Legislative update - Finance Committee approves highway extension 

July 10: The Senate Finance Committee, on a bipartisan basis, today followed the House Ways and Means Committee in approving its own version of legislation that would keep the Highway Trust Fund solvent.

Chairman Ron Wyden’s (D-OR) mark was revised from the legislation he placed before the committee on June 26.

The Finance legislation differs from a bill approved today by the House Ways and Means Committee. The two chambers have about three weeks to resolve their differences before the Highway Trust Fund runs out of money.

Revenue provisions

The Finance legislation includes the following revenue provisions:

  • Under the legislation, $9.8 billion would be transferred from the general treasury fund to the Highway Trust Fund; another $1 billion would be transferred from the Leaking Underground Storage Tank Trust Fund to the Highway Trust Fund

  • Customs user fees would be extended from 2021 to 2024

  • A “pension smoothing” provision would be extended. “Pension smoothing” refers to changes to the actuarial calculations for determining pension funding targets. Currently, the minimum funding rules for single-employer plans specify the interest rates and actuarial assumptions used to determine the present value of benefits for purposes of a plan’s target normal cost and funding target. Present value is generally determined using three interest rates (“segment” rates)—each of which applies to benefit payments expected to be made from the plan during a certain period.

    The Finance proposal would extend for three years the pension smoothing relief that was enacted in 2012 as a part of the last highway bill. Under the provision, the phase-out would start in 2016—a instead of 2013. (Under the bill the Ways and Means Committee approved today, the phase-out would begin in 2018.) The provision would revise the specified percentage ranges for determining whether a segment rate must be adjusted upward or downward. The adjusted segment rates would not apply to determine whether prohibited payments may be made from a plan when the plan sponsor is in bankruptcy. The plan’s adjusted funding target attainment percentage, determined without regard to the adjusted segment rates, would have to be at least 100% in order for prohibited payments to be made during bankruptcy. The proposal would revise the period of benefit payments to which the segment rates apply.

    The adjustment, in general, would reduce tax deductible payments to fund pension plans, increasing the taxable income of employers in the near-term; hence, the change would increase federal tax revenue during the 10-year budget window.

  • Due-diligence requirements imposed on tax return preparers with respect to the earned income tax credit would be extended to include the child tax credit.

  • Additional information would be required on returns relating to mortgage interest, effective for returns and statements due after 2015.

  • The IRS would be authorized to increase levies on payments to Medicare providers with delinquent tax debt from 15% to 100%.

  • The tax treatment of mutual ditch and irrigation companies would be clarified.

  • The excise tax on propane would be lowered, to create tax parity in energy content between propane and gasoline.

None of the revenue provisions designed to close the highway funding shortfall in either the House or Senate legislation relates to the customary source for financing highway construction—excise taxes on fuel and tires.

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