Hope for Grain Fix as Tax Measures Face Uphill Climb on Omnibus (via CQ)

An internet sales tax measure and technical changes to fix glitches in the new tax law are unlikely to be included in an upcoming omnibus appropriations package, people familiar with the high-level spending talks said Tuesday.

A Democratic leadership aide said Speaker Paul D. Ryan, R-Wis., has made clear that there will be no tax provisions in the omnibus, and other people briefed or involved in the spending discussions have also said that technical corrections and especially online sales tax legislation are effectively off the table at this point in the negotiations. A spokeswoman for Ryan did not immediately respond to a request for comment.

The fiscal 2018 omnibus spending bill has been seen as one of the last, best chances for GOP tax writers looking to patch several glitches in their landmark tax code overhaul (PL 115-97), like a provision that has put private grain dealers at a competitive disadvantage with agricultural cooperatives.

House Ways and Means Chairman Kevin Brady, R-Texas, said Tuesday that there was still an outside chance for the grain fix to be included, as well as an extension of Federal Aviation Administration excise taxes that would otherwise expire March 31.

“I don’t want to get ahead of the Speaker and Leader McConnell and the bipartisan leadership here, but there is an urgency to the FAA tax extension and certainly to the co-op fix as well,” Brady said. “We’re very close to being able to share final details on the resolution for the co-op provision in a way that rebalances it back to where it was pre-tax reform. So we’ve had good discussions all across the board, and we continue to work with our Senate counterparts.”

Grain Glitch Fix

Later on Tuesday, Senate Finance Chairman Orrin G. Hatch, R-Utah, released a memo describing changes to the agricultural business deduction that he worked out with several GOP members and two outside stakeholders, the National Council of Farmer Cooperatives and the National Grain and Feed Association.

Under the new tax law, farmers can deduct up to 20 percent of their gross sales to agricultural cooperatives without certain limitations based on income. However sales to private operators receive less favorable treatment, as farmers above the law’s income threshold can’t claim additional deductions. In addition, the deductions can’t exceed 20 percent of net business income, which is smaller than gross income after backing out expenses.

The new agreement would reduce the deduction for farmers selling to co-ops by the same amount the farmer would have forgone under the old rules — either 9 percent of net income from those sales or 50 percent of wages attributable to such sales. That would effectively lessen the new incentive for farmers to sell to co-ops over private dealers.

In turn, cooperatives would again be able to take advantage of a special rule in place before the tax code overhaul. The rule gave co-ops flexibility to deduct based on gross sales and use the deduction to offset their income or pass the benefit along to farmer patrons.

In a joint statement, Hatch as well as Agriculture Chairman Pat Roberts of Kansas, Charles E. Grassley of Iowa, John Thune of South Dakota and John Hoeven of North Dakota said they were “committed to working with our colleagues to act swiftly on the measure and get it signed into law as soon as possible.” Similarly, Brady said in a statement that he hoped lawmakers “could enact this solution as quickly as possible.”

But Finance aides said there were no assurances, at least as of Tuesday, that the agricultural fix would be included in the omnibus. One snag with including an array of tax provisions in the omnibus was the expected price tag, as including one item could open the door to others.

And many Democrats since the new tax law was enacted in December have suggested they’re not eager to help Republicans plug the holes in their signature legislation.

“The way this tax bill was done, rushed through, partisan, in the dark of night, we don’t have much of an inclination — unless they want to open up other parts of the tax bill that we think need changes — to help them clean up the mess they made,” Senate Democratic Leader Charles E. Schumer of New York said Tuesday.

Brady said he thought some issues with the new law which “surfaced early on as fairly minor corrections, could be dealt with now” but that “immediate action and focus has to remain on FAA bill and on the co-ops solution.”

The fiscal 2018 spending package is now being discussed by top Republican and Democratic appropriators and leadership as well as the White House. Negotiators have been aiming to reach a deal and release the $1.3 trillion bill this week, well before the March 23 deadline when a stopgap funding measure (PL 115-123) expires, but it’s unclear if they will hit that target as a number of major policy and spending issues remain unresolved.

House Democratic Whip Steny H. Hoyer said Tuesday there “are a lot of riders still in play,” including on environmental policy, women’s health issues and campaign finance. Senate Homeland Security Appropriations Subcommittee Chairman John Boozman, R-Ark., said a final package may not be released until Sunday or Monday. Accordingly, there is still time for lawmakers to include other tax items.

Lawmakers in both chambers have also pushed to attach an internet sales tax enforcement measure to the omnibus. Legislation introduced by Representative Kristi Noem, R S.D., (HR 2193) and Senate Budget Chairman Michael B. Enzi, R-Wyo., (S 976) have both been discussed as add-ons.

Hatch is opposed, however, as is House Judiciary Chairman Robert W. Goodlatte, R-Va., and the online tax measures are almost certainly out of the spending bill, one person involved in the negotiations said Tuesday.

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