Negotiations Stalling on Payroll Tax

This could put biodiesel tax credit renewal in jeopardy.

Published on: Feb 9, 2012

The payroll tax holiday expires the end of the month and without its renewal a key ag tax break may also be in big trouble. Things are not looking good for either right now.

Capitol Hill newspaper Politico reports that top tax negotiators are not dealing on payroll taxes and that the length of a renewed break and how to pay for it divide the parties. Without renewal of the tax holiday expiring this month dozens of other tax breaks that expired in December, including for biodiesel, won't be renewed either.

Senator Chuck Grassley, R-Iowa, says that biodiesel is connected to all of the sun setting tax credits. He says there's little debate over continuing the tax holiday, that's not the dispute.

"Where the discussion is coming in is whether or not there needs to be offsets and how you offset it," Grassley said. "And then maybe another issue that's a little more on the periphery that's not really going to hold up the bill but are you going to put in some of these tax extenders?"

Grassley argues it's pretty certain the payroll tax break will be extended for a month or two at a time through the end of the year until a way is found to pay for the break. What's not certain is if the biodiesel tax credit that expired in December after a one-year renewal will be renewed again.

"Biodiesel will not be considered separately from the other 50 extenders," Grassley said. "So whether biodiesel is in the payroll tax is dependent upon whether all of the extenders that sun-setted last year are going to be in the payroll, and that's something I can't answer for you."

Grassley says some members of a House-Senate conference committee that he's not on have pushed the issue. But based on the latest reports, those negotiations may now be stalled.