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Fiscal cliff deal revives tax breaks for a variety of businesses

WASHINGTON — Wind farms, motorsports tracks, global banks and other businesses won revived tax breaks in a $75.3 billion package included in the last-minute budget deal passed by Congress and signed by President Barack Obama.

The package of tax extensions survived attempts to curb them to reduce the U.S. budget deficit that has exceeded $1 trillion for four years. Their beneficiaries and lobbyists received a reprieve and a chance to bargain for another extension this year.

The breaks are "generally economically useless or harmful" —lowering General Electric's tax bill, padding accounting firms' research-credit business and letting lawmakers repeatedly tap lobbyists and companies for donations — said Bob McIntyre, director of Citizens for Tax Justice, which favors higher taxes on companies.

"If you make them permanent, you get the campaign contribution once," McIntyre said. "You do it every year or two, they have to ante up again and again."

Most of the tax breaks had expired at the end of 2011 and will be continued through 2013.

Although they are lumped together, the miscellaneous tax breaks include a variety of items, from multibillion-dollar benefits for big companies to much smaller changes designed to increase American Indian employment.

Some are broad, like the credit for corporate research, which is supported by a coalition of technology companies, manufacturers and lawmakers including Rep. Kevin Brady, R-Texas, and Sen. Max Baucus, D-Mont., chairman of the Finance Committee. The two-year extension of the research credit would cost the government $14.3 billion in forgone revenue.

Some of the tax benefits are specialized, such as a $11.2 billion, two-year extension of the active financing exception, which lets GE, Caterpillar and Citigroup, among others, defer taxes on financing income they earn outside the United States. That allows their earnings to be treated like the income of non-financial companies with non-U.S. operations.

The congressional supporters of this provision include Pat Tiberi, an Ohio Republican, and Richard Neal, D-Mass., senior members of the House Ways and Means Committee.

Other breaks are narrow and often ridiculed by lawmakers. They include $78 million worth of accelerated depreciation for motorsports tracks, $248 million in special expensing rules for films and television programs, and a $222 million provision that directs excise taxes on imported rum to Puerto Rico and the U.S. Virgin Islands.

"You can see where Congress' heart is — perhaps its soul as well," McIntyre said.

Restaurants such as Cracker Barrel and McDonald's benefit from the $1.9 billion extension of the Work Opportunity Tax Credit for hiring workers from disadvantaged groups.

The bill includes a one-year extension through 2013 of the production tax credit for wind power, at a cost of $12.2 billion. That will save as many as 37,000 jobs in an industry that's expected to stall this year, the American Wind Energy Association said.

The budget agreement also includes a $1.3 billion, one-year extension of a tax break on write-offs of mortgage debt, a tactic becoming increasingly common as banks seek to move beyond the housing crisis. Borrowers won't have to pay income taxes on the principal forgiven as part of a loan modification or during a short sale in which they sell their homes for less than they owe.

Real estate agents, home builders and consumer advocates pushed for the extension, saying it was needed to avert a wave of foreclosures that could depress home prices.

Fiscal cliff deal revives tax breaks for a variety of businesses 01/03/13 [Last modified: Thursday, January 3, 2013 10:01pm]

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