The tax extenders bill continues to elude passage in the Senate as Democrats and Republicans continue to disagree on the cost of the bill and some of the key issues. Among the many sticking points are what to do with costly Medicaid matching funds, the so-called “doc fix” and unemployment insurance. Unless Senate Democrats can garner a couple Republicans—who are calling for various cuts to make the bill less expensive, the bill is dead in the water.

Last week, the Senate failed to move forward on a version of the bill that cost $118 billion and added approximately $60 billion to the deficit, and two subsequent proposals also were batted down due to cost issues. Now dealing with yet another attempt to pass the bill, one compromise would scale back by $8.5 billion the federal Medicaid matching funds. Senate Democrats now appear resigned that the net cost of the Medicaid assistance needs to be scaled back in order to get support of moderates in both parties. The last effort to advance the bill on June 17 fell four votes short. The new language also would address the carried interest issue which would inadvertently increase taxes on family-owned investment partnerships.

Senate Majority Leader Harry Reid (D-Nev.) is reported to be considering moving away from the extenders for the near-term to address other issues if an agreement isn’t reached soon. Apart from the infighting in the Senate, the legislation is likely to meet additional roadblocks when the House takes-up the tax extender language.

Currently in the bill are provisions to: extend bonus depreciation; exclude 100 percent of capital gains on the stock of qualified companies; extend of the popular research and development tax credit; extend the biodiesel credit; and allow taxpayers in states without an income tax to deduct state and local sales and property taxes from their federal income taxes.

The cost of those tax cut extensions would be offset by the provisions aimed at collecting more payroll taxes from principals at S corporations, tightening rules related to the use of foreign tax credits, and changing the tax treatment of carried interest earned by investment fund managers.

Also at issue: how to deal with the estate tax. Despite the best efforts of Sens. Jon Kyl (R-Ariz.) and Blanche Lincoln (D-Ark.) to include in the extenders language a provision to deal with the estate tax, which currently is repealed, the bill currently doesn’t include an estate tax fix.

It remains unclear how the House will treat the stand-alone Medicare reimbursement fix and the extenders bill if the Senate passes it. House Speaker Nancy Pelosi (D-Calif.) has suggested she might not move the "doc fix" bill apart from the broader measure.