Extenders’ Plight Sends K St. Into Funk

Posted July 18, 2008 at 5:36pm

The lobbying environment surrounding an extension of a long list of popular tax credits has become so politically charged and uncertain that K Streeters pushing the measure are doing something akin to hiding under their desks.

“To say folks are ‘keeping their heads down’ is an understatement,” said John O’Neill, a partner at Venable and one-time Republican tax counsel on the Senate Finance Committee and most recently, policy director and counsel to then-Senate Minority Whip Trent Lott (R-Miss.). “Most lobbyists I know are terrified of saying anything for fear of offending one side or the other. The dysfunctionality we’ve seen in Congress the last few years — whether Republicans or Democrats have been in charge — is infecting everything.”

The typically bipartisan and generally popular tax credits, which include incentives for companies that invest in research and development or those putting resources toward renewable-energy programs, have found themselves in the precarious position of a political football. Democrats support legislation that would renew the credits but with an offset that would delay tax cuts for interest earned overseas and eliminating deferred compensation in some accounts offshore. But Republicans have said the temporary extensions should not be subject to a permanent “pay-for.”

Both Republican and Democratic Members have worked to woo corporate America and their K Street representatives to their side of the debate — a position that most lobbyists say is intensely uncomfortable.

“You get into the room, but you stay out of the cat box,” said one lobbyist pushing for the extenders. “You just talk about the need to get this stuff done. If asked, you tell the Members that you’re not troubled by the offsets, but you focus on the ‘why’ side of the message.”

Another tax lobbyist said the environment among Democratic and Republican lobbyists on this issue has become infected with a “whole climate of suspicion,” with some K Streeters fearing that what they say will get reported back to the other party and “will be misconstrued.”

Sources on and off Capitol Hill said that Senate Finance Chairman Max Baucus (D-Mont.) is working on a possible compromise, perhaps with Finance ranking member Chuck Grassley (R-Iowa). One Senate aide said Baucus is committed to getting an alternative minimum tax fix included as part of the extenders package.

“From what I’m hearing, they are going to try to take another stab at another extender bill [next] week,” said one corporate lobbyist working for the package. “We’re told it will not be just yet another cloture vote on the same thing.”

Yet another longtime lobbyist said K Street should back away when it comes to getting involved in Senate cloture votes.

“You lobby, but what the Democrats want is exactly what the Republicans wanted four years ago — whoever is the party in power, wants you to support their cloture efforts,” said this lobbyist, who is a Republican. “And the business community is traditionally reluctant to get involved in cloture battles.”

This lobbyist said the odds are that Members will approve the tax-extenders bill during a lame-duck session after the November elections, despite the fact that Speaker Nancy Pelosi (D-Calif.) and House Majority Leader Steny Hoyer (D-Md.) have expressed their opposition to a lame-duck session.

“R&D stands for renewed in December,” said a lobbyist working for the R&D tax-credit extension. This lobbyist added that the business community is frustrated with both parties: Republicans because of their unwillingness to budge on the offset issue and Democrats for their unwillingness to overlook the need for a pay-for in this case. This lobbyist pointed out that pay-as-you-go rules have not applied to several legislative items this year including the first stimulus package and, he said, has not been discussed in the context of a second stimulus bill whose price tag would be at least $50 billion.

“And yet they are saying extenders have to be subject to PAYGO,” this lobbyist said. “My point is [Democrats’] position on paygo is pretty inconsistent.”

Despite all the partisan worries, Dorothy Coleman, a lobbyist with the National Association of Manufacturers, said her member companies have stepped up to the plate to lobby for the extenders.

In a letter earlier this month, more than 80 CEOs of NAM member companies wrote to Members, urging them to “act quickly” on the extenders. “In particular, we support immediate extensions of a strengthened R&D tax credit, tax incentives for energy efficiency and renewable energy, deferral of U.S. tax on active business global financing income, and look-through rules for payments between related foreign corporations,” the letter stated. “If these tax provisions are not extended, our country’s ability to innovate, compete, and help solve our energy needs … will be compromised.”

Coleman added that getting that many CEOs to sign a letter as quickly as they did was unusual, indicating the significance of the issue. “It’s important that it gets to the Senate floor as soon as possible for debate,” Coleman said.

Monica McGuire, executive secretary of the R&D Credit Coalition, said the situation remains fluid.

“We’re trying to be visible,” she said. “The fact that [Senators] are talking means that things are in play. You’ve got to play to win.”

But, she said, already her group is lining up plant tours and company visits during the August recess that could become opportunities to press Members on the extenders package if it hasn’t passed by then.