Panel OKs Changes for Tax Credits, Insurance Firms

The House Ways and Means Committee, kicking off a three-day weekend of meetings on tax overhaul legislation, voted Friday to revamp many popular energy tax credits and to put new limits on tax credits for rehabilitating old buildings.

The committee also voted to restrict insurance industry tax deductions but balked at President Reagan’s proposal to tax the increasing value of whole life insurance policies. Insurance companies had organized a massive lobbying effort against the proposal to tax “inside buildup.”

The panel also opted to begin taxing Blue Cross & Blue Shield Corp., which for decades has been tax exempt, in the same manner as other insurance firms. The company said the proposal would most significantly affect the 11 million people who carry individual Blue Cross and Blue Shield coverage rather than those who are covered by plans provided by their employers.

Higher Premiums

The company said the Ways and Means provision could force it to charge slightly higher premiums and terminate some high-risk policies. But Rep. Fortney H. (Pete) Stark Jr. (D-Oakland), who chaired the committee working group that produced the proposal, dismissed such warnings and said current coverage will continue to be available.

Ways and Means Committee members will meet in private sessions through the weekend in an effort to finish work on the bill--their answer to Reagan’s tax plan--by the end of next week.

After several weeks of little progress in the committee’s initial meetings, Chairman Dan Rostenkowski (D-Ill.) had revived what was seen as a dying tax bill with a similar weekend session last month. Since then, however, the committee has been diverted from the tax bill by legislation aimed at balancing the federal budget.

Solar Energy Credits

In a series of voice votes Friday, the committee rejected a plan, backed by Reagan and Rostenkowski, to allow solar energy tax credits to expire this year as scheduled under current law, opting instead for a three-year phase-out. Credits for installing wind and geothermal devices on residences would expire this year.

It adopted a proposal that would make tax credits for rehabilitating buildings less generous and put stricter limits on the types of structures that qualify for such credits.

The committee made few immediate changes in tax regulations for property and casualty insurance companies, which now pay much lower rates than most businesses, in part because much of their income comes from investments in tax-free bonds. However, it included a provision that has become known as “the hammer”--a stiff minimum tax that would become effective in 1988 unless the industry and lawmakers can agree on alternative tax regulations.

Stark conceded that the minimum tax probably will never become law. “This is an attention-grabber . . . designed to encourage the industry to cooperate with us” in finding other means of forcing insurance companies to pay higher taxes, he said.