 tu
e~pendl!U,,". U The PfO'Ilsoon alloW I8l<paye~ kllal\e IiIrgtl, ~
lor depmcialion from INOr business incomo earl"'r Ihan lhey otherwi""
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/etl il e'pl'&<! on December 31 . 2011 JeT eSlimalEt$
IIle tludgeta<y "If...::t of eXIII~ 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 !flS ults 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~ Bx~nd ilu", perfornurnm Is- a n ar....
lhal would be"'~1 In" " en ~lIrlCed COIl!8SSionlli scru tiny as Coog,asa
conslders wa~s 10 address Ille "811",1'& long-term bcaillnbalano&,
Cha l 'm~ ~
TIberi, Ranking Membl!l Neal. and Mernoo,," 01 !he
S ~ tIoommi"etI . t.hi~ r:orMpletllS
my prep"rBd Slat""",n!- I would bot haWY

10 'espond to a ~ 1 qUIISllOf'IS rou ano Members of !he Subcommiltee may
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27
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) 5 129110 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......

Oal~ , Tom G ,lt!ert, Susan J. irving,
T~ McCabe, Timolhy MInelli , Ed Nanll8Mom, Midlaef O'N<!iU, and
Stevens; a nd Sabrina Slreagle. 1(""",
JIm Wozny also prol'ided tecI\t1lC8l support,
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28
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29
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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 todays 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 taskraising 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 isnt 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 arent 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 havent 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.
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You should also reform the way you review expiring tax provisions. First, I think you ought to flip the burden of proof. Todays
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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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 or the direct deficit reduction:
$221 billion for th e income, estale, and gift tax c ut~ originally set in motion ill
200 1 and 2003, plus the expired "patch" to the Ahernative Minimum Tax;
$95 billion for the 2 percenta ge point cut in employee payroll taxes; and
$65 billion for th e 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 .
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' 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 o r spending l"cre~ses.
33
Like the AMT p<ltch. most of these other tempor<lry provisions expi red 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 gove rn 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 t ransit-and
those who drive,
These provisions similarly have mixed effects on the health of 011 1' economy. Severol
have attempted to provide nearterm economic stimulus. Others attemp t 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 th e 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 wh ile r<lising adequate revenue and eliminati ng
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
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34
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 J0; I was a member of the latter}.
Such refOITI1 is not likely this year, however, so J;!wmake rs 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 th e 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
a nd the provisions performance justifies extending it.
Tax cuts that have reached a sill/set review. Some temporary tax prov isions
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 difficul t 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 th e 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 sup porters intend them to be
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35
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? Co uld 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 activi ties or ti lt th e 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 wall t to
maintain current revenue levels, do the potential benefits of the provision
justify levying higher ta>:es elsewhere in the economy?)
Du ratio/!. 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.
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36
R;!ther than "lett ing people keep their own money," these provisions give money to
people :md businesses if th ey 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 reve nu es, as
conventionally measured, would increase.1
Lawmakers should also reform the way they revie w expiring tax provisions. I have
three suggestions:
Flip the burden oj proof Todays standing presumption is that most or all of
these provisio ns will ultimately be exte nded. That's why they are called ~thl.'
extenders;" even ;.Jfter they have expired. Th;!t presumption pl;.Jces the
burden of proof on th ose 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 provisio ns 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 kn ow that the key to survival is to stick togeth er. The
wolves, meanwhile, try to separate a single one from th e 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 attenti on as possible.
21'0 r an ext ended discussio n of these poinl<. see Mnrro n (2C1l l b) and
M~rron,,"d
Toder (20 t2).
l This ~pprwch would make partirular sense afl~rCungress rwlews all the 1'.~pirinG provlsiuns ~ncl
m~kes
worthy un.'s permanent or IU!lg -lived; th e remaln!ng expi.... rs would tben be ei ther sI ncerely
or subjt'Ct \ 1> a pcrlmlk S Lln s~t.
wmpn ..n y
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37
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 (o tlld al so 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 ou t over time. If
fewer pl'ovlslons expired each year, Congress would be able to give eac h one
greater attentiu n. 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 o ne-yea r segments. Por
example, lawmakers often find it easier to pay for' a o neyear extensio n of the
R&E credit than a five- or sevenyear exte nSion. The sho rt 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- a! so allows lawmakers [0 use 10
years of offsets to pay for a single-year extension, further lowering th e
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 woul dn'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)_
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38
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 y~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
des ignation. similar to that for discre tionary 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.
Refere nces
Bipartisan Policy Center Debt Reduction Task Force. 20 10. Rn(Q[jng d meeien):
Fu w re' Reviving the Ecouomy; C!lttirza $oer/drag vlld Debe gnd Creating P Simple Pro
Growt h Tox Sysccm_ Washingto n, 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 2 0 12. 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 curr~tltly hapl"'ns wfth mandalory sl>endin.g
programs.
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39
MOlrron, DonOlld B. 201101. "Enew PolitY and Tax Reform," Testimony befo re 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. "SDe ndtng in DjS2 I1jse." Nuriono/ Affoirs Numbe r 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.
Nationa l Commission on Fiscal Responsibility and Reform. 2010. The Moment of
National Commission on Fiscal ResponsibHity and Reform.
IaLUJ.. Washington, DC:
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40
f
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 todays 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 2year 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 extenderskeeping
the good and eliminating the bad or inefficientmay 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
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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 dont 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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42
i-l
A
A merican Enterprise l nsu'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.x tenders
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
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".'pre$elll rhost? Q[/he American t'-nterprisl:' hIS/illite,
43
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
A successful evaluation of la.
useful
pr~cedenl
~.pi.e.
e.tender~~keepingthegood
ami eliminating the bad - ma1 set a
for I he 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
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2002. A decade lalef, in 2011, 129 tax p'OIIi,;on. we.e set 10 exoire in 2011 or 2012.
44
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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
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 ol la~ e~PI'nditu,e.lrom 100 in 1981 \0 150 In 2003, and then 10 ISO In 1009. '
TM budgeta ..... r.ot1'''quence "flaXe)<tend<>" h 1110 I""".,.. d .;gnlficant,.,. over time. f or ~~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<weI...... lOn .. deducllon for tnc .... ' cI.'<room ...""n,.... with . nel ...... """ 10" o f $!3 billion
inu".,,,
JDin' CDmm,nee on ro .. u"" (KTI. "- Um"'w cI tnt 't.ff 01 ,he Iotnl Ccmmitte.: on h".tloo ~fcr~ t he X><ot
~'I eo....'l'TUU
on Mocit ~.d,",llon (1CX-49-111. Sep,,,,,,ber 22. 201.1. Ivail.bl.
' lvoulh
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www _ktlo./p~bliu~o""""t",11 1(j"".Ulow n&id'4:W;l_
45
over Ihe budg~t w.ndow .' In 2010 ... Iwoyear 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.$aI"l' t"~, another lax eXI~ndel. d"e~ nol seek 10 promot~
onomlC growth, bUI . alhello pro~ide pa.ity belween re!ridenl 01 ~Ia les with SI~le income ta. ~ ~nd
, esidents of states with only sales ta~es . In my view, a more approprIate means to 3Chle~e pafity would
be to .epeal the deduction for Slale and local Income taxe s.'
With re8".d to a lax eXlender th~lls Intended to su bsid i' B 'it 81ven activity. special ca re must be taken to
plope riy evaluale 11$ 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. suiidy 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 l ble at WWW.jct.IOV/o6(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<'SSenote ~jO:S4101. Oe<ember 10. 2010. '''ailable
throuah wwwi<t.80./publkallcm'.hI .... 1fun""lhowdo_&ldoJ71~ .
Se~ "'I ~' 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"'luIflKllpaIk~/ta' ts/'-l>"'11'OWI~
p"'8rusi.e-andPI""IIc.I,p(oPOSilIlo'(ull>I.I50ne;s.-I~'l'Jles.
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46
2.
Wpuld tbe Policy Be Effrctive If It Were Permanent?
Second, polievmakers shou ld t~alua!e the likely ~ffecti~~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 wi ll, therelore, hIve
limited effec\hleness. That j~. iffi rms 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
they are temporary or permanent.
Additional Concern. Ral,ed by
regardle~
of whelher
ra. Extender.
To el plain why I ad~oc:ate either eliminatlnltax e~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

~, The
h~ve
re~enue
and deficit
ro.sal outlook lo! the U.S, economy is sevef'l.'ly troubling, 10.>ay the least. Not only
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 Olrnomlt Re",.rch. WO/ll.in8 Pape' IS6n. December 2009
Scolt W. II.ten, "The Role 0/ G~mment in prorrpo~rIi! 1180 0,' te<limon1 belr><!! Ihe Sen~te Fln. nce Commltl~e,
Septembe, lQ, 1011, II.ble _w.ledrpalicyi~<litul"'I)(""~le"'w.Il<II!fI_"'n.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
3'
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47
'"'''' 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 longterm 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 bil lion. '"
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 aounl 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~el y to be eKl e~ded (or reInstated) is 3n
unneces~.ry
en~ironment
burden on an alreadv burdened private ",Clor. Thi. burden worsen. the economic.
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
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 iol ies 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 t~. 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"IJOC19-091. FebrlJ.1ry 12. 2009,a.-.jl.ble '!>rOUS"
www.jct.go.lp\.Ibllcatla~ .. ntmI1Iure-.tartdown&ld~ ll 72 ,
"' !CT. f>11'""II!J&d~~' {"'((, uflr..
~';"J, u,,.,,,,pkJ'I""'''( ~"u,,'m~ R~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
-reI.
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.)
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48
f igu,e I Tax leglslalion Elipi,alion Ind""
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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""." "n tv.""'.
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~ spen ding policie~ requlte pefio.dic
reauthorization, which permits ",forms and policy adaptation . Obviously, IOday's hearin8 and
thl, Comm ittee'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 e ffectiveness 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 e xtenden have not
" s"e, lor """mple, AI'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.
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49
'~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
R 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,
pro~I'\o".
(ven utenders with relativelv ,mall budgetary Impact deseNe "''''tlnv, as their economic
burden Or
bener~
could be much la.ger.
A.I out lined 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
l a~ vt ende/~
a'e added while few term inate. ts not sustaInable .
As f hi~ Committee knows well, the I~X base has e.oded sisni/iCilntly ave' the las! twenty-r,ve 'fl'ars. A
prollfer~lion of tar tredlls, deductions, and e~duslons h~s left a [a~ SV5tem with a myriad of provision s
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
Inappropri~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;"1Rel~I~' to Re"",,q, and ~>'etopment: I~
rhno/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~JorGfoWlIPtomo l in Q /nl\OW1,ioI!nM Growth thTOUQ~
~i>I R~fOrm (~ . "'". oW, MO; [wlnl M. rlon Kwlfman faund.tIon. 2011), a\l.II.b~ ~I
www . ei.orlllfolnI2011/01/0/!{Ta, -PoIk"y-.dG,owth.pdl.
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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 programs 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 worlds 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.
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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:]
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52
Com monwealth 6fMassachuscus
D EPARTMENT OF H OUS ING &

COMMUNITY DE VELO PMENT
'r~.'i "'01IY
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~
U.S. lI o.. M' of R ~I )N!SIlnln l;" H
Co",mimr on WI)-' ud MU lls

Suhco mmin ~ Oil Se lt<: ' He,'to ue ~ l u';lIres
JU lie 8.1012
Ch~'mlan r;~ri. R~nkinl! ML'TlIt..:r
oppo11uni,y 10 '<:slify ,<>day_

Chuinnan alld t.k NL"dl, and
I WMI
U!
Neal. and membc!f1; ofthe Su OCQm",ill"". Ih~nk you for .he
ct;jlttially hi "okflOwktlgc your leadership on I naliun.llcwl.
Mr.
thank you fl)' il
My ",",'" isA.rOn Gomslcin ami r om .he Und"",,,,rcmry (or
re!;OlIrttS Ii>r alfonbbl~ ,",using and co mmuni,),
Il!",~inll.nd
de"elopm~nl ~h
I,;o",mu"ily Dc,clopm!!n' ("r
year. I'riQl" 10 joining S\l>I~
Plann;ng: Aociation. a nonproro, 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,
--
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ftlml10ij
53
LQW Incl>me HousioK Tu
Cl'l:dit~
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.~lend
lh~~
I'ror,.... m, and the won; they SUPll"rt. We canT.m afford \,. lose tI,eS!'
grnwlh, and Ihe CongTeS:'l should toke aCtion to u tend Ihese
prol!nlln~
in~lru"'Cn~.
as soon a.1
Qf econQ,nic
jJo~~ihlt.
On lhe IQnKer
horitQ". as Ihis Commillcc u"dL'tIakcs the impOrtant lask Qfreforminj:! Qur La~ code. it is impOrt.1m II'
"01 e.~~1
undet)13nd Ihe Irndwffs Ihal are inn/lved i" ci iminating Ihese provisi{)II$, as Ihere one" dO\.'!i
c'{)mpllroblc ,,"a)' \1' enbance e,)mmunil), devclQpmcnlthrQugh nlher 1oCC10($ oflhe g.Qn:mmcnt, In facl.
while the Congress c()(ltinue~ II' cut
dl1"'rtm~Ius,
Ihctlc laX
these rrojec\1i can
benctit~
~Il'-"fldjns progr3m~
nlk~
in \anouS programs under 8 num!);:r of
only rdy o:tJ ~up~ in tI'e la.~ e<>de IQ cOOlin ..... Eiimmatit:,o Qf
CQuid vcry " 'elltcnninatco
hi~lory
Qfpublic-pri"ste partnership that has rn-ought so
mUth gNlwlh 11) Qur Slate and the CQllnll"}".
Ih~y
lei mL' bnen)' d':scri bc ca.::h and what
~~w
have mCanllQ Massach"sells,
Markel.' Tu Credit I'rtJ1;rlm
The 1,1'$1 New
M~rkelS
Ta., <.:retlit INMTq 3 l1o<:alion~ wen' awankd c.mly ninc yean; a~Q, ye1 a\read}' th~
NMTC has c.ltablishcd ~ Ir:ick rt'OOrd as a major lI\lurce ofc(>mmlloilY de"cl(>pment r.nan~ing in AOlcricu.
Congres.o uuthllrizcJ lhe NM"C in 2000 in an ctTOrt tl) stimulnte privaw investm,:,nt in IQ",income urban
'wighborhoods and
rur~1 eOOlOlUnili~'!i
bw;inCSS(."li, crcat,' jobs. and
~IIsl~in
thai Inc ked aceess \llthc capital oL...,dt<lwsuppon and grow
healthy local
cc,~nomies.
Since the
1i~1
NMTC a llocations were
award~-d In ::1001. Ihi5 'oIcll-dcJignl-d pl'Ojl,r3m hIlS 8~"L'T"Jted imprcssi,'e cQnlmunilY developnl""l re$uhs.
l3etwt:cn2(0) and 1010, close to 300
~ummu"ity
development tntil;t."S ICO;S) hat'"
recci~ed
NMTC
ullocatiQns.
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54
11>....,." eDE.', incJooing communit~ loan fund., Comm unity 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
lJ;t
ruKi pri"'le. lhcsc NM'rC inH's itncl\1s ~=I~ orTC!lIWctl an C'5tim~I\'d JOO,()II(I jlJ'bs al a
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.., velOflmLtU 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
l'criml'S nK,,1 imponanl i.lhe filclth"l
c'-~ry
N MTC investment h ...
la~
n:1',,"ue.
br.,.,,, made in husillCss in ~
neighborhood or comm unilY 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 mil lions of Americans who \\'0fI,; han!. \\'lUllto live in &Iron!: <'<Immunities, and
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\\'lInl l0 ensure that thcir children h""ce,ery Opportunity 10 ~chi.,e Ihe Ameri<'lln dn'3m ,
55
New Marlcc"!' '''''<'lIlm.nls can o"ly b;.' made In communili~ .... ilh a ronny I~,d "fal IC'II51111'1t or~
mcdinn io.."{Jmc al or below 80''"' nfurch
'tali~ti""sho"
.nd
lo\\'~r
medi~n
thol New i>h rke\" inwslmcnL.
income. While thc"S<: a .... Ihe minimum U'f'Cl>holds.
l~llCnlly
reach conmlUnilie, "ilh (b:pcr pm-eny le,eI,
median incom .... than ""'Iuim.! t>y ' 1"lUle. In Il,cl 'i<:"""1yfi\'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.

nll"~!ll j,;w.<>\ I.~
Aprro-~hn-~Iely~. of tk Deli,-iIY is in communilies "ilh unomptoymcnt
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

our $lalC. The r,,,,IId like 10 highli!Ptt .. th~ River Valley
OWner.; or this local food business lInd coopcrJti'"e. in
n~d
Mark~t
COIlp lc ofpmj ...... ts from
in Northampton. MassachuSC11S.
,;ure fi nancing (II" the "'oil< ncN..'<i 10 hOIti"lheir b115incSfi. With a

~paCt ~nd
N~w
JII)t
Ih~
Dhract investors '"
Mall<ets Bward. ihQ.OW11Crs
opct\ a fooil coopc-rath<c
rroo.\11ce and mClll frum dozen. o floca! fomlcr.;. tnke ..""t r,JOd "'''''icc. and. siHl/}wn
I>cnernting relail "!,po11\,,, ities in
'n..:
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
wcre ahl~ to ,upport the enostrui.1ioo ofthc qunny
th~!
fealul"t-'S
c~fc,
In odditi,,,, t"
at,iI."Ullural tC11lcrof MauochuS<.1iS. the River Valley Market is a
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(rue wmmun;IY gathering place. with hundl"\...ts of3l'l:a rcsidcnl$ and tourists COnvC'1!ingon its food stall~
56
and
lakc-O}~l
Ri,~r Vall~y
An()\h~r
,;Iand,; on e.'et)'day Oflh" .wck, Kc.\iJcn15 from 1,)"'nS and cilies
are
t>;,n~f'lin~
from
lhi~ fa~il;ly.
projeci "ilh which I know
IIhkh eQUld!l()! aUrael pri,-alt
Co ng",~';m~n Nc~1
111'lyokc, With a New Man:C1S ~ward from Ille

tl",;ed h,"3.llh
is familiar
~b~h"""llS
i~
l~n'lu~nut
inv~,t"'~nt
the Connc~t,Cul
on i.... own.
the Holyok<' Heallh Cenl,-r l'rojei:1 in
II"us'''1O
In\'~Slm~nl Corpor~tio"
{Mi ll e). a
",."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
and
h~s
been
"ced lor
ha~ b..~omc
dc~;gnnted ~ '-m,"<lic~ l ly
one
~fthc low~"St
inrome l'om munilie~ in
Ilnden;c.....ed nrca", The <1<.....' facility
hu~
Massachusell~
helped 1m a sub:;lanlM
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
Scwr~1
u~mpl()yl11cnl rot~s,
bloch from thl' HolYOKe Hcalth
C~nt,.,..
a new tOmpUler C~""cr is a bcnefK:iary ofNI:\I' Mm..:.c....
InYC$lrn"m. 11,c High PerfOnl131lC<.' CllIIlpuling Cenll.,. is a 5168 milli!)"
t~hnology
conSl",ction at B r"nller industrial site in Ihe hl..rt ufdowmown, When completed,
New Eng.land-~ lir;1 hi!!1>
pcfrommnc~
co",pulinSc;-ent~f'iw(lfId-w;de.
fiw
MaSSll"huS<.~lS
l...>mputinl!-eCnl~r and ,,ill
r~nk
am{>ng the
hllb undc!'
t)w
~OO
fllcilit)' will be
mllSt powerful
11", .;nIler waS \kvd<!pl'd throllgh a PlII'ute/public panllmhip including
uni,'c""in,," _ Ilnr,-:u-d University, Ik Mai<S3chuscus Inst'lutcofTcchnology. lloSlC>n
Uni,'ersity. Nonheasrclll Universi ty. and the Uni.-efsily ufMass.lchusctlS - as
wcl1.~
Cisco Systems and
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57
E.Me COrpllrntioll.
Ol'~r
600 con~tn>Ctioo wol1;er.;
project. which has allr~ctL"d
I would
lik~
~ttenliol1
h~"e
throughout NL-W
Mal1;~t6
to de><Tibcl aUQ!hcr New
bcl!n cmplo)'ed on this critically imronunt
En~dalld.
inYeSlm.m in western
Ma6""~hu)ell5.
The l"ity of Pius field
is located in the hCariof the Iklhhi",,, - all imronan! tr>urist destination for IIur ~!:ltc. The city,
economy lkclill"d ,:harply i\Cvcnrl
jobs out of5!alC ,
UnCllll'loym~m
d~"""1Ides
incrt:ase<l
aso wherr Gon..-nl Electric dOM'd ils r""ihlic-s and mlll'<."d its
imm~diald)'.
as did the poverty IeH!. Sintt that t;nte. city
of11dal1i hn"c woncd hord to anmct rlCW bu~inC!\~. =atc a stron~wr 10ClI1 "nllIll),. nnd
panicipat~
in tht
wurism indo,t!)' in thi$ 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
cultural
~)'mbol ofth~
e~mer
Shonly aner
ru-cmL'fgence off'insfidd.
:,fl~'f
many diffieultdccadL'S.
a~
til<> ~onomit and
oflhe llerkshiri.'S .
tI,,, Colonial Th~3ter""'torat;on, 'he city benefiled again Irom a New Marh-u award.
$17,2 milliOn in ftnarlCing i"mm MIll e. lh!' SIX-"""""n
Be~con
("i""rna
Com"le~
Wilh
"'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
new visitl)fS a year 10 tlJ.c 3rcu. Thc Cily eSlim;ltcs lhat 45 new busincsses have O)JXlll'd
rt'SlOrotjon~
11m: rompicled. The
Pittsfield Do"'rl\{lwn foot trJtTic

~lorcfronlS
"'ell-~noll n
h~s
~~ ~OO.OOO
si!\~e
lhe
Barringl"," Stuf;c Comp.:my rclncat<."d tn dOllIlH"""
increa5<'d.
I\:t~il
sat.'S hal'c improved. and "3Cant downtown
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.
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58
I hav<,g'nm you M~$sachu""n$ e.n mplos be<:au;;e Ih~y an; besl bl<!wn 10 u,. UUI Ihou .. nds orNew
Markel~pmj""l~ ~xjsl
projc~l$
fn COlllllluniuo:.; Il,mu!;houlln.:- ""UnifY ~ ~od. In
ha\'c demonstrated Iheir ~ ignHi=tee and their
Ihe~ll<!n
>)lUn o)"n"w },0";Ir"S.
1k<:S~
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<tnd ~
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"!!;

.hon
lim~ Ihc~
'r"" Credi! and Ihe Low Income l'lousing r"" Cn:diL
But in ~'C
",."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)<"IInt Ty Ih~ COSI ofborrow;lIg. Betwn April20!)9 aTHlIX"Ct:ml><:r lilli ,
VerDate Mar 15 2010
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then: w"",,, o'~r1.27~ >eparalc ;ssuane.,,; nf llmld Am~ea Oonds. roising over 51 ~I billion forcapll.1
59
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
Acccl 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

laoorutories
~nd i~
ofM~s!i:lchu,.,ns
t:luilding a T'CW Commonwealth Iionors I!esidl'"..,e
AmhcMlI - mmvntcd IWO
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
abon~d ""~aUSt!
Within
th~
Am~rica (I"nd~
program ~\lUJd help
~n~urc
tru.1 projC<:ls 3rc nQt t<!11nin:ltc..J or en,n
of the uncertainty ufp",j~'Ct fu\Klint.
Build America Bood I'TOllrJln. OJfll<n.">S cswbli,hc..J the
combined nAtional
\'{>Iumec~p
Rl,\:o\'~..-y
Zone Bond Program, with ~
ofS25 hillion. The Co",mon,,~al1h of Massachu~ts waflallotte<l 5557
million. GovcrTlor Dc .. ~1 Patrick ~ign~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 conIrolled by Ih~ 1'31rickMuTnlY Adminlw"tion
with Ihe Recovery ZOlle (I""d

e~pand
Ihe;r e,li~(;n!;
I'rogr~m
"'II, ",.,d.
t..ing must allrdct;\,e 10 companies thaI wanted 10 rehabilitate
o~
rllCi1l11~.
In Lcnox, Ihe Al tegmne C,)mpany. a fumilyowne..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
VerDate Mar 15 2010
08:41 Apr 19, 2013
!Orr-c\o""d buildins. The
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Mine",1Cosm~tics company in Great UarringlOn benef.led fronl
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Insert 80206A.045
~xp:lJ1d"
60
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,
Congrc.ss 10
~xle"d
w(' ~trnngly urg~
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.xc.~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
"'Ia in.d i" Ci,y's
Squa",
di~lritl
Emp"wcml~m
1.j.IKIOJ<lb~
lnnc. a diversca",a lhal include"S
fi\"~
had bc<"ll
clth~r
crca,c.l or
neighbor;'oo,!.. The Newmarket
in Ihe neighbortll)()d of Ro~bury is un ",t 3mplc orhow Ihis program lransfonned a blig.lnNl
a"'3. fiesl WeSlern HIl'els red.:velop(."<l 3 IS0')'cor old. ind",;trinl build ing inlo ~ en-mum hotel lhnt sc,.,...",.
the BoslOn .Med;c~1 CC1ller. Wilh 5t""(:r:l1Nllcr such
proj~'CIs. thi~
thriving 101:31 CCfller uf commcll:c. According 10 n 2010 r<po<I on
ml,a is no longcrdo:solalc. bUI is 3

ih~
Boslon Empowllnnent 7.un~ h)'
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61
l'<'SCareh~r Jam"" J~,,,,i~~:
"A
k~y
accomplish"'''''' "ftlll.: Emp<,wcn'!<11! 'lon~ is thc~gnir.can~ ~ili,' "
cm.n~e in pcrccpl iol)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$Cholt! incf/me al"" ot,tp.<'<:d the n:st nftllc city. Th~<;c are nu small
m.nm'pli,hmcms. and Sl1"ak (" Ihe ;mrort8ncc
authority. Atlllilionally.
twol)I~r
"r c.~tcndinl! the Em",,,,,.,nnen! ZOO"" and their bondin!:\
cumplimcnla,y pro~"''''s. (he Emcrrn,." C",nmunity and
Rcn<'w~1
Communily programs, wcre \Cnninatl-d Bllhe end of2010. Many of the'S(! al\:as uf economic
dim"!",,,
Were located in rural areas. and ('>luld .... ncfil from. longlerm e.~ltnsion Ihnl would .'flsure emaimy tu
'n>osl()rS in Ihuse ....,a .
l'ht t ow Inco me
Il o u~ in g
The suCl'CSS<'. uflhc New
Ta. C red it !'.ognun
Mar\;~ LS
Ta.\ Cn:t1i! f'r<.>gram art panicularly J1Uwcrful . !:lU! lncootcOtllCIl
genera ted by tile Low Income I i ousin~ ra~ Cn:dil program ure t:qffiLlly po""rful. AUlhunlw by
Congl"C'SS in
Ih~ T8~ R~fnrm
ACl of 11186. 'h~ Low I~co'nc Iiou~ing 'fas (,...dil progrum "liS crt'a,...d,o
,pur tile dc, dop<",."t of bIldly ,I<le.l affortlahk rental h(\U~;ng. It lias ulliloohtc;lly achk,...d th~! 1;001.
Sin~c
ilS au!horillltion. the Low Income
H,~,sing
'l"a.\ Cre.Jil has created
()r
pre""n'e.I <lHr 2.5 mHiion
unilS'ofrental h,m"ing. No ,"h~'f (CdL....I "''''''ing progl'llm - and cenainly nu sl~tc-fu rnl...d housing
p",,!:\rnm _ call cquallhaL 1'<'COI'd. A~ 'he Ii ouse con.idel'$ lax reform n.eru;ul\!S in 11", cO!n;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
~n surt' ilS CQ<ltinul-d SUccesS.
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'.
62
The Lo" Intomc- liousing Tax Credit is rKIIjW;! a hOIl~ing proJ::ram; il is Bs ignifican! co",munil),
dnelQpm~nl
prog":,"l. The credit creatcjorn..
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$. U.... credit crc3l"l'jubs - million. ofjobsowr lhe lire uflhe progrdm. In M.ssachu!le1I S
.I\I!>e. credit mVllrds hD"C helf>ed ~reall. ,,,'cr 4(1.000 jubs - aoo ih31 is iust during cOnSlmctioo. Once- a
(lfoje.:t ha, Ix""n buill or rehabilitated. il creales pcmml1entjob;; on ~ilc
_jj~
f(jr propeny managc",.
so:rvk-e <"OOfdinalOt"S, "",imcnancc empluyees, und ullin' SUlff.
Admi,)i~lcred
11exiblr.
allhe Slate k"d by housing "edit agc"ck'S such asou, I)"panmenl, lhc prog"''''
Th~ ~redi!
i~'
highly
can be awarded 10 ~Il kinds ofprojC"lS: !WW cooslrw:lioo, r<.:habllilalion, und
preservalion; projc'Cts ror f3mil il.'"S. for seniu!>. for \ Clcnms.. for p."r~m5 "illt disabil ilics. l"or indi,' iduals
"ilh ~enuln 11e..'dS, for Ille formerl )' 1l00nelC5~. The credil c~n support rcnlullmu~in~ lhal i~ complelely
~tr.)n1ah1c,
si de by
bul il can
~iIk
~Iro
SlJppon min"tl.illCOlnc "'"lal hQUSi!ll!. '';It.
~(fonlabk
unilS Bnd markel units
in the smne building.
Counlll'1\S housillgCTedil proje<:1S bal'" hnd major impa"l$ 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

Iill< rolls.
noliee.
Ih~ n~ighhQrlwod
l"i~
underu~d
propcrtie5 Qr( r(11,1bililaloo and rclumed 10 lh~
impro\"l'S _ and privale i"'<.'Slurs. always alen for opponullil;"5. bo:~" lu \..I;e
i. ""mmunily dc.\"~lopl11"nt at ils
be~l.
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"
63
In lIur
1~'1\c.."
ci,i",,,llOllsingcrcdil
"",iro"m ~ma l
become
proj~clS
oltell are buih Oil uri"", ill_fill siles - si les Ihal frequ"n!ly ha.-.
h37;lrd, Ihl"(ll)8h illegal dumping and othe'1" criminal .cliviIY. In Ihousand. of
Amerie-~"
n';ighborho.-x\." til<! I~X credil
~ddi li"nal
inH'l;lIllcnt - "..t.,illlp[lOrtllnilil"S or markel ratc hQusinl' - in OIL' ~urrou"ding blocks, This is
C<IIllmunil~ d~"dOJlmem
T,,~
in Ihe troesl
pr~'l'Um
hus broughllhe.-.: ,ileS to lif'(, and hM h<:lpcd SfIur
j,efl~~.
credil projl'\:ts thmul;houtlhc counlry kJlunl n"W omce. "'t:.lil, Or commercial space $erving
rc.idcnl>"aflhc
pr<)j~el,<;
propcn~
constitute a
bUlalso the bn>a<lcr communily, In addilian,
rI:~dy_n",dc
I~
mi,i..'nl$ in hI/using m:dil
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
cllmpri~inl'
~rrordablc
~i""e
'he program b<'gln, To dmc, we
llUt cm:lilS 10 574
pr(tj<"Ct~
3'1,016 unilS Io<:ated in e,<'I)' ",giM ofllw Slfile, Appn'ximatcly BS )K(eenl Mille
t<l i"di" idulls or houS(Cholds earning no 1lI0re Ihan 60% ora"",
group im"l1d..d byCol1grelS when Ihe program

n~'Cdy
h~vc ~WJrd..d
mcdi~n
wa. aulhori~..d 26 yc-ars ~go.
'JIlil~ are
income _ the t"rget
The program
~V<$
very
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~
VerDate Mar 15 2010
08:41 Apr 19, 2013
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Insert 80206A.049
ar" tlUt high_payingj"bs - oft .." i;>e low $50.000 -- \:Iul lht5"jQl>s are in ,n311Y "'ay~ ce' 01ralto the c'\:'1Oom),_
64
populali"n._ The Commo"weal~ , ofMllS$: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
pol ic~
VHl.g~
" '111
buill in a wcanl
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 wil l 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<",:. VtlcTlln~, Th~ fir.;t p",jccl - aliiO fUllIkd by DHC[) ~nd other public lenders - is locau.-d in
Pin... tield. MA . and includ,,~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

h()mcl~i.<
ha~
juS! awankd
In.~
credilS 10 Ple~sam SIr~~! . a his!ori. rdlshililal;on rrojeet for
,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

pt'Op"niC'S for homdess
r~lIlili~ and
d~,doping
individual!.. irtCluding humcle-s. 'L"teran .
and
"'.n~gin~
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
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"
65
At this time. DHCD is working with Ihn."<: add iliwal vc!~rao~' pmjt(:l&\\,hru;e spon><lr.l intend to
cn.'tIilS as the cO!'flerstone oflhcir tioancing. On behal f of the
IXp;ortm~nt. 1 wanl 10 Id l
~k W~
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!
u~ 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
of-state own,," "hll pro"io:kd mininla l management and ",acted slowly.

within their pmpen i.... Th""" P"'l"'rtk'S were n"loriO!", within
tl1 ~
if~t
haJ bc<:n
pu",~d
by out_
all, to criminal activity
13rgC'T Sprinljficld com m"nity and
eonstituted Bdrain 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 o~er m;magcnI<'IIt in 2006. As ",habil itation
got untlerway. Fin! Realt~' s nlwnagernent co mpany focu".,d ,hurply on chun!r.inll. the I>chavi<)( of the
rt'Sid~~I!.; by enforein!! rent cull<.'Ctions and leMe t."""$. City ullicials ~nd the police dl:p,:tnm~"tlt h~~c il11
'err happy ""th the results. inch,dinll a substnntial drop
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criminal actll'lty mth" neighborhOOd.
now has linis.hc'tl
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!he Wonhinllton nei ghoomOO<i. This is ~ tnt" cummunity development and comrntmity :Vil31i2Jtion
pmject. The appearance 'lfthe ncighbochOQd has chnnged Mll.nilieantly, a~ has quality of lilt for it"
ft'SidL~n$.
Nu pUlgrum DlhL" ihau the Low (nL'OIne HIJUS;I1J!. ra.~ Cr..--dil is pow<...ful CUIJugh 10 SUPI)()f\
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66
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,
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the HOU$inll nnd Econ omic. R ~o"cry Act (I IERA) of2oo8. When the It RA
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~ould
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~~tcr accum..:y
thee lal!!" nf!h~ 9% er..'<lit to pril'atc inl'estors,
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introduction
ofl,,!;i,I~lion
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~i ncc
new allOCalions ()rHnu~inli! Cn:dir~ ~3nn ('1
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~upied wilnin Ihc n.e~t year ~nd ~ h.lf. !'ropeny Ik,'clupo::n; recci,ing 1l1l0C'3tion$ of credits in
M~,",d\U,.,1t..
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amounl ofequ;ty that can be r,>;sro for

diffieull 10 develop
thi ~
llou~inl!
housing. We ask
10'" credit amoun t. This has dlcCli\'eiy reduced the
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fixed """ I"Jle be cxwndctl.
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67
Condll,lon
In condusion. these cotlltllunity development laX crc'tlits prmide 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 nflhi scounlry'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>cbroadcning eX<'l'C'>C)
to l<m~r Ihe lop cO!pOr.l1e Bnd individUIII mlCs.
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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 thinkcan 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 dont.
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 Jims workload, but it can be asked to provide such
information as available.
I should note, by the way, on that particular issue, I dont 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 dont 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 buton 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
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doesnt prove the effectiveness of the policy itself. And so for any
given credit, for example, there may be lots of energy production,
but that doesnt 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
dont 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 programs 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 GAOs
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
experimentdivide 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 GAOs 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?
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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 theanswer 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 GAOs 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 dont 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 committees responsi-
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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 didnt 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
GAOs 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 doesnt 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 Jims 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 meI 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 its 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 reflectthe 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 dont 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. Marchants question on energy,
I am sure you were glued to your computer screen when we had
the last hearingit was a very highly rated session we hadwith
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 dont 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 dont 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 dont 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
provisionsand 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 cant
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, lets 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 shouldnt 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 sectorthose 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
creditsLow-Income Housing Tax Credit, New Marketsthat 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 dont know if you have ever done that before. Have you?
Mr. WHITE. I dont 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 wouldnt answer this question. You probably couldnt come out and support Mr. Gerlachs
amendment to the appropriations bill to zero out HUD grants and
transfer them to the tax creditjust 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 problemwell, 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 policyMr.
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 doesnt 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 Credittwo 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
thatI 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 dont 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 werent 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 Donalds 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 gentlemans time has expired.
The gentleman from Texas?
Mr. MARCHANT. Thank you, Mr. Chairman. I will be very brief.
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81
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 throughand I believe we willas 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 wont 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 todays 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
(1(m-225-5816
om"" Roilding
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 of rcnewing 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 st!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 excl udes b d~'lIliction for sales 1:l)[E'!; - pcnatiling residents
OfSlOlCS \Iith 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.
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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
83
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84
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 u~Braled facility solutions thaI a lso provides
energy effldencv home and commercial retrofi ts across the CDuntrv, I thank you for the
opportun ity to e~press support for thl! restoration and
1'~lenslon
of residenHal and commefl:ial
energy efficiency tal credit$.

Plea K' 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 lessexpensive and lessefflcient alternatives. It ha. proven to be an
important tooi to promote energy effkiency by help ing owners aHard nigher efficiency windows,
doors, HVAC s~tems, hot water heate~, roofing and insulation. It h as 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 o f 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 Comme rC 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 eXisti ng building as the baseline
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for a performance calcula tion 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 rewar d those real energy ~avinss. To ad~ance the country's enerRY security,
significant enersy-efficiency imp rovements 10 older building is important.
85
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86
May30,1012
The HOIIOfllble Da ve Camp

Chpir
Commlltct' on Ways and MeDlis
U.S.llousc of RepresentJtivC5
Wa shingtlm, DC 20515
The Iionorabic SandlT M. Levin

Ranking Member
Comminee on Ways and Me311s
U.S. Iiouse of Rcpresc:nt~tivcs
Washington. IX" 1051 S
Th~ H ()norabl~
Tb~
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
Honorable Richard E. Neal

Ranking Mcm i.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 Le vin and Neal,
We, the undl'l"Signlxi companic~ und OfgIlni7.ut ions. 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~rs money on Iheir
energy bills.
TIli s 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,,,i t!!lCy
Improl'cm"nt costs (up 10 S200 for windo""SI, urn! t1sed amoonts lor sJl'l'Ci fk-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 support ing 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.
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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
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 Corporlu ion
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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88
.,,--
~""'''Ciln cleaning
[".tltute"
CommenLS Rel uting to

A Framt!work for Evaluating Certain E.~ pirillg T ax Provisions
House Committee on Ways and Means

Subcommittee on Selecl Re venue Measures
Ju ne 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 suppl im nfingredienlli and packaging til [hO!.e fQm,ulaml"'li
~s weI! as th~ d()m~"Sl 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 iaJj e)(t~nJ~n; i~
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.~ cSI~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 i ~ 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 s hould be consid~Nd ripe for el imin3110n or jlm.ndm<~'\.
c.g., I"'f)I...work and

impacts". In Ille III ex tcnder.;' conlext, il 5....,,,, $
reasonable lh~ 1 ~n BnBly~is of polent ial 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<tuity~ ora cn."1Iil eould be anaiy.wd and m:ldc poln of tile policy debate .
10 11,, rcgul~1I'ry arena, agern:ie< are l"I.><juircd 10 as:;;~ss d"5ig"'H~"1I f"CIO'''-
the emironment. when delermini ng
regul~l!)ry
EKumplcs of .."tlmpeti[i\'c impacts In.-evah,,,!io ," could indude government funJingof

focililieslprOlJucl~ in di""'l eOlnp<'1ltion will, e~iSl;ng privale sector caJXIbihlie, us well as market
dj~lonions s uch 3$ rJw nmerial supplies and ("(I~IS. Analy:l!ing, the Nmpe1itive iml"'ciS ufa lax.
eXlender WQuid ~Ilo'" pol icy n'"k~rs 10 belle, !argcllu credits for n'aJ<itnum benefil "nd
minimal ham' 10 ~Xi5ti"g indW;lri~~.
w.,,"-, DC 20005
- .......'""i'~" ......9
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\l.lll S~_NW. SuIt.16Il
89
,
The diNldvanlagcs crcuH:d by tal( credits ClUl crcatc cxtrtlTldy stressful conditions for an
e5wbli,hcd induStry wilh Ih~ potential 10 fo,\l-r sign ificant. 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 ~i ven e.~tT:lordin3ry 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 situJ tion ~'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 Un il 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 C ll11\:ndon !look-vard
II PH(l.I
Ariington .. VA 12201
D127@oomcuSl.nct
571-24'J-Q118
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90
Comments for the Record
Hearing on
Framework for Evaluating Certain Expiring Tax Provisions
Steven Nadel
ExectJ!lve Director
American Courlcil for an Erler9yEfficienl 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. In ~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 substantia l 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 expl icit budget for ta x 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 incen tive_
Thl.ls. if Sto 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.
Regard ing 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.l ld use limited dollarli in ways that can use "jujitsl.l" to leverage lasling
chaflQes in markets_
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Rece nl examples of such tax credits Indude the energy efficiency appliance la~ credit (Section
45M) and the new homes ta x credit (Section 45L). In the case 01appliances. 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 eligibil ity levels to De Ugnlened several times so
that incenti~es are only available lor the very mos t efficient proctuCIS on the markel. WIth
91
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
e~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 residentia l 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 substanlial ly 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-la ~ -lncen!ives.
Based on this analysis of experience, we recommend that future energy incentives;
Target energy-savlng equipment a~d practices wilh substa~tlal e~ergy saving s and
talget energy sources that can produce a SUbstantial amount of energy o~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 sa les:
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 eithe r 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
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'GAO. 21)11. C""rlJ~ CanJ~fWf!a~ <mdOi""'f~ CI)c"'J~, Faeron laCof'.id~r i" rl!~ ~<ig~ O/ IM /OOfIlnJfi"~ ..
E....'Vy "'Of}t!nvCr~'1oI. GAO-li318. W hing!on. DC: Gene r.IA<oountonK Office.
92
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93
Statement of the
American Farm Bureau Federation
TO THE HO USE COMMITTEE ON WAYS AND i\'IEANS

HEARI NG ON FRAi\'1EWORK FOR EVALUATING CERTA I N EXPIRING
TAX f"ROV1SIONS
June 8. 2012
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"' __ """ __ '_":_'.>IR"_ "'" __
94
The American Fann Bureau Fcdcr7llion we!comes lhis hearins providing an <'xaminalioll oflhc
rl':lmcwork Congress ~hould usc lu !'v~ I 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 " '1'11Ixin!!, of famlS- 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 plann ing.
3efOfe discussing spccilic provisions, I"arm Burellu would lik~ tn cmphasilc Ihe impnrtanc~ of
eXlending the cu=nl l"Stat!" ta.~ ".~emptJtlll . This is and has been al or nCar th~ top of leglslali,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, bui 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 long-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.
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With hea lth insunmIX premium s ()fl the risc lind bencfits on the decline, sdf-employt"d individuals.
including must ramlcTS and rnnch~r~. conlinue 10 find ;1 difficult lu ubtain an d 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 UIXlS.
95
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 ~-quipmeolinl~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 Agricuitures 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. Fi ve-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) i ~ owed. ~nd iihould be reinSl:lk"tl. eXiClld.:d and al1\cl1dl.'d 10 ~O\l.'r new
~Ol1traclS 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 chari table 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.~illg 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 i ng) c~nlake advantage of lax ineCllliyes for
donaling food,
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96
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
e.~ tctlded 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.
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97
June S, 2012
Honomb!e Dnv~ Camp

Chair
Comminee on Ways und Io. leuns
U.S. J Jou:;e of Kepn:seIllJli~cs
Washinglon, 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
nil.'
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
nll!
I~onor~b!c
ral Tiberi
Chai,
SubeOnlminl'C lin Se'lcct ReYl'nuc Measures
Comminec on Wllys and MC:lns
U.S. I10o:;e ofRepre$CIllJlivcs
W~shil1gton. DC. 205 15
Dear ChuirnH:n Camp and Tiberi 81ld Re-prcscn!ativcs Levin and Neal.
As you l"{)JJlinuc your onglling re"iew ofmx cXlendlTs, we urge you to pt.'rl11Bnently extl~ld lhe
mMS Imnsil oommuter 111.\ benefit (~'Clio!l 112(1) in Ihe 13~ code) m the level equivalcnl 10 Ihe
monthly p;lrk ing bcnelit. Originally enacted in 2(109 as part ofbipartis:m lcgi~I~lion. this
provision. which cxpir~d at the cnd of Ins I ycar. helped CUI comnlUling costs by e~tab1i~k;llg
parity wilh the Ulx-t'n.'C p3rldng bcnciits available 10 cQ"lmu(("TS who drive.
Thrct, years ago. COlIgrc$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 bene fIts 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~'stic 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. Addi tionally. commutcr bt'nclits arc an att r,Ictivc Iringe illcClllivQ
ofTen.'tI by employers.
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As ~uch. failur~ to c.~ 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
n.,."
au",,,,,.,. Co.......<:01
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r:iir.iI Sustainable
LLMEnergy '
'''' '''' -' ~----
Statement 01 the Business Council for Sl.Istainable Energy

Subcommittee on Si!lect Revenu e Measures
Hearln, on a framework for Evaluatlns Certain Expiring Tax Provisions

June 8, 2012
l~~
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Tho Co .. ~tiI 'f\d I.. "'."'..... ~ ..... I>t.n 1 . '"eof"lln~"' ,""" . . ... ru ""...,.. <leon "". 'IV....,~' 1.' 0
.m"",l>0<1<..., '"' ",Iorm""" lk Cwncillo wWIIni to ""8_ I(, <I"'.><Ion' ....... ' _ '0 >lfuel ...
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100
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101
Commen ts for the Record
!louse Committee on Ways Ilnd Means
Subcommittl.'l.' on Sel!.'ct Revenue Me:ts ures
Hearing on Framework for Evaluating Certain Expiring Tax Provisions
Friday, June 8, 10 12, 9:30 AM
By Michaci G. Bindner
Cemer for Fiscal Equi ty

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 mi litary 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 ESO P continuing 10 be e.~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 ilike Net Business Receipts T~x lN BRT), 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 (i nCluding people who fil .. without payin~), the eorporat .. in~omc 1a~,
busin~ss tax filing through individual inl'ome l a.~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.
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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 of cncrgy
(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
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~ gencril l VA TIi~e Nt1 BusillCS, R.-ecipts Tu);. we
suggc~t as JXlrt o f our comprehen s 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~idy 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
CU Il'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. Thec hullengc ari si:'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'ities 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 VAT 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 l i1~ 10s~t'S and
privatiz~ profit s through Iht NB IH would ccar.c 10 exisl "'ith the tax it is replacing.
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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
Contact Sheet
Mich~cl Bindncr
Center far Fiscal EquH)'
4 C anl~rbury Stjuare, SuiI<' 301
IIl ex~ndriit, Virginia 223 (14
571 3348 771
ii'(~!t'I1u,\)'@k~p~on , '""
COlllln luef Oil W AYS pnd I\!~a ns

SUh COllllllilltt on Selecf ReHnut I\!ta,ures
!lea rin g on Fra mework fur E,'sluating Cerla in E:l lli r ill g 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 an d/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.
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104
Oty 01 Glc"~I~" d
lJep'''''''''"! of I.., ...
601 Llke<idft Av .., Suile 106, CI~,,~13nd, Oil Hll~IOH

f216161>4 -4 50~
1I,s. IIOUSOF REPRESEN1'ATIVF.5 COMM ITT EE ON W AYS /\NO MI!AN"S

SUBCOMM ITTEE ON Sf.J.Ecr Rl!VENU~ M ~ASURES
6/8/12 11 ~ad n g
on F...",cwo,.k ror Evaluatlnll Ta~ hlende ...
POOl -H urlng Written
CQrnrnl Ue~
$Ubrn iu IQ!1
"Dramatic "dverse~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 st ra ight-furward, 'rax-toob und~r prllgr:llns like EZ
and NM1'C are admittedly not fully So~\-effeCllve pr cost -efficient; yet. they are m"der~tely
productive and. ImpPrtantly, th e only tools cu rrently :1V~nable or In-play. It would be not only
counter-productive; but Oneill,;ve ~v;dence ufa coal~ste""" or Owardke and hubr is for Con s ress
not to extend the useful lives of th""c vital tools. Havti,ai n"d vOur anenl ion?
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We arc call<><l. by virtue of our respective positions. experience, and intellect to euga!:e in Informed
public discourse ..,eking dnigent disc~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 duo m readi lY 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 th e
second -largest and only robusl nalional c<unomy, China, is nuw seeing a ~ignificant 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 co ntinue to do what little we CII n do and
105
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 curr~nt scope. Unless
and until pr~nted with some viabl~. effective alt~rnative t"",ls, ~!!!il!tl\.ten..!Uh~P tf,Ul;e'!..tQ.o l s
!Il..!'tMIC a n d.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 bes t: 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...
~e_ mustcJarlf)'..ourJ houg h.ts_a n d_an a ly_s i s .
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
exhortlt lons 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 mu surernent. rt!portin& ~nd mnnltorlns effechvellc.~s of such pros",m 5 lIrt!,
g.. nerally. obluse and sustepllhle of manipu lation and mlsiotcrpret;,Uoo, either unwlttinll or
contrived.
liE: EZJ~.rogJ;3 n l.u"The Offic.. of Inspector Gener~ 1 (O IG) 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
progra m 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 ~ nd Urban
Deve!opment (HUD) is fu lly engaged with proscriptive im p lementation 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
commun tfy bas .. d development organizations, over tile past d<'Cade a nd 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 a nti 3 DDL Grant of$20 miliion .
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R.E: NMT C PrO&~B3 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
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107
ClearStack
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 helpfu l In allowing uS to demonstrate Ihe ledmology . II w"s proved It) a demonstration on
a small steam DOlle. at Ihe Liocolo DevelOpmental Center", Ul1Iln. 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
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.
Creat'OIl Act or 2010 10' al least
This Is an easy 18trof,t technology that C8n diminish Ine number of e ~ 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; Wthese 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 [nl o 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""' _ _ .. _ _ _ ... _
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www.c lea,."r.c com
108
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~.n el
ClearSlack LLC
John Siegel . Principal
6tOO Dutchmans Lane
9"' Floor. Sul1e 900
Louisville. Kentucky. 40205
502.s846022
J~!l!@~~ars\acl<9!!'.
""'_ f"-......J_ ..._... "' .... _"" .. "'""" ..... _oI_ t.." ...............
jo._ . .,_. . . . . _
~
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www.clearstac/r.com
109
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 coMiderl his 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~
incenlj~es ar e 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 ha s been a
significant incenti~e lor homeowners to choo~e energy efficient products o~er less eKpeml~e and
lessefficlent alternati~es. It has pro~oen to be an i mportant tool to promote energy efflcienCV by
he lping owner.; afford higher efficiency willdows. door~, HVAC ~ystems, hot water heaters. roofing
ilnd insulat ion. 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 ronmentlor those
In the building indu5\f'1. A return to those levels would further support American jobs 10 the
residential building sector.
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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 bipartlsan Cut
Ene/'iY Bills all10me Act" (5.1914) would create the B E tax credit --11'11' first residenlial
perfofmance based tax credi t given to homeowners who make energy efflciencv improvements.
As a performance ba~ed incenti~e, 2SE would reward energy sa~ing le~els rather thin specifiC
products, thus ali8ning taxpayer dollars di rectly with publk policy objectives, crea ting significa nt
energy savings and Job creation. The 2SE tn credit would lay the foundation not only for short
110
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~eotat 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
!a~.murdoch@effotiencyf;rst.org
Jun ~
8 2012
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Title of Hearing: Framework for EYah,ating Certain bpirlng Tall Provisions,
111
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

Committee on Ways and Means
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June 8, 2012
112
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 hungerrelief charity With a network of more
than 200 food banks In every state servIng over 60,000 local food asslslanct' ilgencies. Feed ing
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 healt h costs as well as Investing in a healthv future workforce.
Feedl .. g America network members utilile local and Ilatlonal publk private partnerships to
ma~imlle 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 manu factured food donations and a sta@.8ering150%
Increase in the amount oflood purchased bV Ihe Ilelwork.
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The. food donation ta~ deduction (Internal Revenue Code Section 170 e3) is a critical food
sourcing tool for Feeding America network members.. The deduct io .. 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 selli ng Ihe food to another retail outlet.
113
Sillce the inception of th e 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
corpora tiollS. This modification to tile food dOlla tion tax deduction gave small busillesses,
;ndudillg passthrough entities (Subchapter S corporations, limited liabilltv companies), the
ability to take the same enhanced deduction for th e 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 th is
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. Accord ing 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 th e expansion of the provision to Include 22 million pounds of
food donated ifl 2008. Howeyer, the temporary nature of thi s 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 .
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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 accoun t ing choices thai most farmers organiled as sale
proprietors use afld prevents farmeri thai are sole proprietors from lakillg the tax deduction.
114
liIstly, the legislation would codify a" Import ant 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 th e 37 mi llion Americans fed last year. The
food donation la~ e~tender and tile broader Good Samaritan Hunger Relief Ta. 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 donat ion
giving Incentives C corporations have had lor deades. We urge the Subcommittee to swi ftly
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 Constit ution Ave NE
Washington DC
202-546-7001
ccalvert@feedingamertw .org
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115
~~
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STATEMENT OF
COMMITTEE ON TAXATION
fiNANCIAL EXECUTIVES INTERNATIONAL
BEFORE THE
sUaCOMMITIEE ON SElECT REVENUE MEASURES
u.s. HOUSE OF REPRESENTATIVES

HEARING ON
FRAMEWORK FOR EVALUATING CERTAIN EXPIRING TAX PROVISIONS
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JUNE 8, 2012
116
The Comminee on lautlon of Financial E~ 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 lon 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"h lp.
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 eJplre d, 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 eXpi red during the carefUl a nd deliberative le@islatiw>
plocess on tax reform. None theless. 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. t ~~pa~ers lIave come to rely on these u.
plOYlsions when maklns business deci,lons. The research and de~elopment 'R &D) ta. credills such an
e xa mple. Wllile the R&D cred it hu been ~ proven Ince ntive for R&D Inye.tme nt 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 cred it onlv ranks 17'~ overall among the 34 countries In the
Olganllation lor Economic Cooperation and Developmen t (OCD) . 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 t ~a\
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117
R&D - ~Iong wl~h the jobs, Inve~~men~, and intangible properw
outside the U.S. ~t the expens~ of our ~ronomy,
~h a ~ ma~
result - will be conducted
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 e xtended. 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 u . ~. e.JKln, financed by
cap!ive finance rompanles are not p~t at a competitive disadvantage <omp~red to their worldwide
com petitors.
A more recenT tar e'le~der that the Commillee 0" Titxation believes shOUld toe e<tended il Ihe related
controlled foreign rorporatlon (CfCj lookthrough 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 the se ru le., ~ urh r~inve' l ments' would
(ompetitor~ ba, ~ d in many other counuie. do not incur .
b~ ,~bie(t
to Immediate tax that
, he Committee on Taxation al,o urge, Conjl ressl!> ""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 belie ves that expensin8 is an effective invEllment stimu lus
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~e r.
can ma//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.
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118
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
To202.626.1809
F: 97].B4U222
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119
@
.
FOOd Donation
Connection
p' 111M"'''!) ... ~ ....

Hearing on
Framework for Evaluating

Certain Expiring Tax Provisions
Before

The U.S. House of Representatives
June 8, 2012
By
Jim Larson
Food Donation Connection
Bo~
22781 Knoxville, Tennessee 37933
865-777 - 2398
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PO
120
of Food Donation Connection
U.S, House of Representatives, Committee on Ways and Means
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.!!!, degyctl gn fqrJood jn'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 nonprofit organizations.
The current economic climate has intensified t he needs of chari ties 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' suctes5lu l 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
th e 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 includin g 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!j101 encouragTng food dOl1ations by olfseulng the costs Incurred
by donors iind provide iin economic Incentive to donate rather Ihan dump SU~llJS food.
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121
Result In ta!laimes5. This provision results In a just tax code since non-C corporations
would be allowed t he 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!ub lic 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 t he retail price it would pay for a sImilar product.
Allow for proper Ln pl anning for non-C corporations and good stewardshIp of
wholesome surplus food that can help people In need.
Katri na 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 corporat ions. 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 biannual, retroactive tax extender approach makes it dillkult for potential
lood donors to undertake <ldequate tax planning.
!:!!U1..29 Permanemlyj._tend and ExPJ1~t he Charitable Deduction for ContrlbuJ!Q!!!.~
Food Inve ntor,'
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 valuat ion 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 Chari table deduction for 5 years, 10 mirror
the treatment of C corporations.
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122
Ta.~lm~1
fOe i~ uniQue\v po5irlon~d 10 enm lne 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 donation s 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;:\~
--~
"-
-- --
-----_.--
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.
,11111111
----------------- '-"---"'-
uo .. _
----
.. _
-,~
: 1--1 - - - - _.-,.--:-
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The ... cand ch~rt, Pa und5

Oonatn/, graphica lly
illustrates the Increase In
pound. offood donated In
conjunct ion with th~ KETRA
extensions.
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123
Cho,IU .. AnI.....
-r
____________
-,'----------------- --1f:ii:S~'"'=-
1,_ Chorill.. 1
In 2011- _
The t hird chart, ChQrities

Assisted, illustrates the
increased number of
orgarli~aljons helped ~s a
result of th e ~ETAA and
subsequent e~ten!ion!,
:1'----..loI~~~~~ 1
II I I I I
All three charts ilh/strate the grow th 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 nonC corporations Irom being discarded.
P!-rtinent History
The fundamental features of HR 3729 have been previously e~amined and agreed upon In
bipartIsan bil ls 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 Charilabl~ 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 I~. Subtommln .... "" Soc.I.1 SeC;\lfity .nd f .mlly Pel ....... Senal~
r;".n<~COmmiU"'" ~p"' m"",
U , lOO5.
In dosing, p 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 wr ites:
... 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
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124
meaL That Is lS00 free meals that would otherwise be thrown away if these restauran ts
didn't donate to our organization..
AS you consider the best ways to addr ess 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 redirect 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'lC
corporat ions 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 nonCcorporations 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
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125
f
Fuel Ce ll &
Hyd rogen Energy
Association
.lun c /l, 2IHZ
Cell ~ nd IIl'd rug~ " Energy AMindalloll

Commillre 00 WM)"S and MC"'I~
Suhf omm illce On ~ Icc ' Re' c o,,~ M c~s urrs
Fn ul1 cworl; for F.~ .. lualil> g Ccrt"ln F: ~ IJj ring Tu rro, isio'l ~
SIAlcmr nl
of l"~ fu~1
Ilou!i~
II cn rilllt on
The Fllei Cell alld l lydroi'."" Encr~ Associalion (!'CHEA) commends Ihe ConHnim:e for mn~io~ a mlloh
nffilcd reviewoflhc frnmcv,ork for eval,,",.. in!!, l~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 $I:\"cralla~ inte"1llives Ih3111re criricallO ensuring com;nw..d Amtrican Icalk'r'lhip in thi~
l~chnQlogy.
!'O leA is Ihe Inllle assc>cialion for 100 fut'l cell and hydrogm e"1lergJ indumy . Out mc",be",hip indudi.-S
fucl Ct'li malerial~. tompon~nl~ and !yslem~ m3IlufaCIUrff'l; 3ulomOliw companios; hydrog ..'11 producer.!
and distributors; ul1i~eni'ies, gowmmi.'I1llaoordlories ilnd agenci'-'S; and OII11:r cnd ~rs .
As you may I;now. fud ....,H~ and hydrogen enor&l-' l~hnolo!:il"5 dcliwr dean. rdiable pt.wer I() 1i.'lIdin!!,
and public 5<.'1.101" ~rs. ~nd FCHEA memtJ.ers arc helping to tnmsform our
cn,:tgy, .."C()nomic. and ~nvironmcnla) fUlun:. Our indU>lry h~s quietly bttome a ~ignilicanl soum: ofjom,
and l,<:onumic gro .... lh in Ihe US. o"~r lhe polSt fl'W yc~rs a. fuel c(ll produl"U !}ain tJrly ",ark~t traclion.
"fbc prosp'-"CIS for grow,h arc C);'''1>I;on31. This ;s an l1ncrsing Ame,.ic,"l 5UCl"t."SS stOT)' - AllllTicau
Il"<:hnology and Amcrjcan -mad~ prodUCIS domin~l~ the t~rlr co"'mcrci~1 fucl cell Olarkl1s IIcre and all
over Ihe ",,-,rid. ThIs is ~n cnefJ!.y !{:ChlK.ID~ wedDIt"t have 10 buy baek from,tIc Eu",p':~lls 01" Chincs<:.
Rul we do Ill"<:d,o fos'L"r i"o 3chlcve ma~imum grDWlh and increased c~ports 91Jd more Americanjobs.
~dg~ ~ol")Xll'""dte, a~de'l11ic
FCllflA is opel' 10 (be concept ofcomprchcnsivt ta~ rcfonn Ih.1l would simplify lhe la~ code and 1001;
forward 10 "'orking .... ilh lhe C,-,,"",illce 011 proposals ,hal could Ix put inlo pia ....., all ..,. ,hc e~lsliog: ctl'tli!S
"II' ,hdr course. Wcunden;land thnllhc li,u~ is 110.... and con,,,,,,nd Ihe Comminl"<: forWI;;ng lax ",nmn
and !llC prolif.....alioo Qfindividualtax crooilS 5..... iOO$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.
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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 e lTecu\"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" nr the 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
gOlcmmCni. Because. 1603 is lap$eJ in 201~. 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;'
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 ASQCiation suggeslS:
,w.,.
Extcndinllthc IMl3 progl1lm Ihroogh 2011 !>flthal we can be 5"rt thut ~apilal markets are
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.
r~Mcred
The Grantln-lieu i~ ,mly available ror PTe and ITe eligible CrOOirs and Ihe continuat;un of the
Wldcrlrinll SCalion 48 Pud CelllnVCSllncnt T ...~ C",d it 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. indutrial 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 g~""ratioo applieruion.<. they are upw"rds "r85% ef1icic,,~
Th~ Fuel Cell and Ilydrog.:n
credit:
EncrJ!...~
i\S!<OCinlion suggest.lhe liJllo ... ioJl. in reg"ds 10 Section 48 fuel ce ll
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"~lrial Fuel Cell Vehicle ACI i ~ a
modifiCll1iu!l oftne c~isl;ns.crt:dir 10 allllw them 10 UJ(If(: sm oothly apply I<J Ille nl",rive m:lrl:C1
Section J OC II I dTlIge n ln fra, tr llchorr C redit: While Ihe i\llcnluliv~ Fucll nfrastructurc Credit npiR'S
,nlhe lim .... lrumc ""inl! ~ons 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
iniriated in 2005 and has e>;isloo ru ,1IrI<Io5 levels thl"
s~vcral ycu<s with a CUlTenl expiralfon dme ofDcc~nlber 31. 2014. This credil ii for all a llcrnaliv~
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
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aJ,.,
127
,)'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.. T hisen!.! is expected to COme down signifiantl) but
nOl withoUl "olunl~, which will be .... sist~ b) ,useful ta~ c1'~il. 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 "a ll
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 in frnstructurI,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 e,~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 c,~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,eoriinal 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 ,~hi 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 20142015, The I'wl Cell and
II rdrogen 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,
credil b<: e~tcn<kd umil 2016 or unlil,: ",[om> has ONu!Ted and we havedevdopcd moreand te<:hnolllg'y 'gnOSlic mcallS by "hieh to ensure c()l)tinued American lea<!=hip in
flld cdlt.chnolug)',
Th~
~;mpli f, .d
ljtio" 2SD ",'Sid. nl iul Fue l C~II Tu Cr~di!: Whi le this credi, is nOi du~ to "-,pi,,, Ull1, l 2016, il i.
11(~. "" we under.sland il, under'h ",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-"J it W<lS e,~tcodl in the TA RP 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 """
HyJrotll Energy ASsociation
~Ul!l!~.'IS:
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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 h ~lf~W, It ll:u 1lC\'C!'
been ckar why we would provide" larger ~redi t to businesses th,.11 10 illdividuals, panicularly
128
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. M a rkowit~

Pmidcllt & Exc<:uti,'e Director
Fuel Cdland Hydrogen Enc'1"&.v Associatiun
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129
M . Manufacturers
Statement of the
National Association of Manufacturers
For the Hearing Record

of the Subcommittee on Select Revenue Measures
On
uFramework for Evaluating Certain Expiring Tax
Pro visio n s~
June 8, 2012
L.-,g '''''''\Ie/ion- C"" ' ii>p ()pjxvtwI1(y Pt/rsollf>g ProgrwS$
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130
Statement
01 the National Association 01 Mamilacturers

For the HeatiflQ Record
of the Subcommittee on Sele<:t Revenue Measures
U.S. House 01 Representatives
Hearing on
"Framework for E~a l 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 e very industrial sector and in all 50 st~les. 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, lookthrough rules for controlled fom ign
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 th e 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 re'roacti~ely e:xtend these and other business
tall provisions as SOD'I as p05slble .
R&D T ax Credit
The R&D ta~ credit SPUIS U-S __ based innovation and R&D jobs_ By design. on ly 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 fi rst 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
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131
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 cred il 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 Bus iness Financ ing 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 lt1el r foreign counterparts. are subject to
simultaneous fore ign and U.S. taxes on their oven>eas income. This added tax burden makes
U.S. manufecturers les s oompatiINe , threatening U,S IIKports and jobs.
The " look-throu gh" 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 2 1 million peop~
In the United States are employed by compan ies with ove/seas operations
Conc lu sion
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
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132
thrive In the global mar.cetpliioo and Imposes yet another road block to durable U,S, economic
growth and job Cfeation .
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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
Statement of the National Association of Manufacturers (N'A.MJ

For tM Hearing Record
of the Subcommittee 00 Select Re~enue Measures
Committee on Way~ and Means
U $ , House 01 Representatives
00
"Framework for E~aluati!19 Certain E~piring Tax Provisiofls'
June 8. 2012
Conlae\:
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) 6373182 Fax
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134
--. --..'-_ ...

_. ,-,
""''''''- -'"
- "",,~
_ " " ' ' ' ' ' . . , _ _ . 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., .. "
,~. 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"'"
modlfl..,ian
i.
wi,""",
_ie,,,, ",.
In ". ,1I<>t, IoliIO",. ,""

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."on m~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 '.
' ' '<Ii!r/
Tile biotllo.. '

i. poI. . n to con ..noo tJat "'ome ntum 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
.,""'.d,
..0 lhe ro<e". "P:,.,Ioro of 'ho

HO"'''''.'. 110. IndO>lry'. 'o<.n' .""ow .I'!a<lld "". ~ (.1l<en fa,
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..,.
could
Io'p,"", wi''''''''' ,h. biodi<! ..1 II.
OIIon8 R_w.blt fuol Storodord (~fSl. Wh"" lhe
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 .
"'h"
Iroc"" "'e a"".
Only In 1OH, afto' C""Br... "''''lIled tM

Inau.try ,~g.a'" Its loatl"R Ind 1><11" "mQln~
t.,
t., IIKNI''''' .nll , h. ~fS W luHV Implemonted, did 1100

"~ ~r<lauctian
ap;". Wltn ,"corabr.aI<iftQ .uccw.
_'IIf"_
With tn~ ""loire e<Onom<c

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 t l>o. 0<0"","0: "ud~.
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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
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 wellcrafted 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 biojet 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 goodp: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 bloj .. 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 Indefini tely delav
an ".ten,ion .. rnJ continue to jeopard ile 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~"';~ w, 8iodie,ei i. a renewable, low-ca,bon diesel replacement fuel. Th e
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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 110140). Ihat dom~nj<aUv produced blodie...1i, 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
8iodiesel I. made ffOm w~st e ,rea.es .ud> a. recycled cooking oil, ~"lrn.1 fat nd .econd.ryu.s
a,rku ltural oil . and is felined to meet a .!>&ific com merdal 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 bentested 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.irnat tly 195 domestic and foreign biodieoel plant s r e,i5~,ed with the EPA.
representing ~ ~ombin e d produClion c~ "adty in e.cess of 3 billion gallon .
8iadie.ell, primarily marketed as .. five pe,ce nt (85) blending component with conventional dle.el fuel.
but can be u,e.j in concenttatlon. UP to twenty pe"e nl (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 ... 1t.~ 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 e nde d through December 31, 2008, a. pan of the Enerev Poli<'l Act of 2005 (P.L 1091901. 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 i ",d for.1I of 2010, Congren extended the t a~ credit through December 31, 2aU (P.L. 111312).
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 t ~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 incom e 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 mlollu e ned I!: t~e biod T ~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 capaoTt~ of less than 60 million sallon, pel year. The cfedlt can be claimed on
Ih~ first IS mill ion 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.
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N BB T .. liroony
137
Ot!~nde"ce 0/1 Fore/; " all: 610dlesel can playa milor rolf: In e~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 d j;placed an equl~al 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 e Tlerg~ Ihal
Is required to produce the fuel .
8/oll/esel Reduces our
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 enety
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~ r 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.ca le 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'ad itlonal 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.
Contrib ..t /o" to the conom,: NBB

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 .
The Blo</Ie, el /"dulff)l I, Creollng Jobs ond Mo.lng 0 Posltl .. e
estlm~t es
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 l a ~ 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 ,
T~e blod iesella~ incentlv. has helped achieve the dtslrfd toal ollncrnslng the dome1llc
irlll use 01 blodiesel, and in turn has helped Ihe U5. ,nllle Ihe energy SKudty, econom"
and en~irollmenl a l benefits assoclaled with disp lacing petroleum with domestically p,odu(ed
renewable luel l, 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 blodiesel l~M incentive.
Conclu.ion:
proa~Clioo
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 biod iesel producers; stale, nat,onal and imernallonal feedslock olianlzatlons and fee<:lllock
process." organllatlons; ' uel mal~elersan.d dlSifibulors; and lechnoltlg'l provider!.
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AIKwt Nil:
138
Chairm an 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. biod ie",,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.
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139
Grrllt Public Scholl/slor liurry Swdrn'

Tes timony Submined for the Record
US . 1I0use of Re presenta ti ves
Commillee on Ways and Means
Subcommittee o n Select Revenu e Measures
Hea ring 01\
Ce rtain Expiring Tax Provisions
Jun e 8 , 2012
Chairman Tiberi ~nd Members of the SublQmmin ee. On behalf of the 3.2 million memlJers
of tile Natio\l<ll Education AssociatioQ (NEA), we thank you for th e opportllnity to sllbm[l
these comm ents for the r&ord in conjunctio n with th e hearing on certain e~piring tax
provisions. These co mm enl'l foclis on two specific expiring tax policies - the educator tax
deduction and the Qualified Zone Academy Rond (QZAB) program.
Extend th e Ed ucator Ta x Deductio n
NEA strongly 5ullports all e~tension of the educator tax ded llctlon. 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 moreof their own fund s each year to supply their classrooms and purchase
csse ntial items such as pencils. glue, scissors, and facial tissues. According to NEAs most
recent survey, 97 percent of educators surveyed indicated that, in 2006, th ey had s pent
some of their own money to meet the ne~s of their students. These educa tors 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
abl e 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 curren tly lack
such as essential d assroolll supplies, paper products, an d arts aud crafL~ supplies. Th ~
majority {82%) of teache rs ,"ink It is their res ponSibility to ens ure stude nts have the best
learni ng cxp~riell~e possibll' - 110 m~t!er the plice tag - s peudlng their own money on
sup plies 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 nndln g the need to reach into their own pocket has increased in thesl.'
difficult economic times, as funding cuts lead to shortages in essen tial su pplies and more
students co mc to school without basic learning tools. A large majority of educators al s(I
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, 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"mlnmo:'!">lTim ....,.u'lJ:!01
140
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 tl1res 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 SNA P to 21 million [one in four) ;
16 mllllol' childreJ\ (more than one in five) curren tly 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..
Expan d the Educator Tax Deduction
We also strongly support the Teacher Tall" Relie f Act (H .R, 1738). introduced by
Representative Reichert [RWA). 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
uptodate 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 cri lit~ll tlilTl'rCnce in helping educators acc~ss qUiLlit)' training.
Ex tend Ih e 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 costeffective way to help
disadvantaged communi ties 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
Ibid.
TI~ Re/"alum ', Q' 'I.'''in1; I",f'''''' <HI A,~.rI" ,' :. Chll"'~~. IIId""",,,,. "!Chlld,.,,,, '. """,,,,1,' iI''''/.fJ~m,~ 7lI"'''K~
.0011. Jul i. t5a:l<;,. " "",kif\!!' r"<lil\~i , .. , 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
(~~Ie' lor Ed.,col;or> SIO!i<lic.
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R~pO/{ (<I,d lor Am~'ko. Irr/rrmrvcw,<:, 2009
141
credi t equal to the amQunt of interest payable on the bonds, thereby relieving lo(al
t3xp~yers and municipalities or the 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.
this uiUcaJ program.
W~
urge COflgress 10 extl'lld
Thank you for your cOl!~ideratiol1 ofd)es," OOlnmelll'<.
Submitted on behalf II!:

The National Educatinn Associatin"
120 1 16" Stret'l, NW
Washington, DC 20036
20Z8ZZ7300
20282Z7309 {fax)
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VerDate Mar 15 2010

08:41 Apr 19, 2013
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144
PRES ERVATION WORKING GROUP

June 21, 2012
T~e
Honorable Pat Tiber;
("ai'mil"
WaY'- and Meaos Comm'tt....

1102 Longworth
Ho,, ~
Olflte SlIlIdlog
Washington , DC 20515
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 Ran kin8 Member ~eal. Thl~ important piKe o f bip~rtis~n le81slat ion would provide
slability 10 the 9% cred it, ultimately ensuriog thallhe UH1C rem~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 in dustry 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~tor equit~ a property cou ld raie, often creating
large gap~ in financinK that ne eded to be fille-d through alternative funding lources. BV
funding gaP5 by providing more LIIHCs to propertle5. Elctendlng tllis critical
nor
VerDate Mar 15 2010
08:41 Apr 19, 2013
pro~;ding
rate, HERA elimin ated the uncertainlY of the applicable percentage rate and helped fill
n a~e
provi~lon
in HERA does
any additional (osh to the go~ernment.
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fl~ed
145
PRESERVATION WORKING GROUP

The UHTC program;5 the largest production
the crea tion of the program, the UHTC
prORr~m
~as dey~loped
for alfordabh.' rental housing. Since
or prf!'5eNed over 1 mitllon affordable
apartmenH serving low-income families.

More recently, lhe 9 percent (fedit ha5 been allocated to preserve "nd imp rove HUD and
RHS assisted
propertle~
that af!' In need of rehabilitation or at risk of being converted to market-
rate. 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 cr jllcal tool for rehabi litl'uing properties in wmmunitieS, retaining affordable housing cptJons
for low -income
filmilj 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 sunse t da te 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
Na tional Housing l.l3w Project
National Housing Trust
National Lowlncome Housing Coalition
Network for Oregon Affordable Housing.
Madison Park Development Corporation
Maine Affordable Housing Coalition
Mercy Housing
Preserva tion of Affordable Housing, Inc.
Ohio capita l Corporation lor Hou.ing
Stewards of Affordable HOusing for th e Future
VerDate Mar 15 2010
08:41 Apr 19, 2013
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\l0110" S".. ,. N W " ~~0100
146
f
'HI
c_.,_,
...".... _c__................,
~V.' ' ''' Tl~'.
r".c:..-,._<4 ...
e~",
~ UT"
~, I ~h".n..

Of
Dave Koenig, Vice Preside,nt, Tax and Protitability,

National Restaurant Association
For The Hetlring On

"Fra mework for Evaluating Ce rtain
Expiring Tax Provisions"
Before
SubcommiUee on Select Revenue Measures
CommiUee on Ways and Means
June 8, 2012
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08:41 Apr 19, 2013
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lC1 311 5toO
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"oc
"I.
147
Chainnan Tibo.--ri. Ranking M~mbcr Nl'ai. and membcn; of llu.' House Way~ and M<'ans Select
RC\'enu~ Meu~un:s Suix'nmminec, thank you for the npponuni ty to submit thi s statement for the
n:cofd on b<'ha!f Of the National R..."taurant A.$SQCI~tiQ n .
We ~ppluud the Chainnun, Ranking Member, nnd Suix'omminet:'s eonsidemt ion ofl:l:(
The Subcomminls June Sill hcarin~ t" "_'p!On:.' pnncip!es and ",ctrics \0 cI'ah_mle
tu e-xtenders imponant ly ~dvane<'<.-d
possible fra meworks to assess ta., e~tendcrs. nmny ofwhieh shared k~y criteria. Key ..:ritCTia
induded: Ihe rationale for Ihe InJ( P'Jlicy: fel'emli'! 3nd dlicirocy; lIlId, lbe ITliSQn for the
tcrnpor~ry natun: or llle ta.\ policy and its appropriale dUrJlioll.
cxtendc~.
ThiS S13tcmcnt focuses on th!'\.'t'! e.\pil\.'<1 provisions tlfsignificbncc to the restaurant industry: the
15ye3f depreeiatinn "" hedulc Ibr kasciw ld improv<'m .. nts, l\.'StHur.mt improvcmcnl.'\ and new
c()nstl'\lctinn, und retail impr(wemC'llts; th~ Work Opportunity Tas Credit , "WOre"); and the
dL"!uctinn f\:lr dlmations Qf tixx! '"'''nIOry. E"aluating thL.,.." tu provisiOns againstlhc ;,ey'
criteria di$Cu s$Cd at the June 8th hearing denHmstrJtes th~t these important policies $houlll be
mnde penn unent.
Looking ahe3d, t3Xrefort!! prc5CutS an opportunity to provide tll.)lp.lYCT') with ccnainty.
simplicilY. and fairness, while encClUr:lg in g economic growlh and job cn.:u ion. 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 eharil~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\.'SW Ul'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 o fthc
U.S. "urkfon:.:. We are truly tb~ COmel'lit,)n~ MthiS nation' s L'(tl!h)my.
Moreo"er, il is impor.:mt to $tress th~ t the n:stuumm indUSlry is ~n industry Msmall bu~ in~sr.l:s.
Thcre 911.' 970,01)0 restaurant and foods.::n.-kc outlcts in this country. Sc,'cn out of ten I'C$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 a lso sc rve as theconfen.1lcc rooms for many nfth,'
sclf-cmpIQy~d lind other sm311 businCS$H.
I S::l~a ~ Of,>ll rec l ~ l ion Sched ule for Le3schold Iml!ro" clIl cnts... Res taura nt InUII'!)\'cm cnlS
a nd 1'/"''1' Co nslru~!lo.!!.. ll od~lalllml! m\'Cmcol~
Ratio nak for T~~ f'ul i~,

During tile June 8th hearin~, l\ itnl'1s<:S di sc usst'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\'cm mem imcr.cmion und wllClhcr n tn~ prQ~-;$ion rcf1CC1s
sou nd lax policy.
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National Rc.slaurnnt ASSOCiation
148
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 struclura l 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~ li mcframe for rl'1:overin!; the COSI of investments in rC~lh\lrJnt buildings and
improv~nl l'llts.
Re,'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,

cITecliwly.
m~u"inl!.
whether the pnwisiun nCCQ11lfliishes ils gilals
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
R F-V t:.N\J~ PROVISIONS CONTAINEU IN PR l!..Srmxr's FY 2012 BUIlGE"r PR OI,(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\'Olhirds ofre.llluranl o[lCralOrS ho:'nefilled
Irom Ihl."" IS-year depreciat ion schedule, eith"r c.>:panding or making improvements 10 Iheir
~Slat,rants. Oflhese reslauranl opcrallH"S, 52 pcrecn! said Ihal Ihe e.~pa nsion> Qr improvement s
may nOI h~vc been undertaken if the 15-year depreciation 5eh"dule 1I"1IS not in place.
sample cIllcuJlll ions
Figure l.
or 15- \ 'ea r " ersus] -Yea r Depredal ioll
Ann",,1
Annual
Allnual
UiI"\\:",""" in
TOI.) Capitol
Ikprcrl~I;OI1
Ann".1
lkpreci3li".
AOllu.1
bpendilUre
(3Q-y".U")
T..~S~'il\g::
(l S-}.",.)
SIOO.Q;J(I
S1.532
S6.667
s~sa.ooo
S6.J~9
TnS",'np
SI.WO
U.f1Ol1
S3J,33J
58,000
S~.%1
S~6.667
SII.lOll
56,\14 7
SM,6I>7
$16.(01)
$?,O24
S IOO,()()O
SI3l.JlJ
S:: 4,OOO
S I~ _gil!>
~H.OOO
$ 19.&48
$500,000
SI2.6SS
'"'"
SJ.OJ8
$100.000
$17.721
SUS)
SI.OOO,OOO
S2UI6
SI.500.000
SJ7.97S
SSO.6Jl
S6.076
S9.114
51.000.000
F.'1'ond"ore Suuri...
$ I.SI9
S12.1'i2
$16.667
To.' Saoings
S'i~2
52 \481
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
..,.,! "",e.I """ 14 """cot~1 .1fi.'CII,.., w'''f!.imJ ,, mi.
Pagel
National Re>tnuront Associalion
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N(Hc Flgu''''
149
Additionally, when rcstaUl'"Jnt5 in\"Cst in eQnstruttiun and renovations, the hnpaet sp.-cad$
thmughoutlh~ economy. Figure 2 providl"S s\;(lC'-by~stale eslimales of the udtJiII'lllal spending
on r.:sullIr::m t improvements and new constru<:tioll th~l wou ld result from an ext.:nsion of the 15y..ar depredation prov;~ion. as ",cli as the ovcmll l"<:tlllumic and cmp l [)ymL~ll impact w;lhin each
slate.
CunSlqucntly. 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 th ey 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.
"'.Iur"
Reh.~IHl for Tcmllonry

a nd App rnpriate 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!: Uncmploymc ntln,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 ISYefir 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. tl owewr, the IS-year depreciation s.:hcdlllcs 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 ISyear 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.
Ra tionat... 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 signi tieanl burriers \0
employment. E~amplcs of WOTC-targe1ed emplo~~e groups Include veteran s 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 Tcm pomry
Assistance for Nccdy Familics Program t''TANF).
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Notional ReStDunlllt A;;soci~tion
150
WOTC was cn~ctcd to address the critical issue ufpI.'Tsistt'llt uncmployment amung certain
who face significant bamer.; to cnt~rins the workforce. The credit is pro~id~'lllo
cmplo~rS!\l help offSCI the additional co.t.~ a5!>OCiated Wilh employing these work~r
popuI3Iion~. 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.
sroup~
RCHnuc an d Eniciency
JCT has cSliut3tOO lhat a (me-year e.xlel1siOOll f 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 P ROVISIONS
COto.'TA lt-iED IN P~'HIl)~"NT ' S FY 1012 BUDGl ' 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, wel tllre reeipienl~, a hislorkally dilllcuh group to
employ. arc being employed in Ihe pri l'alc sector and 7 oUI of 10 ",clfan; I\'cipi~'llS 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
Ihi s figure dOl'S nOI reflect any olTs.:ning savings from lower "clfarc. disability_ and social
>ccnrily paymt'llts.
Rennu for Tc mllurary 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 c.~tensi\lns ofW01'C
rdleet Ihat Ihe ta.~ poi icy el1i)cti\cly an d cOldc nlly add r~Sl>l.."1; 3n importanl policy nced. As pari
of tax. rerunn, Congress should make WOTC permanen!. Until then, worc shou ld be c.d cndcd
n::troacti H' 10 thc ~sinning of20]2 lind prospecti ve as well.
Dcduction f!l r C haritable Donation of F'md l '!r!!!.0!.)' for S mall
H ~ioeses
Ra tion nle for T n 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)Tation s. In 2005 , !he pnJ~ision was IcmpoTllrily expnnded 10
include p~ssthrough entilies (i.e., Snbehaplcr S torpor:llions, limil~d liabili ly cumpani\.'s) and
hilS bi.."'Cn extended on subsequent occasions.
Without the pro~;sion. 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 of food inventory. IhcS<:.charities
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National Rl'Staurant Association
151
wuuld b;: hard -pressed 10 me,'t critkal
risk for hungcr.
d~m<lnds,
putting our natiun's most
l'ul"~r1Ible familic~
Ilt
Re"enue and Enici enc},
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.OVIS10N sComA1N[(J IN PRHSIOENl" S FY 2012 Buool'.T PR OPOSAL,
JCX -19-1 I Mar, 17,2011),
Wilh 3 small rt'venue imp!lct, the dedu.'tiun pl:l.ys a critic al 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'~ enaetmlnt 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 w ith 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~taumnl 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 di seardingsurplu 5 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
A pl'roprlll r ~
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
addre~ 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. Maki ng pc!1H~lIcl1llhc now-Ielllporl:lry
componem oflhe deduclinn 1I'0u)d make it more c 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 m.~ 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. Ta.~ re fonn would provide an
opportun iTY10 ~'olnp",hcnsivcly re"iew the tas eSlendcrs und OTher tas polidcs and consid~'T
pemlanenl SQluliolls. UnTi lthcre is ~n opportunity for IlI.x re fom', we U1l:c Ihe immediate aDd
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Nation31 Rcstallmnt Ass<l<.iation
152
~t"~ml~s eslen~joo
uflhe e.~pired lax provisions. As Congn:ss ~'Onsj den lhese irnpor1anl i~sues,
10 s('rV~ as 3 re$l'lup:e f<)r th~ Sul;X'ommlu<,C, the Coml\lillcc. lind Cong:r<."\$.
we would be pi('!tSci!
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National
153
Figure 2
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Page 7
Rcst3 UrJnl Association
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154
f
Ohio Grantmakers Forum
Serving G,ommOke'5. PromO'ing Philonrh,opy
!>TATE MENT FOR THE Il.fCORO

GEORGE E. ESPY
PMESIDENT. OHIO GRANTMAKEMS fORUM
HOUSE WAYS AND MEANS
!>UBCOM MITTH 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 of lhe 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 charI13bl 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 Ih al day. Ohio'~ foundation community ha~ IIrown 10
~.306, includ ing 68 community foundat lon~ . Mil!lons of Ohioan! are helpl!<!- and lives changO><! - every
day by irants slven by the s.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 rece ive job Iralnlng to hl'lp th~m
find n~w jobs;
Chlldren wilhoutd"ntal ;n",r<lnC1! get teeth deaned and repai red bv mobile oral health dinics;
,.,
Ohi!>ilOi of all .ge~ ar" enrlchO><!

orsanizatlons.
b~ vlslt~
to mus.eums. lOOS, parks ilnd perlormlng aou
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: onequarter of Ohio tJ~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,
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8ecaus.e of the Intent,ye provided bV this legislation. Ohioans have ~nt ributed thousand. of doll.,. 10
the caus.e.thev car .. about, wllh slgnW.:ant Impac~:
155
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156
..______,...,
;:;;,..
".,','~
;; B l vd
44131 . _ ........'wcrIJ"II._
:;;;;:;;",.,....______
. '~""'""' '''< OH
iu.." 12. 201 ~
H~S"I><""'mIU""""~I""Il,, "" ... ~ I ~
'101 l<.. sworth II....., 01110< lI",ldini

W.."""....... I.I.C.l()SIJ
IJ<of
('M'nn". Tlbcn:
!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 I I'M A I IIl'd in Ohio, Il!Id .,..,. ... fly l.OOO
m<l" "''''';''i .......1> ''''''.,.. ..... lhililk ~..., 1"(.- jour kod<t= ..... m..... 'n ""'p<>II>< '" )'..... ,"""",,' fOf in"", r"'~'~lnM
On
."'''''''ide
.,kl"",.'"
,_,in.....
Pl..... ...,.".
"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,
)'0\lI"!>e>";O\i
Unomrl"l'.'''" In ...... ''''. Ro.,,''''''' .. ,'''', .. ,d h>l>Cru"""A<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
"""h ly 6(1 """,,<n! .'" """'Mod OS Sol.
Propr l<\O<Sh,rt ond 0\10 ... "r-',.'h""'fIJI"
'Il<h S C<Itf>S.nd Ll..Cf "hi,~ >0)(00' (or n
1>"1"'"'1' cf _11 "".ll l:>u!oi n.",.,. in ,II< U.s. ""ullO p<'I'C<'fI' "f . 11 ...,,"fact" ........ ,
,ha,
"",i'in.
M;llWr",,"1'OfS. in< 'udi"l1 ..... 11 buw,.o<os. u,m,. 'ox <ml i.. 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 I II .""Ur.""",..... !><Ihct
C ('""""",kin<. S CO'I'""II"-. P............. ,r< '" on)' "' ..... po<s.""""gh on,i,i ..
""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 btil "" ftWO.,.,... in J.., .. ~
r""" lJ On.
m.""f3C'"ri"~ """'I""~ ,."'u'i....
I V.,,,.
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0IlT .,cm~ UlW,.
157
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 (~"R U l IUCA~) and rdated e,x piring 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 TR~ 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
l ~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 ;,t lltr indlls\rie~, the R&D TaA Credit is an important component o f inno\'ation for
small and mediumsizcd 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~inll ;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 s imply 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.
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SI;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 cri ti<;~l for helpin~ n,,"'ufacturers b 'dlhe ~lob~ 1 playinglkld_ For
manufacturing c,","'panics thaI w;.:<J Ihe Section J9() 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
II .. ,. ",.1 II.w"
n".
T... L)rc''''''-''"NI''~
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 mnch inc" 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. P 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 .
I 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;~ Admini5tmtions ;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
onClhird 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 feDISC. 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: ICDISC 10
increase. For those companies ",hu have 10llg thrived on e.xpons. ICD ISC 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;.
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f~<llIIe TI<r
Tile va>l !naj...n\}' orOtic Voice m~1I1~f11 are stnretun:d as tamilyownd .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, hmilyowllcd 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 l 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
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 slabi lity Bnd
lrunsparency in lhe lax cooe. A husincss eannil! e1Tcc~ ively pbn for the liJlure when il is unclcar
whelher Congrt:1!s will eKl~nd a pm"i~ion before il c ,pir~' , Or ga mble 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 Eng land hascd manufacluring bu,incs~
Wilh mughly200 e'nployces ami ,lcmonslr:ucs lhe impact on Iha! pa" icular manufac!ul"<:r shou ld
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% EITect ive 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 el im in81e lax
diSHd\'an!3 gc~. 1',c cU!T~nl la:< $Iruclurc i ~ a myriad of high nlies, lempornry credits, loophole., and
outd~!ed policics th~l slow growth and coml"'!i!ivcncsi'_ In order 10 compete globally under lhe
cum:m U.5. lax SlruClur~. domeslic rnanUfaClUrt.'1'S must use as many lax inccntivl'S as possible 10
low~r lhcir bunk'fl. expand lh~ir busines ....'S and hire more ~"'ployeL'S.
Manufac!uring bu~incs>es employ ncarly 12 million Amcricans. reprc~cn! more lhan 10 pcrcC1H of
our enlir.:: e.:onomy, Dnd BI"<: ~ vilal
of America 's fOlllre cronomic and no!!onal Stturiry.
Comprchens;I'e lax rcfonn is tht single rnOSl imponun! ~!im" lus Wa~hinglon eoold pro~idc
businesses manufacturing in America.
Po'"
'!"hank you fQr your considcrnliQn and YOllr kad<."fShip on IX'half ofmc mel.1!working
indu~lry.
Sincerely.
II I
William E. Gaskin
PMA Presidem
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160
STATEMENT OFTtIE R&II CRELJIT COAUTIO/,\'
SU8M ITfED FOR T il E RECORD OF TUE UEA RI NG 0 ,"
~flL\" l f. WORK
FOR EVALUATI NG CERTA IN EXI' IRI NG TAX I'ROV IS10NS"
IIEFORE
SU BCO.\IM1TIEE ON SE LECT RE VENU E MEASURES
CO,\ IMITfEE ON WAl'S ,\ /'ti D MEA NS
0 ,..
June 8, lOll
Intruduction
Th.e 11.&:0 Credit Cfl.llition w(:l.-om<.,; the <)p[lO"unily 10 pro~lde eom m('I1 ts lOr the re.:l>rd of the J"ne S.
2012, Commit("" I)fl Way~ & Meau$, Sekc111.~,""ue M ~a!>U",s Subco""H jtt~e ('Com lllilli,el hearing
10 examine 'how COI1Srt'SS should eyalU:lte cenain IQX pro"isio"~ Ih~I cilh~r e~pil"\,d III 101 1 or win
,'""ire in 20 I!."'
llle II. &D Credit CooliliOl1 thanks Sekcl Rnc nuc Mca~urt!; Sllboommiu~~ Chninnao Tihoerl all<!
Ranking Me",""r Neal f(>r gi",ng Member.; lho., oppQn unily '" diSt"u~~ ~ rr:ln,cwork for c,aJUilling
impor1:1Tl1 tax e~lcnder provi~ion. s uch as 100 Rcst:arch & \)c,clopmcnt I~R&DJ tax credit (also
known as Ih,' Rl"SCareh & Experimentat ion lax erroil). In :KIdilion. we would lih 10 than k Ways &
MeallS (omm illet mcmbcni Kcvin (jr~dy (RTX) Slid John Larson (0-(1) rorthci, IC3d~",hip;n
s[lOn,,";ng nil. . \142 le!!;s lutinn 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$ir>n ln~1 would pro,ilk- hu,inc:lSl"S wilh lhe certainty and in~enl"es lh~y
nC<.'!Ilo maintain and il\crc~St" K&D jutu. he".. in Inc U.S.
Th.e R&O Cr<:dit Coali1ion is D ~"P nfmure than 100 Inlldc anJ prnl~si(>nal a~ial;onsal.;ml! "'lin
sm~lI. medIum and large tompank~ thai colle<:II,'dy !\Cpres~nl millillns of American ,",,\lO;CTS cngnJ;ed
;0 U5i..bast.'tl ~3rch th,,)ugnoul major seeton; oflne U.S. <.'(."()r1omy. iocluding 3l'l"Os"ace. agriculture.
biolechnology, chemicals, d""lrunics, "n,,!"!:y, inrotlnJlion 1<.'Chnology, manuf~cluring, medical
Il'Chnol ogy."harmaccul;~al :l. sufl,",,"~rc and leieconmmnicati"ns.
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Allhough Ihe rnnkc' \lP of lh~ R&D Cledi! Coalilion i~ Jiw~, 11K' member com"an;cs ,hare ~ major
"haNctc.".tic-Ih.:.y colk'Cti vely spt'nd billions of doll~r,; aOllually nn .....-;eart'h and dcYrlopm ~t.
which p....l'";dc~ high_wagc and higllly--:<kiIlNlj.>bs;n Ihe UlljteJ$fate,;. TI,." , is signiJicanl global
compelitiun for R&D jobs, "hieh m<.":Irn; t/ul! eompan ii.'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"ing WhL.,.., Ihey ~n' going 10 creale and ",ninla;"
R&Ojr>bs .
161
Even before the I) .S. R&D credit e_'pi~ at tl>< end of 10 1I, on 3W""dg~ 3 cQmp:myciaiming ihe credit
QIlly re31i~d an crr~cti\'~ ......dit rot~ "f6%. In ad,I'lioo, th ... U.S.
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.
"''qu'''''5
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
s lI'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: uss lo ll
The R&D I~.~ cr~dil, Nigin.lly en3~lcd in 1981, " 'a> dc'S'gn.,;! 10 be:l1l imJlOn~m in ...:mi,e in ~purrin)l,
privale S<!C10f in,'cslmem in ;nno"ali\'e n:st'arcb by cQmpan;o;:s <If ~II 5;~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 cUllingedge 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. OEC I) 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 coumries l .
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~ $lrcngthl'll<-d, P<'nnancm Crc<Jil,
cspt'cinlly in a ta.~ refom1 cnvironmelll. is l"l';tic~1 10 m~inlain;ng U.S. le3denhip in adl'uneed =arch
.nd o:nCUUI1IIIillg companies t<1 C(lIll;nuc 10 sl)I.'I1d R&D limds h.,.., in Ihe U.S_
The R&D credil has a ~igniticanl Impact on pril'~lc R&D spl:nding and IheCrenlirm ofrescarch jQb.."
n:ccnt ,Iudy by Ih~ Cenler for "mcric:.n 1'rollfCSS Wllcludcs Ihat. "'he crcJil is cffccl"e In!/>c sense
INII each dollar offurellont tn~ !"Cwnue enlISt':': bu.incs:I("s hl invesl al 1<!lI~t ~11 additionRI doll~r in
R&D.'" In ~ddilion, according to n "..'c~nt sludy!}y Ernst & Youug. "ll1tlltal. the 1I"crall policy ~ lhe
c,'i~ling c~dil plus stn:nglh('I1,ng Ihe altCf11~l ive si mplified credit - i$ ~'Sljm~tcd IQ intrease annual
private r"""arch sp'-~Id;ng by Sl 5 billion in the sh,mI.'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, T~'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 .
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162
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
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.~
t"" . .
The U.S. m~; 1 mainla in. globally eonlpl:lili,,; to" 5y~lem mal .uPfl"'u hij!.h,killcd. hignpaytngjobo.
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~rdi~.11It
cSP<"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.
In,,'"
While the Uniled Sialot!; nilJ offo",d an "'on-asaill, " I!. g;"n~ inl...,""" ('0"
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,"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.
'"Sc~, T""h""'~ ~nt1 hldu.slry Sooi"=rd:' o.,,"tnl><r 2009. p. 7~.
' OI,en.
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..
163
Nalional Sci~nc~ IlOaN "-'JXIn eondud.,{! lhal the Unil~d Siaies' lead in scicnee lind
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!,
A
=~nl
u:~hnology
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!);l l 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.innOlale 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
10 13 l.ludg~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 (RUT)
inlroduced S.I 577. Th" Greater Rc.><:arch Opportunities With Ta~ 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 sil11plify ingPlld Mn'11glhcnlng il. Iherehy incrca<ing ilS dfC'Cliv~l1Css.
Condu~ i o n
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~nel1l re~1rch and Ih"I'clopm<'11t 1.1~ ,,..,d;t is CrillC:!)I/! C<)tllpel 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~ilh 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~ s ystcm 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 compan ics
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.
The
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' 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
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 lcurpor:lIc_T_~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,t inall}fQns fulull: .orgJP[)f~"Y R&D Cn."\liUkWVO ILl!'! ~/i(!!Jf
[)cIQilic. '"Glob;al SUI"\'ey IlfR&DTa~ Incenliw<;.
ht!p:/I" W" .inycslin'l1ncriC$ruturo.org/I[)f ....(j lub~I %20R[)%10SUT,c~r.20Fi(la !'/'.2{1..% 2020 II .pdf
NRrionRI S"i"n"e FOlln,I,lio" P"'"
Compt.1ili\'cncss in Scicnce and
nt~~,p_
"New 1I:~1'''I1
nlllli"""Tri~" I,
in I I.S . nl"h,l
TcchnolollY~
Itllp.JI""~''. '.if:g()vln.fM,<'W~/IIf'''3_$"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, I.(lrgl('(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!<:durgldocrnt'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:

R".lCfln:'l, (1",1 EXpNimell/tlliQlI (R&I::! Tax Credil "
Th~ be"ajil~
a/Enhuncing lite
ht!ffilt"~ww.. ln} ~l imlm~ru:'I$ fulun: ,,''l!.ifQEsah'll.uryR LlRcWrtMurI;.l!ZS-,PD)'
..,
CO!'l'T ACT
I NfOR~ l 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
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165
f
It\OV\N
STATU IK/Io, FOR TilE R ECORD
OF
TERESA BRVCE BAZ.El\ IOIU;
PRESlll ENT,
RADIAN CUAlI.ANTl' I NC.
FOR Tin: HE AR ING ON

"F llAM~: Wtmk
fOR E\'AU)ATl I":(; Cf:'fr/l.IN EXI'J\UNCl T AX PIW VISIIINS "
BEFORE
Til E U.S. Ho us ro r R EI'RESENTATIVES

Cm IMITTE.F:O N W A VS ,,-~ I\11>ANS
SUBCOMM ITTEE ON SF.LECT RD' ENUE l\h:ASURES
JUN E S. lOll
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160 J M:l.rkc! Street, Philade lphia, Pennsylva nia 19 lOJ

800.523 .1 988 tcresa.brycc@rndi:m.biz
166
Thanll. YOll for the 0Pi1Onunity 10 submit this statcment fOf tlJc record. I am
T('rcsa B 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'$". Private
mongagi: ;nsuronee ("M 1-) helps promote alld preseTvc the trudition of homeownership,
while protecting ta.~p~yers from ddimlt-rdated losses tm residenti al ti rst mongngcs.
Radian urgcs Congress 10 extend Ihe deduction for private mongage insurance
(the "private Ml deduction"). The priv3Ie MI deducti on c.xpired on December
31,20 11 , aJol1g wilh a oumber or oth.-r critical tax policies. Whel1 evaillatl'd against the
key criteria discU!;5Cd at the June 8th hcaring. the private Ml deduction is an im portant
tax polley that should be made permanent. In this re!;ard. we eom melld Congressman
Nunes an d COngressman Crowley for their introduction of H.R. 101!l, broadly-suppon<::d,
bjpani~an l<::gislation thut "ould make pennanent the private MI deduction.
rrcmium.~
Rev i('wing tax ex tenders in the eont~.~ t of tax rcfom! wou ld p11)vidc an
opponuni ty to comprehensively considL"'T the tax extenders ~nd other tllX policies.
However. until such 3 review. we slrongly urge the immediate and seamless extension o f
the private MI deduction. Until there is an opponunilY to address ta.~ pol icy in a longterm ~nd comprehensive manner, extension of the pril~te MI deduction is imporwnt to
ensuring that there cOlllinue ttl be ineenti\'es aimed at stabilil.ing und strengthening the
housing market. which is still undergoing a tragik fI.'covcry.
For many families. the mos, common hurdk to homeownership is saving enough
money for the down payment. The traditional 20% down paymenl is a hardship ror many
IlI1d an impossibility for othcl'$". Pri vate 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 ubill in pdl'me Ml in order for Ihatlo;!n to be eligible 10 bc subsequently sold
to Fannie Mal' (W Ffl-ddie Mac ("the GSEs"). Len ders 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~
result ing from reselling tile pmpeny for less than the. oUlslnnding monguge loan OOlal1c,::.
Placing the privlltt' Ml comp~ny's privutc cu pitul 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 a Oordablc 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
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-2-
167
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 Mllll odell1o.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 th at result from borrower default. I'lousing
policies shou ld 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 th~ need to mllke it pcrn13nent. This S1.'ction considl'rs thl' kcy
criteri~ disl'us~d al Ihe June 8th hearing.
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168
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 critica l factor for 1011'- and moocrolc-i'lCQme tamilics
scckillg to becomc homeowners. as It allows borrowers to qualify for a mortgage wi th
less thall a 20"10 down paymenl. The private M I deduclion mak es pr ivate M l premiums
deductible to the taxpayer. assisting in offsetting the COSt ofpri l'ote MI. Maintaining
incentives for these borrowers is important to ensuri ng 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;d ng
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
lXpcnSC. Without the inSUr:lllCe purchased by those premiums, interest charges would be
mUl'h hi gh!.'r as II tOl1s!.''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 ~\lme 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 , Ih e deduct ion reduces IQssc~ to the
taxpayers. In the past, borro\\crs wert' circumve nting private M I, whiel-t was not tax
deductible. by instead prflCuring a "piggyback" or second loan, wh ich 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. Eliminat ing
the tID: deductibility ofprivnte MI wil l incentivize borrowers to obtain risky piggy backs
for which the il1!ert'Sl is la.~ 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 di scu,s ...--d the importunee of evaluating 3
tax provision by iii; revenue eITeet and its effidency. meaning wheth..:r the provis ion
accompli shes 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,\IMI TII!E ON T AXAT!ON, ES11MATIill B UOOET
EFFECTS OF REVF.NUF_ PROVtSIONS CONTA !NED IN PR ESIDr: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.
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-4.
169
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 posi tioned to obtain the loans needed to purchase homes for their families.
Acrording tn Interna l 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! sav ings 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 iodi vidual s.
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 or the housing sector in recent year.;, ex tcnsions 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 popul ation 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/Jr Tempurary NUlllr e ul/ll Approprillft' Dllrllfit/ll
Al though 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 e ffident lax poli~y
Ih;11 fosters homcownership und equalizes Ihe tux cOOe trc'Jlmen t between private MI
premiums and mo rtgage interest. As P;'Irt Uflal( rdonn, Congress ~hould mOlke
permaucnt the priv~te MI deduc tion.
CO"~CUJS tON
Tnli. re form would provide un opportunity 10 comprehensively review the tll.~

eN lenders nod other tnx pol ides and consider permanent wlutiolls. H.R. 101 S is
bipartisan !egislationlhat wou ld achieve Ihis objective, breaking Ihe COnSt31lt cycle of
c)[pir.t tiol1 and c.~tension. In thc interim. howcvCf, we S[wogly urge Congress 10 e)[l ~nd
the private M! deduction Sl'amlcssly und c.~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.
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-s -
170
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Juno R. 2012
The I lonora~ l o Pm Tiberi. Chai,
W.Y''''''' MoaMSut>oomm;lI~ on Sclec,
Unilcd Sl~I"" Ilou,", QfR .~""tal;''E'S
W~sb,ngl"".
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IInring on 'rl m.,,'or k for " ., .Iu l lin g C
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Rebuild Anw.i<:;,' . S~h<l<ll~ ,pJ1'<C<"iul ... lhe <>Il!l"f1"ni,y 10 pro, ido SIa~m""l the
Ilou;< W~Y' and Mns Subo."'\lOI,mill nO S<-Icct 11.0"""",'
rill" ,lie lI .arin~ 1)11
"".8$" . ..,.
F",me,,'Orl; 1<:>0- Evil""'li"~ C~r\.ln !;~ pirin~Tt, I't(>. isi()l",
Rebu ild An\<,ri:1 '~ SCOOols i, wriling I<> ..xp"'" W' ,u pI"'rl for Ih. '~ I<n;ion of
'he Qualilifd 7.... u. AClld~ nI)' lkIod (Q7..;\ 8 ) .nd th~ Qu.llflfd S< hool
COn.llrtution Bond (OSCB) p~nom~
,,~"-,
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-"
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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 <:unic nlu",. 07./\
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""i 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
2 1" C...,tury 5<0001, in C<lmmllnil'cs """".Ihc 'OO"I"Y.
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QZAA, and QSeA, art hdping $ hool dOwietS 1'1""';& ",t:>d<m. mort "nCfl;Y
om.im . In.....'' ond I-octl,'" ..:Il001<. ilnpnl," n~ IN' I.~mi nll <:twln)I'U1Iml f... ' ,u&"1$
"nd i.'1ihancing!he "'<>tkrl""~ f.....",don". lo..,h<n.nd
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!.
".f!:
''''''-'~~
,..,.. lO,-"",.,,
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SupflQf1lhrough Q1.AII:I ~nd Q5<:1I, ~rc helping rcvair, ",",,,"10 ""cl """"--rni~
Alncrieas .schools alld Slimulatl,,! and o",aling 11 "", ,,,,,,<1$ (Ifjl>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~ i """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 "'tctl in IIH: 11" cc-n,ury "OI1<r"", .
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-'''.
~ --",'-
171
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 di strict usage o f Qua Ii lied School COllSlrudioll
BOllds in 201011, 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 Sc hools a~1u th at th e QUlllificd Zone Acade my Hond "nd Qua lilied
Sc hoo l Co nstru ctio n Bond Ilrogra ms SUllportill g sc hoo l mndcrni Zl1 tion ~ nd j nb cn!u li o n be
in cludt'll a nUIn!:, ta~ c~lclI s io n pn.)\' i.~iull s eOl1 sidcred by Ihe Ways ulld Mean s 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
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S77.4 mUllon
W ~lTt" n Counl)' (l ebanon) SchOOl [}imicl, Ohi!) SJ.O
M ail<.m ;nJ; Coum)' (Boardman) Ll)Cal School Dis.rict. Ohio $l.5
Summ il Coun.)' IRccw) L(.ICal Sehou l Oislrict, Ollio S.L'
Clinlon CO WII)' (Wi lming IOll) School District. Ohio SOJ
Cuyahoga Co unlY (Chlsrin FgUs Excmph:d Village) School Dislric . Oh io 50.5
Highland CounlY iUri\>htllocal School Di.,rkt. Ohio SOA
tl~milton CounlY (C incinnati) 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)' ( Piq~ ) School Dimiel, Ohio Sl.g
rtlnklin CQumy (I lilliard Ci,y) School Dislricl, Ohio $5.0
I.akc Cou n')' (WiI!<lugllb)'EIIsllakc! Sc)l(.)01 Distric~ Ohio (2 is~U<.'S) S t l.'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
Co lumbinnn Exempted Village S~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 ;~SIl\"S! $5.4
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211 11
172
2010
$ 293 millioll
Lorain Co ullty (Kcyswnc) Loca l School Disnict, Ohi o 55.3
Hmniltoll Counly (Sycamore) City School District. Ohio S17.5
Stork Coullty (Con ton City) School District, Ohio .$6.7
Clark Cnunty (Sprin~ficld) City School District, Ollio $ J.O
Henry CQ UIlI)' ( l iberty) Local School District, Ohio S:U
Richland CQUllty (Madison) local School Disu;ct, Ohio $6.9
Meigs Coullty (Sou th ern) Loca l School District, Ohio S2.0
Ashtabuln Coullty (Pymatuning Vallcy) Local School District. Ohio 50.7
Harrison Co ullty (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 Distri ct. Ohio 54.0
Coshoc ulI1 Ci ty 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 (Nort hwest) Local School District. Ohio 51.7
HHlI1ilton County lTh rce Rivcrs) Loc tll School District. Ohio S 1 1.3
Columbiana Coullty (Crcstvicw) l ocal School District. Ohio $4.0
Cuya hoga COllnty (Clcvl."Ja nd) Municipal School District, Ohi o $55.0
Cuyahoga County (Rocky RiI'er) School District, Ohio S 11.3
Hamilton COUIl I)" (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
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Ri chland Coullt y 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 (Sprin gfie ld) 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 Dist ric 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 Co ullty (Franklin) School District, Ohio SI.O
Stark Co unty (Alliance) School District, Ohio 52.3
173
Statement of the Residential Energy Efficient Tax Credit Industry Coalition
before the

United States House of Representatives
DO
" Framework for Evaluating Certain Expiring Tax Provisions"
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June 8, 2012
174
As the trade associatiorls represerlt]rlg marlufacturers, distributors, retailers, remodelers,
(rlstailers .. rid wrltractors brll'lglng energyefflclent 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 t he end of 2011. Our member companleJ acti~eJy promoted and theircustomef5 benefited
from the higher tax credi t levels that were in place from 2009 to 1010, sustaining jobs in our
industries during the ot herwise 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 th at Qualify for the 25C lax
credit are manufactured-and also installed-In America, unlike alternative energy sources that
have benefited from other fe deral 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 credi t is
generally t he minimum incentl~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 reside ntial energy consumption.
We are seeking a uni form lax credit across most product categories to mlnimile consumer
confusion, include labor cOSU for all qualifving producu and main tain 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 t a~
credit programs from a remodeli ng perspectl~1! are significant (selling aside the long-run
I.'flergy efficiency benefits for homeowners).
With respect to the 2SC credit fo r energy-efl klent remodeling of existing homes, the IRS da ta
Indicates a total of $25.1 billion of qualified expenditures in 2009. Overall, in 2009 taxpilyer~
claimed nearly $5.9 billion in 2SC a[ld 250 tax credits. for t ~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 ta x program .
Because the tax credit in 2009 was limited to $1,500 per taxpayer, not all of this actfvity
genera ted tax credits. In fact, according to the IRS data, just a little more tha f! 71 percent of
these COS15 ($5.404 billion ~e rsus potential $7.';'39 billion) were allowed In the :/.SC calcu lation
due to the $1,500 limit. Moreover, due to other l ax fules, only $5.172 billion of the $5.404
bi llion 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 fa red beller over the 2008 t hrough 2011
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'b. R~lier, l!n.mlllovmont 'n,U ... nC. Re.~t hQri,.tjon, 'nd Jotl c:re."o~ Ad ol2010,Sec. 110, ' '''Oil lOr
Nonbull"" .. {no'BV P'DI!e"y.
175
period than new home s~les, The t~~ 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',
:..' '..,- - -
~' \
$160.000 _
.,
,
' -"., ....
,"
... .... ,1,..
."
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$140.000
j
1
SUo.ooo
Sloo.KI
SIIO,IJ(IC
:j
$W~
~,ooo
i
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 wi th 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 Inco me 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 im pacts by sedor. The follOWing table presents till" impacts that
result from SHlI),OOO of remodeling activity.
, hIIp;i1,, lOW ,nahb.<lfW~''''''ic ."'1" ?wc,i""ID><7H& K~"OI1cC" ""'~"u I)~ I0) S~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.
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176
The jobs are meitsured on a fulJ.tlme equiva lent (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
Proprietors' Corporate Tolal
FuU-time
oed
Salar ies
Income
Profits
Income
Jobs
$100, 0005 I'll on Remodeling
AlIll\dustrles
Comtl\lttio/\
Mal\ufacturjl\
Wholesale and retail.
Transponation and
warehOl>sing
f iJlaJlce aJld insurance
Real estate and rental and
leaSing
Professional, Managemen t,
administrative services
Dlher services
1.11
$52,109
0.54
0.18
$25,573
$8,136
$13,810
$&,601
$824
$16,141
$4,232
$4,529
$82,667
$36,406
$13,489
0.16
0.02
$6432
$1487
''''
S71
$2,307
$1 459
$9,588
$3017
0.01
$315
$1,652
$758
$2,125
,,"
$6,970
$9924
0.12
$2191
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 togetn er. 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 bi llion +1\ wages lor these workers ,md $7.5 billion 11\ net bl>siness Income.
Conclusion
The program has created and preserved America Jobs and promoted energy efHciency by
helping OWl\ers of existing ~omes afford higher efficiency wil\dows, doors, HVAC syste ms, hot
water heaters, roofil\g and 11\$l>latiol\. We are deeply concemed that Ihe loss of t~i$lncel\!ive
before th e 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 Dece mber 2011 to the
Committee 01\ Ways and Means sl>pporting a robust eXlension of the 25C tax credit, knowing
the $1,000 level wou ld effectively leverage consumer activity and lob preserva liol\. A cop of
the letter is Included In the appel\di. of this statement.
AS th e 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.
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177
~~l!cOrtj!!l: IQ!ll!~ID A!~!lti!!tig!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.!!,.t ag
Ben Gann
Director of legislative Affairs, Natronal l umber ilOd Building Ma terial Dealers Assod,n lon
(202) 367-2346
ben@dealer.org
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178
Appendh(
Res id e ntial Energy Efficient Tax Credit Industry Coalition

Ikcember 8. 101 1
The Honorable Jnhn Bochner
Speaker of the Hou~
H-.H 2. United Statc"s Capitol
Washington. D.C. 20.515
The Honorable Non.::)' I'elo,;;

Ilou~ /I.l inority l eader
H-204. United States Capitol
Washington,0.C.1051.5
The H on()r~ble Dave Camp

Ckainnan. Commilll'C on Ways & Mean~
1102 longwonh House Ollice Building
W(LshinglOn. D.C. 20.515
The Honnrable Sander levin

Ranking Memb-r. Committee on Ways &
1139E longwonh l'louse Ollie.:: Building
Washington, 0.C.10515
Mean~
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.~ credi l 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 insu lot ion. We arc deeply CLlfICCmt-d Ihut thc los.~ of lhis
inccmivc befofl: Ihe housing m~rk<:t n:COV~T$ would lead (() ~ubstanlial job JoSo"'-":;.
Residential rentodeling aClivi ty spurred by the 25C lUX credit in 2009 and 2010 was critical to
ntaimaining our economic vitality. In 2009. Intema l Revenue Service data indicates American
taxpayers report .. d spending $25. 1 billion on rcmod~ling costs assQC:i 8ted with the lax credit.
MorC{)vef. Ih ... progmm sllpportl'd 278,61 0 jobs (135 ,.540 of which were in thccvnstruction and
remodeling sectors ). uppro.w natciy 513.2 bilHon io wages UQd 57.5 billion in ne! busin<:ss
;neome a('cording to anal)'sis by the National Association of HOI11(' Builders. In uddition. 2SC is
lruly a middle-class ta:l: credit. In 2009. over Iwo-thirds of the households claiming the cr~dit
had adju.slcd gros income ofS 100,000 or less.
FurtIH'r, private Tt..'5idClltial investment as a percent of gross dornc~tic product set lIollther Tt..'(:ord
low tlf2.4 percent illihe third qu:m~r of2011-in comparison \0 its historic a~('rage tlf
approximately 5 percen!. The 2SC t3)( credit has providcd a needed floor on remodcling acti,ily.
declining 32% since ils peak compared to 76% for new home sales, It creatc5job5!l11d benefits
homl'Qwn,-r.; by reducing.lheir l'nergy usc. lowering their ~n,'rsy bills and improving their
homes.
Again. we urge your support for a robllSt elttension of the 25C 13.' credit. kuowing Ih ... 51.000
I('I'd would elTecl ively leverage consum('r activit)' and job pTCS<.....atioLI. We belie,,(' thul the
pwgmm has had a puwl'rfu] and positi~c impacI on empl(l)'m~nl and cxwndint: the inc.:ntilc$
nntilthe housing market furtheT stabilizes will protet:1 American jobs.
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179
TIlan\( you ror your
~un,id~mtion,
We look
ofth~ resjdentiall.'1l~rgy i!r1iciency crediT in
fOf\\-~rd
10 working with you to include an

tll.X legislation before Ihi! end of the year.
c.~1l'n,ion
Sincerely.
Ai r Cnlluitioning COl1lmelOrs uf America
Air-Conllitioning. He~ling and Rcfrig~ration Institu le
Andl'l"S~n Corvorati()[1
A.Q , Smith
A.'ptmlt Roofing Manllfactlln.."fS Assuciution
Champion Windo>, M~nulact 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.
LowesCompanics. rn~.
Nutional Association of)lome liuitders
N<lliollul Associat ion ofManufaeturcr5
Nntional A~iQlion of the Remodeling Industry
National Electrical ManufaClur~r.s Association
Nutit)nal Lumbt'r ,lIld Iluilding Malenal Deale.. AS!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
Reta il Indus1ry leaders Association
Rhctm M3nufaeturing Company
RoofC()at ings Munufaclllr.:rs Associlltion
Spray Polyurelh:mc Foam Alliance
Tile RoofIn g Instit ute
United Teehnologiel; Corpomlion
Window and Door Manulac1urers Aswcialion
ce: I rouS<.' CommiUl.., on WaY!' and Means mcmhcn;
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180
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
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
Suocornmincc on Select Rt''''enuc Measures

Committee on Wmys and Means
U,S. Jlollsc of R"prcscnlati.,oe,

Wa~h;nglon. D.C. 10515
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 wcl1bcing 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 wi th a permanent S!llution 10 our
long-tcnn energy challenges. These provisions are essentiiLl to ooi lding a strong domestic
rencwnble ,m~ industry Bud cTeatingjohs.
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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 Uni Ted 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
181
app liance produels eove r;::d by the incen ti ve. These i:lre ju~t a couplc of exa mll!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 rstti rn e ill
decudes. FUrlher diversification of oUI energy supply and broader deploYlllen t of energy
emciency nJClISUl1)S is needed ir we arc to conlin ue. th is positive trend. Expanded deployment of
renewable tiler!:), and efficiency lochnologies is esscntia l 10 uccomplishi ng the goul of energy
illdcpcndence.
The spccilic provisions
\<'C
urge the Comm ittee to reillstlUe include the foll owing:
Sec. 25C(g); CT\.-di t for certain non-business enef~ property

St<:. 30J3(i}{4): Conversion credit !or plug-ill electric
vehiclc~
SC\;. JOC(&)(2): Cred it for alt ernative fuel vehicle refueling property (nonhydrogen
p1opcny)
Sec. 45L(g): Credil for construction of new energy emdcnt homes

Sec. 45M(b): Credit for energy efficiell t appli~ n\;es
Sec. 48(d) and
~ec.
1603 Qf Pub.
I~
No. III-S: Grants for specificd cnergy properly in
lieu of lax credits

Set. 132(1): Piltity for exclusion from illC()mc for emp loyer-provided mass lransitlllld
pa rking benefits
Tho specific provisions wc urge you to ex tend incl ude tho fol!owing:
St<:. 142( IXS): Qualified I:~n buildings and sustainab le design projeet bonds
Sec. 40{b){6}(11): Cellulosic biofucl llToduct:f credit
Sec. 4S(d): I'l ucedin-scrvire date for wind
produclion credit
faeilil i~s
eligible to claim electnclty
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 uell ulosic biofuel plant propomy
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Withoutthcsc tax iucenti ws, we ri,k losing thou.'Rnds ofl'xisling Amcrican jobs, and growth in
lhese domestic industr ies 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 ti on has been a le3der in the ll'Search and dcvclopm.:n t 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~tt or ex tend thl-os!>' im]X)I1U1\t U\.1(. iuccntives.
182
'l1lank you for your aHcntion and consideration of lhis maHer,
Sincerely.
THE MEMBERS OF THE SUSTAINABLE ENERGY & ENVIRQNMENTCOAUTION
Rep. Paul Tonko. SEEe Member

SEEC Co-Chair
Rep. Steve ISl'lIei. SEEC Member

SEEC Co--Chair
Rep. DoOris Mntsui, SEIlC

SEEC Vice Chair
Mcm~r
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Rep. Rush Holt, SEEC Member

SEI:C Vice Chair
183
~-~
:J:CI:
m Ungevin, SEEC Mo:mber
%W.~
Rep. John 0Iva-. SEEC Manbo:r
Speier, SEEC Member
Rep. MIte Honda. SEEC Member
~K.~
Rep. Ruu Camahan. SEEC Mo:mber
Rep. Mazic Hirono. SEEC Member
~;Wr
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Rep. Georst: Millff. SEEC Member
184
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185
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

Hearing on
'''Framework for Evaluating Certain Expiring Tax

Provisions"
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.Iune 8,2012
186
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
Found ations rqmruing how Congress should
cvalum~
bch~lr of the
Council uf
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
~in~
21102 I hn~c s.:rvcd
O~
prcsidenlllnd
~hief eJ(t-,::uli\~
officer of the C.olumbus Foundation. a communi ty 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 Colum bus Fouudalioo
has grown 10 bI:eomc the tenth largesl community foundation in the Un ited 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 com mUfli ty
fouodatioJ1~
in ewry regiol1 ofthe cou ntry, 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 indi viduals and organizations in our comm unit ies 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 cont inuing to do everylhing we ClIn 10 provide
"sS\."oti~1
SUppor110 the celllnli Ohio region. and I know Olher com munity
~"Umnlillcd
round~tions
arc funy
to Iheir cunllllUnil;c.< as \\"dl.
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187
I am testifying today on behalf ofth .. CO ll tlci! on Fo\tndations, {)fwhirh th(' Columbus
Found~ti on
is u member. "111e Council nn Foundations
repr=nL~
o\"cr 2,000 gmnt making
foundation s Dnd cOrpQration~ \\l1h aSSCI5 of OI'cr $31111 billion, As ml' miceofph itanthmpy, 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

{)flhl' Cc,une il' s miS5ion is l(J
ad\'Ocat~
W{)rk
most c1T,:cti~ely_ A key compolmll
p<llicics which will penn it 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 iml ividu"1 rct.ircment plans for charitable purposes, popularly known
as ml' "tharitable IRA rollol'eT--. 1
J applaud Chuirnl3n Ti lx.'ri for holding: this hearing. The Council on

much
agree~
lhal
e,~pircd
wry
or expiring wx prul'isinn$ sh{)uld be further este nfled only ifil is
condusile)y d~l11 onstroled IhallhoS<.' provisions cfl'c~l ivd)'

~u~h
Found~tion~
SCI"\'~
worthy
poli~y
gonls. Based
01)
evaluation criteria. thc charit.lbk IRA ro IIQv{'f vcry much ",crill; further CS1en$;Qn_
13)' way or background. prior to 1006, taxpayers wishing to tr:msfcr Imlil'idWil Relirement
Account (" IRA -') asselS 10 charity first had to rccognilC Ihe
and then cla;m a charitabk contribution
d~'dllCli{)1l
~mount
as incumc, make a 1ransfcr.
Ii)r the amOllnllli lled, This ollen resulted in
.II~ l/It l 'hllirman' , anOOUl1<:t"",nt of 1M Mmng nmoo, amoog tho "\'A ~xre"d.~" 10 "" lIddres.cd by \he "",,"nQ,
.,,' """"'<\~Itndru ,n Tilk VII ,,(Publio l Qw N", 111-312, 'h" ''1""" k.l id: U""mpluY"""'llnsuno
k.'a"l1lOOI.:ItK .., .nd Job (",cal."" "'" or 10\<)", The IRS "'"0Wr ..... ;mJI"~ lhe pro.i,i,,,,, "~I.'f\d.'<I ,n Ihal 2,)111
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188
tn~
linbility,
Ttw
c~ell
though the dllllor ultimol<.ly tr:m,f;;!TTCd thel'lltire IRA
P~nsion rrot~"(:tion
di~tribution
ACI of'2006 partially SQI~(.-d this proolcm oy allowing
trnnsfcr amount$ frum their IRA accounts dil't.X!tly to charity without lir;;t
distribution as income, Since its initial
C11~ctment.
to
ch~rity.
illdi~iduals UI
h3~inl:lto rcc()gni~c
the
the charitable IRA rollover ..... as "xtend~'d
multiple limes with bc-oad bipanisan suppon. ' nle m OSI recell! cx tension 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
Community
round~ti()ns
sa~etl o~er
communities. through both volullteer service and financial supp(lrt.

rely on many
illdi~idual
don()r;;, most of wh(\m c()ntribu\c
m.>dc~t
su ms
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 shou ld 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.1Ur tiuuUlcly hu"e utilil'~oJ IIle
provision.
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189
Thruughoutthc very difficull-<'conomic circum5tancc5 or [l"C<'nt
~xpirt.'d ~hnrit~hle
y~an;,
the
rec~1nly
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
gr~at~1'
I.'cnuinty nt'l...,j~d for prudl.'nI chari tahle gin pla nnin.:;. ,U1U Ilill
nrthc provi si(ln
r~gard ing
IRA rollover:; will provitk dOIl0f5lhe

ensu~
future donors have
the ahility to usc this cfficienlmeans of giving .
The members 01' the Ways and Means Comm illee 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
is. that the prmision confer thl.'
m(l~imum
tasp.'l)'\.'f Tt.'SOur<.:e~, The charitai;l1c IRA

for private donors, using
lh~ir
htl~k".
possible public bend,t whilt' USing the least
fl)liOVC f
thot
pos~ible
has dOlle just that_ It provideS a critical Impetus
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 pri vate charitable entities who gel\emlly do nol
rt.'ly 011 govcnllllent stalT or funditlg 10 accomplish their missions.
them thc
ne~ii;lility
~nd
whoSl!
.>truC1Uft.-S
alTord
to con ler 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 already-
strainl-d gOl'l.'mmcl1l budgets.
Thc Council ')11 Fnunduti0ll5

simatlon, !he lOp priori ty is simply
I'l-cogni~es
e~tendil1g
that. in view Mthc cUm.'nt
the expired
provi~ion.
ji."tlcr~1
budgl1
However, Ille Council
suppons fCvisinns to Imemol Rc\'cnlk" Code Sl!ction 408(d){S) Ihal would make !he provisinn
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190
mort:
errc'Ctiv~ .
At an approprim<: timc,
~uch a~
in th .. contc;>;.t o(ta.x r~(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 beginnin g at a~c 59 \1,. and p;:rmining rollovcrs 10 donoradviSC<J fund$.
supporting orgDl1i~ations. and pri"ate foundations.
Making the-chari table IRA rollovcr-available f!'lr gills 1<') donoradvised funds. supporting
()rgani~al ;ons.
an<l private foundation> will cnabk additional <lonors. parti"ularly aml)f1g
!l1;ddl~
inwlTle Americans, to utilize-charitable rollowrs for the benelil of ofgani~mions Ihat are
parlicularly
wellsuit~
10 dcih'crin philMthropk reS()ullX's quickly and d'fectj,cly 10
cllmmunllies in na:li.
By
expandin~
th;,-_charilnbk rollo,'cr 1() all philnmhropic tools, including
donor~advi5ed
funds. cliaritable Ilil'ing 'n>ulll incfl.'ase cwn more. In panicular. community foundalions. which
make as !Uuch as hVU-lhird$ oflhcir gmnl5 from dOlJorad\'ised
neW sourceS of supporl from wilhin
th~ir eommuni1i~s.
li",d~,
"oold be ablc to aumCl
These new girls arc parlicularly
im portltnt for ~11lall community foundalioos-thllsC with less Ihan S5 million in

are JXInicularly dep;:nlienl on donoradvh;ed funlis
lQ
u~S<!ts -which
provide Ihecharila\:llc rt'S<.\UTCes-Ihcir
communities need . Studics by thl.' Coullcil Oil Foundations fOllnd that, in 2007. donuradviscll
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om'~'lhird
Frm 00194
of all commu nity !oun dali on D,Si,'ts and 62% oflh.::;r 101111
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funds accounted fi)f ,~""r
191
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

found3lion ~
and 10 the philal1lhropic St:>:lOr generally, it is "l'ry important Ihal

fund~
and donor-adviscd
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! pmvi dc philantl1rup'...s with
1'IIII,abieadditionai tool, ne ..dcd \Il ful fi ll their missions, and help
m~-.::t
the growing
nced~
of
lheir l'(lmmuni ties.
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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192
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
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,Iune 8, 2011
193
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 OIl SC
Wa,.5 and Mea ns Subeommille-e on Select Rel'enu e Meas ures
Framework for E"nhmting Ce rla;n EI I,;rin g Tn Provisill ns

.Iun e K.2012
A!1l~rica
Summ ary: The Je\\ ish Fedcrations ofNonh

Committee 10 make
penn~nent
M~ans
nnd expand the cU lTent incentive in thc tax code thnt
pennits tax- fret' rollover \If indi\'idu~1 retirement

Ch3ri tabl~
urges the House Ways and
RoHowr"). As one oftbe nation's
aceountlloll~n;
la~1'-li1
to
eh~rit i es
(Ihe "IRA
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
socia l 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 tharilie~ 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
thaI if Congress reviews Ihe IRA Charitable
Rollo~cr
allhe hearing held on Sune 8, 1012, the provision will
usirtg the
obj~'Cti\'e
bcjudg~d
beli~l'e
criteria outlirted
worthy of indus ion as a
pcrnmncnt pan oflhc income 111.;0;: code.
Background: The Jewish Fedenllion s of No nh AmeriCll (herein referred 10 Il,'; " J rNA ") is
the national organi:alt illn 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.l l planning lind coordinating bodie, for an
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194
extensive nctwork of Jcwlsh health, education ood social servkcs in their communities.
Thus, the JFNA System rcpresents over onc thousand affi liated agencies and serves
several million itldividuol s 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 afii liatcd Jewi sh commun ity foundations raise in
l.'(CCSS of another 51.25 billion each ycar through ch aritabl c vchick'S indudin g donor
3dviscd runds. supporting organizations. (togethcr referred 10 a "p:micipatory fUllds').
which supportulle Of more spt."l: ified public charities or programs th rough all aCl ive gnmt
making program, as well as maintaining chari table income
endownll'l11 assels of the J FNA system is in
c.~ccss
plon~.
The con lhincd
(>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 lati vdy recent incentive added 10 the ioron1e tax
code which Ims materially incrcasillg giv ing!O FedemtiollS throughout the country.
IRA C harituble
Rc>lIon~ r :
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 conlai ned 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
chari table 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\.'C Il y rrom th eir individual retirement
aceOUllilO eligible charities. Amounl$ roHed over arc 1101 token into incQme by the IRA
owner and arc IIOt el igible for a chari table contribulion deduction. Howcver. sueh
rollovcT$ qua lify as an nnnual required minimum di stri1;Jution rrom th e OWller's IRA.
II is importanl to 1I0te that the IRA Chari table 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
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195
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.' contributi on
deductiol1 for the mort: than two-thirds of allt9xpoyers who do not claim itemized
deductiol1s.
C rit<' ria for EI'a lulItin g
E~ pirin g
Tu
I'rov i~ion s:
JFNA applauds thl' Subcommitwe
on Sekct Revenue Mea~ures lor conducting the hl.'aring on the Ihlllcwork for evaluating.
...... pinng tax prov isions. We lind mud, to
agr~e
,vith in the testimony provided by Dr.
James Whi le, DiTl.."'1:tor of Tax l&sueS for the Government Accountability Office who
outlined thrl>;: mujor criterill for cvaluUling e.~piring 1:IX provisions. In additi on 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
each provbion, it is also esscntialto
detemlin~
foregon~
for
ir tile proviSions are fair or cqui(oble. Are
similarly situated uupayers treated cquolly under the provision? FU"i"lemlOre. docs th e
proviSion promote ceonomic benefiLS 10 Ihe soc iety 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 burdln in admillistering the tax
13w~?
l\1 erils of the I RA C ha rit a ble Rollove r: JFNA believes that in the sill (ax years ill
which it has been Pll" orlile Intcm91
proven success as
tI
R evenu~
Code.lhe IRA Charitable Rollover has
tllX incentive th at has greatly increased cilarit3ble giving. In tile
words of Donald Marron.
Dir\.~tor,
Urban-B rookings Tas Policy Center, the provision
has satisfied tile burden or proof' or del1lollstnlling its merit. 'nle e.~istillg IRA
Charitable Rollover has been all overw helming su":c<:sl;: for the charitabl e sector ill
g..:n~-ral ,
and Ih e JFNA system, in particular. The IRA Charita ble Rollover helps charities
provide needed social

fewer
rcsouree~
servit~s
at II time when there is both an in creased demand and
available from go,'emm<'1ll sourecs. In II relatively short period of time,
Jewish Federtuions Illlv..: recc1ved more th a n 530 millio n in contributions from IRA
cllaritable nlllol'ers, through targeted c3mpaiglls, such as one to attf'dct rollover gins from
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196
grondparents to support Jewi sh day school s by reducing !uitian eos!s and funding
opcr:llions, Charitable rollover gi lls have niSI) en3blcd
J ewi~h
Federutions to accelernte
capital campaigns to finance nL'W construction projects. e.:'lp:md or fully-fund

social services progrums, among other
worthwhil~
e.~ i stin g
projects, a\ a time when other !;(lurces
of charitable giving havc been on Ihc decl ine. In addition. many donors ha\,\: tllken
advantage of th e IRA Ch;'\ritable Rollover provision to fund un endowment for their
unnual FedcrJtion campaign g iil. These gills arc pl!rhaps the most impoflillll as
th~
annual
Federation campaigl1 represent S the life-blood of giying to the lFNA system and th e
source o f annual allocations to literally thousands of social service ;\gcncics throughout
the country. Each year s ince thl: pl'lw isioll has been
cna~',tcd
and renewed, severnl large
Jewish f edcrntiOIiS hllVC reech'ed rollover co ntribut ions in e};Cl'SS ors I millioll,
Federntions have come to rely on IRA Charitable Rollo ver gifL~ as all important Sn ur(c of
anllU:li budgct ing 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 provid es charities with a significant source ofrcvcnue without ;)

large re\'enue cost to the Fcdernl go vern men t. IJl addition,
individu~l s
\\1'10 all: over age
70 V, arc able to make gifts dif(.-cUy to a charitable inSli tution 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 \VeI l as f orm 8283 for nonensh
chllril3ble contributions in excess orS500. Further, the funds thllt fl(\w dil'L~t ly from
reti rement aerounts lire often u,ed to pay salaries and other operllting e.~ p~nses for
charitable o rganiZlltions. It is impofl8 nt 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
nonpro lits in th e U.S. employ oyer 13 million workers , which is almost 10 po:reent o f 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
ad01inist~'1"Cd
by the IHS thrOllgh
~xi stin.reporting
by investment brokerage linns and
others that (ulTemly handle IRA acu,mnts.
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197
FirSI .1FNA ReeOlllmcllIl,lIilln: M a ke Ihe IRA
CharitalJl ~
Ru iJ (I\"f.'r
p~rrllane nl.
We
I'CI:onllllcnd th at. 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 confus ion 10 laxpayers. Iheir linancial advisors ,
and the charities that can benefil from such tl1lllsfers.
2.
Bel3u~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 lain 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 r~quiri:d

minimum distribulion requirements make it cssel1 liallhallaxpayers know th""
la\\f with certaifllY. Potential confusion Qver the inleraclioll oflhesc 111'0
prov isions 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 w hen Ihe statute

was cnacted ill Oe<:embcr
Second JFNA Reco mmendati on :
relr03ctiv~
~ Iland
e.~umding
the
pro~ision
to the prior January.
currenl Ja w to include p rov isions
co nt a ined in th e " I'ublic G(lod IRA Rollo\er Ac t of2 011." Bi-panisan legisl8lion to
make pemlUllcnl and e ~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"$, and H.R. 2502. inlroduccd by Reps. HergeT and
Blumenauer and 18 cosponsors. The major provisions in the " Public Good IRA Roll o\'er
ACI of2011' would (I) mak e the rollover penn~m:nt; (2) remove the eurrellt 5 100,000
annulIl cap on qua lified charitable distri but ions; (3) allow donor advised funds.
supporting organizations, a nd privah: fOllndnlioll5to receive qualified charitabl e
distribulions: ~nd (4) provide IRA owners at 3ge 59V, with u pl.lIlned givin)! oplion such
as using Ihe rollover to fund a
~p ljt-inlerest
(Iife-incoml.") gift lhrotlgh u charitable gifl
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198
annuity or c\writ3b1e remainder nrllluily lrust. Although JFNA urges COllgress 10 cnact
the "Public Good I RA Roll over Act of20 II" as introduced, we wish 10 provide specific
comments regarding
IWO
of its main provisions:
o A U!!w dlln or a d v is~d fund s, s UPP llrting orga nil uti ons.
~ nd
private
founda tiullS to recei ve qu alHi ed cha ri ta ble di stributio ns. OVl,. the past
sevel<Jl decades. the lFNA systcm has bc<:n proud ofthe growth in charitable
giving that has tx-.:n
generat~-d
through planned giving vehicles. Ofspl"dal
importance bu\e been partieipaliJry funds. such as donor adviSed runds and
supporting orgllni7.alions, which arc
c.~cOlial
in creating n broad tl.'lSC of
support for the Jewish commun it y to fulfill its social services mission.
especilrlly in times of economic distress. Participntory funds have bc<:nllll
indispensible tool in enc()umging inh:rgelllT.ltional in v() lvcrnent in Jewish
d\llTity through family philanthropy. In addition to prMiding financial
rcwlln::es for criticul human scrvicl's in local Jewish 3nd gen eral communities,
these cll3ritable vehicles alSQ advan ce Ihe valucs and
Systm through nurturing
rcl~tionships
go~ ls
b<:tween Jewish
of the JFNA
phiJ~nthropistS
(lnd
Fedcration lay and profe$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 ~xle 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~ l endcd
period nftime, including
the lifctimes o rthe donor and spo us.:, hcirs und additional SUCCl"SSQrs. this
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199
relationship continues to grow ov('r time and sllecceding g('nerations of Je\~is h
community leaders can be- fostt.'Tcd, This provides the J FNA 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 Mean s Commince
continllCS 10 consider lax rcfonn options in general. und
pani(;ular, JFNA urges IhaL growth in
pal1icip~lory
1a.~
extenders" in
vehicles be ul10wcd 10
nourish and urge Ih311hcy be illl'\luJed in the definition uf charilil"Slhat are

emi tJcd to rt."t:cive qualified distributions from IRA Charitablc Rollovcl"!l.
(}
Provid e IRA own ers a l agc S9 Yi wilh a plnllllcd gh'in g oill ion such as
using Ih e rollover 10 fund a s plil-inIHl'!l1 (lire- in come) giflthroug h a
charitable gin a nnu ily or c hurilable re mai nd er a nnnil y IruSI. Expansilm
of the I RA Ch aritable Rollover 10 pc:mlit tho~" age 59 .. 10 fund life-incomc
charitable gifts could also provide: udditionul resources to America's churi tics,
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-regu l:lted amI
popular method Qf fundraising for ch~rilahlc iru;lillllions.
federal
rl~ul~t;\lns
E~;sling
state and
\\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 po rl 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. Pem aps 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
Flxlerdlion~
fl.llfillthcir individual and collttti\'c r;.-;'ponsibilitid to improve thl'
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200
world, build community, ~nd foster Jewish renaissance, As noted abol'c. the two key
clements of such fundraising is a higl1ly-recognized nnll ual 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 III I' 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 gi ving
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
Reven ue 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 extende rs" 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 oPpol1l1nilY10 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 Washi ngton 01Tite at 202-736-5868 or
willi:un,daro\T(tliiewlshfcdL'r:ltions.urg or Stn'en Woolf, :;enior tax policy coun:;cl al 202716_5!o:63 or .'Itcven.,U)(lll@je"
ishl;:'oJmt iflns.or~
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201
f
T RUE B L U E-
STATEMENl' FOR Till:: JU:COlW
J OANNA S. M 01'lrW E
VI CE PR ES IO El'o'T, DEP UTV GEI"U: RAL COUN St:L
Ol'nn:R
AND C HI EF COMPLI ANCE
TIWE BL U.:. I NC.
r;'QR Tm; U F.ARING O N
"F RAMEWORK FOR EVALUATING CE RT A LN
EXP IRI NG TAX PROVISIONS"
BEFO Ki!
TIILU.S . HO USE OF RPItESENTATIV ES
COMM ITIEE O N W AYS AN O M EANS
SU BCOM~II1Tn: ON SELECT RE "F.NUE Mt:ASURES
J UNE 8, 2012
1015 A St ~l , Tacoma, WA 9840 2
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253.383.9 10 1
202
On behal f ofTmtHlu~, Inc. ("'r meBlut"), 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 Subcommi l1 iX"s June 8th IJearinft ttJ e.~plore prin~iplcs nnd metries to eval1l8te tax
c.mnder.; was panicularly helpflll in advalleing lilt.' diak'gui.' on Ih ."e tax polii.'ii.'s. 1111.' witn<'~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.\
pol icies. 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 di scusscd 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
ex tenders 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 unem plI)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.U t; 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 ski ll ed work thmugh five lines ofbllsincss:
Relldy; SI'Mlan Sla ning; ell' Resources; Plane Tcchs: and Ce nterline. The TrucBlue
fam il y 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~irool1lcnl.
l~bor
A~ a lcaJ ing supplier of tempomry 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 Slani ng (,ml s 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 contin ues its fmgile ret:O\i.'ry.
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. I.
203
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 opportu nity to
support {)f supplement their wQr\.;force in variQu5 work Sillialions. sueh as emp[oye.: absences,
skill shortages, 5Cllsonp[ worl;lo.1d~, and specia l 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$im.'ss ~nd ~-':(!I){)mk ~"()nditions bo.-fore ~'()ml1lilling to p~."l1nunem hir~"S .
In Trucl3lut"s eXp'-"lienn'. the aV~'I1Igc 1C11UI"l' Qf a tempor~ry employee is appmximately
one month per year. Howe"er. e\"en ifsomeone works for us lor On" doy. Iha! person is an
employee oflhe ~"Ompany r.UhlT thun an independent eontrnctor. Employel' stmus intcyrntes
I'>'orkcrs inlo the lJ.S. economy byen~uril1g Ihm they are eligible to ...or\.; in the lJ.S., that all
workers' compeosution. unemployment. and incomc taws ~ as I'>'eli as any court ..onlercd
gontishments - nre ,~i t hheld and colil'Ctcd, lind thm W 2s repon income aCl.."'IIr.ltely.
WOtUo;
OHO~TtlN ln' T A."\; C~ r.utT
WOTe and its pl\.'ileecssors.. the Tario:eled Jobs Ta;x Credit ('1'JTC" ) and the Welfare to
Work (" WTW~) T~.~ Credit, h3\e c.~isled sil1~e 1977, eseept for a brieflaps.t: in Ihe 1990s. Since
WOTC ,,"ali eslablish~-d in 19<16, il hall bcco lemporurily e;xlcnd~d nearly a do"cn limes. WOTC
wns last ~ignificontly com.idcred in 20M. when it was lnodified nod extended through August 3 I.
20 11 in the Smalll3usineS$aod Work Opportllllily Tax ACl of2007. In 20 10. WOTC was
cstl'oded through December 31. :Wll by the 'h~ Rel ief, 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 ~~ternns' 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 hlaring. witnes~es discussc<.lthe need 10 uud c'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.:: gro ups surrer from lIighcr llnemploymel1l and lower wagc.~.
E:m mpl.:s orWOTC-targClcd employee groups include vetcmn~ whQ dlher arc food stamp
reeipicnlS Of aTC unemployed ~11,j $Urrering3 servk e-C()flnC\:INI disabililj, fomlcr felons,
discnnn(Cletl youlh, and mcmhl'r5 of families Ten'il'ing h\'ndilS under Ihl' Tcmpor~ry Assisl3ncc
for Nl"t:tly Fam ilies i'ro!;r~m ("TANf'").
WOTe i ~ strtlCIUrctI as a tall nedit for l'mploycrs who hire individuals from the largcted
grOlJps, providing an inc ... mive for 11Il' employe r. W01'C cO'cclivcly lessens tlte impact of~
prOOuclivily gap between the tari!~1 group membcr5 and nlher worh>fs, eneouragilli! employers
to lake a chance and hire workers they may otherwise not. AI the same time. the emp loy<"\' is
given an opportunity to work. building skill sctS and taking them olTpublk Iissismnee.
WOTC addressL'$ 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 c.~tcnsion of wOTe would cost $97 I million o\'cr 10
yf.'ars. JOINTCOMMIITF:f.OI'l T",'<ATlON, ESTtMI\Tlm BUD(,ET EFFP.C"N OF REVENUE PROVISIONS
CONT,oIINW IN PflI:SHJt:N'r' s FY 2012 BuOVt:T PItOI>QS ... L, JCX-1911 {Mar. 17, 2011). The cost,
howl'l'er. must be co~sidered in ligln of the sign itieant benefits associmed with WOTC.
wOTe works. eflcc li vcly a~'Complislling its goal of endm!; ('ICrsiMcnl unemployment
umong our Mtion's most vuhlcroblf.' eilil\!ns. O"CC in the workforce. worker> in Ihe largel group
gain experiC11ec and on-Ihe-job tnlining. allowing them 10 subsequently "climb Ihe ladtlcr" 10
higher-skilled and lIigllcr-p:I}'ing job!;. Through WQTC, mort' long-tcnn welfan: rccipicnL~ - thc
most difficult ca~ - are Iwing emp]{)ycd in the privatc sector and 7 out of 10 welfare l'!.'Cipi~nts
arc \ISing WOTe to lind private seClor jQbs. ;!ccording 10 a 201 I study hy l'elcrCappel)i oftlw
Whart{)n Ru~iness Selmol at the Un ;ver5ily ofl'cnnsylvaniu.
In 201 1 alone, nHm: Ihnt I. I million workers found jobs lilrougil WOTe. Furtllcr, lhis
important w ,~ polie,y l'l'lablt's these " 'orkcrs to move inlO Sl'lf-suOicicncy as they cam a steady
income and become contributing taXp3yers. nle Cappelli study found th aI individuals h ir~d
untler WOTC go on to tx...,{)me producti ve cmpluyC'Cs who an: no longer dependent I)]! public
assistance. In thi~ monner, WOTe provides a r..:lativcly less C1.'I$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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Framework For Evaluating Certain Expiring Tax Provisions: Hearing

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FRAMEWORK FOR EVALUATING CERTAIN

EXPIRING TAX PROVISIONS

SUBCOMMITTEE ON SELECT REVENUE MEASURES

COMMITTEE ON WAYS AND MEANS

Serial No. 112SRM07

joloto on DSK67XMDP1PROD with HEARING

For sale by the Superintendent of Documents, U.S. Government Printing Office

VerDate Mar 15 2010

08:41 Apr 19, 2013

COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON SELECT REVENUE MEASURES

joloto on DSK67XMDP1PROD with HEARING

PETER J. ROSKAM, Illinois

RICHARD E. NEAL, Massachusetts

VerDate Mar 15 2010

08:41 Apr 19, 2013

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

SUBMISSIONS FOR THE RECORD

joloto on DSK67XMDP1PROD with HEARING

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

VerDate Mar 15 2010

08:41 Apr 19, 2013

joloto on DSK67XMDP1PROD with HEARING

VerDate Mar 15 2010

08:41 Apr 19, 2013