In the weeks following the events of September 11, no fewer than seventeen bills were introduced in Congress with the primary purpose of revitalizing the nation’s Travel & Tourism industry. Four of these bills include a provision for a travel tax credit to encourage Americans to take a personal (i.e., non business-related) trip within a specified timeframe.

Each of these bills were subsequently referred to various Congressional committees and subcommittees. It is unknown which bill, if any, will make it to the floor for a vote, but the Kyl (S. 1500) and Shadegg (H.R. 3041) bills appear to be the frontrunners, as they were among the first introduced and currently have the greatest number of cosponsors.

The official title of Senate Bill 1500 (as introduced in Congress) is “A bill to amend the Internal Revenue Code of 1986 to provide tax and other incentives to maintain a vibrant travel and tourism industry, to keep people working, and to stimulate economic growth, and for other purposes.” The bill was introduced on October 4, 2001, and was referred to the Senate Committee on Finance the same day.

The bill amends the Internal Revenue Code to temporarily:

1) allow a tax credit for qualified personal travel expenses;
2) restore full deductibility for business entertainment expenses; and,
3) extend the carry-back period for travel or tourism industry losses.

The tax credit would cover travel expenses associated with airplane, cruise, train, and bus tickets, hotel and motel accommodations, auto expenses, and rental cars. In order to qualify for the tax credit, one must take a trip at least 100 miles from their primary residence, stay overnight in a commercial lodging facility, and take the trip between the date of the bill’s enactment and the end of the year (2001).

The events of September 11, combined with a slowing economy, have had a far-reaching negative impact on the Travel & Tourism industry, and provided the impetus for the bill’s introduction. Lingering fears about future terrorist attacks, prolonged military action, and an uncertain economy have curtailed many travelers’ plans over the past three months.

According to its latest economic forecast, the Travel Industry of America (TIA) estimates that pleasure travel will decline 9.0% in the fourth quarter of 2001, compared with the fourth quarter of 2000. Air travel and travel by personal vehicle are expected to decline 25.0% and 2.0%, respectively.

For the entire year, TIA estimates total domestic travel volume by Americans will decrease 3.5% to 962.3 million person-trips, and domestic traveler expenditures are expected to decline 7.0% below 2000 figures, for a total loss of $33.7 billion.

Total inbound arrivals for 2001 are projected to decline nearly 13.0% and international traveler spending will decrease 11.2%, for a loss of $9.2 billion in 2001. In total, nearly $43 billion in spending by domestic and international travelers is expected to be lost during 2001.

Travel & Tourism businesses have also continued to eliminate jobs in an effort to remain profitable. According to TIA, approximately 453,500 jobs directly related to Travel & Tourism will be lost this year, and an additional 74,000 jobs will be cut in 2002.

The hotel sector has been especially hard-hit in recent months. Based on figures from Smith Travel Research, room revenues for U.S. hotels were down nearly 17% in November when compared with 2000 levels. This decline comes after similar decreases in October (-17.7%) and September (-23.4% ).

The rationale behind the bill’s introduction can be found in a press release from Rep. Shadegg’s office. It reads: “The catastrophic events of September 11 have had a disproportionately negative impact on the U.S. travel and tourism industry. It has not only harmed the hotel, car rental, restaurant, entertainment, and other related travel and tourism businesses, but it has had a large ripple effect damaging many businesses that are only indirectly related to the travel and tourism industry. As a complement to the enhanced safety measures that are being implemented throughout the country, Congress should include in the economic stimulus package a temporary incentive to travel. This incentive will encourage Americans to resume recreational activity and tourism, as well as provide a much-needed stimulus to the American economy.”

As noted earlier, the Travel America Now Act of 2001 also contains provisions for restoring full deductibility of business entertainment expenses and extending the carry-back period for travel or tourism industry losses. The tax deductibility component, while important, has been debated in the past and applies only to the restaurant and entertainment sectors rather than to the Travel & Tourism industry as a whole. The loss carry-back provision is a complex accounting issue that may warrant future deliberation, but is not directly tied to the consumer. The travel tax credit, however, represents a unique and innovative effort by the government to stimulate the Travel & Tourism industry and is the provision that will most likely have the greatest impact on the traveling public. Therefore, the tax credit provision will be the primary focus of the Task Force.