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Member, Beacon International Group, Ltd.
WASHINGTON—The future of a tax bill with a provision that would change the tax deductibility of punitive damage awards is in doubt after Senate Democrats failed to garner enough votes to stop debate on the bill.
The Thursday effort to invoke cloture failed on 56-40 vote, four votes shy of the margin needed to halt debate and bring the bill, H.R. 4213, to a floor vote.
In an effort to win more support, Finance Committee Chairman Max Baucus, D-Mont., this week pared back provisions included in the measure that would add to the federal deficit, but Republicans said the changes did not go far enough. Sen. Baucus said he will continue to refine the measure to get the necessary 60 votes.
The measure would disallow companies from taking a federal tax deduction for punitive damage awards; in states that permit insurance coverage of punitive damage awards, the amount paid by insurance would be added to an employer's taxable income. Those changes would apply to awards paid or incurred after Dec. 31, 2011.
The tax bill does not include a provision to extend federal COBRA premium subsidies to the unemployed. In a previous version of the tax bill, the Senate included an extension to provide the 15-month, 65% federal premium subsidy to employees laid off through the end of 2010.
But Senate Democrats later stripped that provision, which was projected to cost nearly $8 billion, to bring down the cost of the measure.
The last COBRA extension expired May 31. As a result, employees laid off since June 1 are not eligible for the subsidy.
Pension funding relief provisions that had been part of the tax bill were removed and passed Friday by the Senate as part of a separate measure that would temporarily reverse a reduction in Medicare payment rates to doctors.