Last night, as expected, Congress took a giant step toward finishing appropriations this year, as a House and Senate conference committee agreed to a $446.8 billion discretionary omnibus, which includes six of the seven remaining appropriations bills. In addition, the House this afternoon passed, by a vote of 241 to 181, the tax extenders package as a standalone measure rather than attaching it to an appropriations bill; and it's completely paid for!

According to a lengthy Congressional Quarterly article (subscription required), Democratic and Republican conferees from both chambers tussled over hot-button issues – such as needle exchange programs in the District of Columbia and the fate of detainees locked up in Guantánamo Bay, Cuba – while hammering out what has become the Fiscal 2010 Consolidated Appropriations Act. The six spending bills included in the omnibus bill are the Transportation-HUD, Commerce-Justice-Science, Financial Services, Labor-HHS-Education, Military Construction-VA, and State-Foreign Operations bills. See our Appropriations Table below.

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The tax extenders package, which extends several expiring tax provisions, clocked in at a cost of roughly $31 billion, but legislators offset those costs with new taxes on investment fund managers and penalties for overseas tax avoidance maneuvers. The tax extensions vary between the popular research and development credit for businesses to the deduction allowed for teachers who purchase their own classroom supplies.

To pay for these tax provisions, members of Congress changed the "carried interest" rule that taxes investment fund managers on the share of profits they keep as compensation. Previously, the government taxed managers at the capital gains tax rate, which taxes investments held for more than one year at a maximum of 15 percent, but will now tax them at ordinary income tax rates, roughly around 35 percent. A Bureau of National Affairs update on passage of the bill provides an explanation of the second receipt-generating provision:

House lawmakers also passed a new provision that would impose a 30 percent withholding tax on payments to foreign banks unless they acknowledge the accounts to the Internal Revenue Service and disclose account ownership, amounts, and fund transfers. Tax advisers who help set up offshore accounts would be required to disclose their activities or pay a penalty.

The Joint Committee on Taxation estimates that the investment fund tax will bring in $24.6 billion over ten years, while the offshore tax provision will raise $7.7 billion. These two provisions are levelheaded revenue raisers and responsible think tanks have been applauding the passage of the tax extender package all afternoon. Chuck Marr over at the Center on Budget and Policy Priorities (CBPP) has an excellent write up on the bill's passage and why it matters. His analysis claims that this tax extenders bill paves the way for Congress to get back to pay-as-you-go budgeting and urges the Senate to pass a paid-for tax extenders packaged as well. Here, here.

Image by Flickr user **CRT** used under a Creative Commons license.