Tax News

CCH (cch.taxgroup.com) reports:

  The Senate on August 6 approved a bill (HR 3435) that would provide an additional $2 billion for the Cash for Clunkers program that gives consumers a cash incentive to trade in old vehicles for new, higher fuel-efficient models. The measure was approved 60-to-37 and came after lawmakers defeated six amendments that would have altered the original House-passed-version and likely delayed final action until Congress returned from its summer recess in September.

  "We have a choice before us. We're either going to have an extension of the Cash for Clunkers program with a passage of the House bill without any changes in it, or it is going to die," said Sen. Carl Levin, D-Mich., as the Senate prepared to vote on amendments.

  The widely popular program began running out of funds less than a week after it began, prompting the White House and Congress to seek additional funding. The House on July 31 immediately passed a bill providing an additional $2 billion to keep the program running (TAXDAY, 2009/08/03, C.1), but it was uncertain whether the Senate would follow suit before recessing for four weeks. Some senators had objected to more government spending at a time of record federal deficits, while others wanted assurances that Congress would find other means to finance the program instead of using funds earmarked for a clean energy loan guarantee program included in the American Recovery and Reinvestment Act of 2009 (P.L. 111-5). President Obama is expected to sign the measure quickly in order to keep the program running without interruption.

  The initial Cash-for-Clunkers legislation provided $1 billion in tax-free vouchers to automobile dealers who participated in the program. The program vouchers, worth $3,500 or $4,500, are given to dealers when consumers trade in old vehicles for ones with higher fuel efficiency. The vouchers are considered taxable income for the car buyer. Lawmakers created the Cash-for-Clunkers program as part of the Consumer Assistance to Recycle and Save Act of 2009 (CARS Act) (P.L. 111-32) (TAXDAY, 2009/06/25, W.1).

  By Jeff Carlson, CCH News Staff