On July 1, Senate Minority Leader Mitch McConnell (R-KY) and Finance Committee Ranking Republican Chuck Grassley (R-IA) sent a strong letter to Majority Leader Harry Reid (D-NV) and Finance Committee Chairman Max Baucus (D-MT) calling on the Senate to work to find a bipartisan solution to extend expiring (or expired) tax provisions, including clean energy tax incentives, an extension of the alternative minimum tax (AMT) "patch," and the research and development (R&D) tax credit, before the month-long August recess.
The sticking point on the measure is whether the bill needs corresponding revenue offsets, given the Democrat commitment to pass only "revenue neutral" tax provisions that do not add to the budget deficit and Republicans insistence that the omnibus tax extension bill does not need to be offset.
On July 3, McConnell sent a separate letter to Reid and House Majority Leader Nancy Pelosi (D-CA) offering a "compromise" in breaking the impasse. In his letter, McConnell recommended that, in exchange for Senate Republicans agreeing to offsets to the bill, the House and Senate Democratic Leadership agree to pay for the cost of extending expiring tax relief by reducing non-defense discretionary spending.
In a July 8th letter, Sen. Reid rejected McConnell's offer. Reid stated he wanted to advance a bi-partisan bill, but insisted it be offset and remained committed to the offsets included in H.R. 6049, which affect hedge fund operators and are non-controversial within that industry. Speaker Pelosi has not yet responded, but she will likely reply in kind.