Thursday, May 20, 2010

"Tax Extenders" Bill has stuff for transit, human services, too

House and Senate leaders have been preparing a must-pass bill to extend various expiring tax provisions. They're hoping to get this "extenders" bill passed by both chambers of Congress and onto Pres. Obama's desk in time for the Memorial Day weekend.

As drafted, this legislation will have provisions affecting a fair number of public and community transportation providers, including:

  • A six-month extension of the temporary Medicaid "FMAP" increases (i.e., the percentage of medical assistance that the federal government will reimburse to states' Medicaid programs) that were put into place in last year's American Recovery and Reinvestment Act (this is estimated to channel another $24 billion of federal funds into Medicaid);
  • A one-year extension of the "emergency contingency fund" created under the American Recovery and Reinvestment Act (ARRA) as an add-on to the Temporary Assistance for Needy Families (TANF) program , which will direct an additional $2.5 billion to states' TANF activities;
  • A one-year renewal of the special summer youth employment program created under ARRA, which will provide $1.0 billion to local workforce investment boards as a supplement to all their other youth employment activities this summer;
  • One-year extensions of New Markets Tax Credits, Empowerment Zones, and Renewal Communities, which are tax-favored opportunities to support reinvestment and revitalization of economically distressed communities (collectively, these extensions are estimated to provide for $1.4 billion in tax-favored community revitalization);
  • An additional allocation of $25 in lending authority for Recovery Zone Bonds, which were created under ARRA as a mechanism to provide quick, financially secure investments in local infrastructure projects; and
  • A two-year extension (and some tweaking) of the ARRA-created Build America Bonds program for financing infrastructure projects carried out by state and local governments, which should leverage an additional $97 billion between now and 2012.

These are not the extenders bill's highest profile features, although the Medicaid FMAP increase is its second-highest expense (top of the chart is the bill's proposed extension of federal unemployment benefits eligibility).

As drafted, the extenders bill does not address the treatment of transit benefits under Internal Revenue Code Section 132(f). Under ARRA, up to $230 per month of individuals' employer-provided fringe benefits for transit passes, vanpools, etc., are tax-free. This has pumped more than $1.1 billion into public transit since the enactment of ARRA. Unless Congress changes the tax code, the allowed value of tax-free transit drops to the pre-ARRA level of $115 per month on January 1, 2011, which will cut this revenue stream for transit in half. It's possible that advocates for this transit and vanpool benefit are carrying out other strategies in advance of the year's end dropoff.

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