Tax Extender Bill Would Reauthorize Cotton and Wool Funds, Etc.

(H.R. 4213 is not yet in effect. Generally, in order for a bill to be implemented, identical versions of that bill must be passed by both the House and Senate, and then the bill must be approved (enacted) by the President.)

Would Reauthorize Payments and Duty Suspensions of “Cotton Trust Fund”

H.R. 4213 would reauthorize the “cotton trust fund”, a program created in 2006 to provide payments to U.S. shirt manufacturers and U.S. cotton fabric and yarn producers and create a pima cotton promotion program in order to respond to a commercial disadvantage caused by an inverted tariff.¹

The trust fund was funded through the revenue collected from tariffs on cotton textile imports (primarily yarns and fabrics) and included duty suspensions and reductions on high-end cotton fabrics and yarns, subject to quantitative limitations. However, the authority to transfer tariff revenue to the trust fund expired on October 1, 2008, and the duty suspensions expired on December 31, 2009. H.R. 4213 would reauthorize the program until December 31, 2013.

Would Restore “Wool Trust Fund” to Authorized Levels

To address an immediate shortfall in the “wool trust fund,” a program created in 2000 to provide payments to U.S. suit makers to compensate for the competitive damage to the U.S. suit industry caused by an inverted tariff¹, H.R. 4213 would use revenue generated from tariffs on other apparel products to fund the wool trust fund at the level authorized in 2004.

Direct Payment in Lieu of Tax Credit for Energy-Efficient Appliance Mfrs

The bill would allow manufacturers of energy-efficient appliances to elect to receive a direct payment in lieu of the section 45M energy-efficient appliance tax credit. The direct payment would be equal to eighty-five percent (85%) of the tax credit that would otherwise have been allowed under section 45M.

Link Energy-Efficient Window Tax Credit to Revised Energy Star Requirements

In order to claim the section 25C tax credit for energy-efficient windows, taxpayers must purchase windows that meet certain specifications. Many have raised concerns that the current specifications fail to account for different climate regions in the U.S. Recently, the EPA updated the Energy Star requirements to take these climate regions into account. The bill would link eligibility for the tax credit to the (revised) Energy Star requirements.

Other Energy Provisions, Foreign Tax Provisions

H.R. 4213 also contains energy provisions, as well as provisions on “closing foreign tax loopholes”, which would (partial list):

• extend the tax incentive for liquid fuels derived from biomass, biogas, natural gas and propane used as a fuel in transportation vehicles;
• extend the alternative motor vehicle credit for heavy hybrids;
• impose rules to prevent the splitting of foreign tax credits from income;
• have guarantees sourced like interest and, if paid by U.S. taxpayers to foreign persons, to generally be subject to withholding tax;
• eliminate the special rule for certain redemptions by foreign subsidiaries;
• limit the use of section 956 for foreign tax credit planning (i.e., the “hopscotch” rule);
• repeal of the 80/20 rules; and
• amend the HIRE Act on the statute of limitations period for information on cross border transactions or foreign assets.

¹According to the summary, inverted tariffs occur when the duty on a finished product (e.g., a suit) is lower than the duty on the inputs (e.g., fabric) used to make the finished product.

H.R. 4213 available here.

House Ways and Means press releases (dated 05/20/10) available here and here.