WASHINGTON - As a major rewrite of corporate tax law advanced closer to passage yesterday, a push to permit first-time government regulation of tobacco products was left on a House-Senate conference committee's cutting-room floor.

The tax package will now go to the House and Senate where supporters hoped for quick passage this week before Congress adjourns to campaign for the election. However, supporters of FDA regulation of tobacco were considering a filibuster in the Senate over the tobacco issue. The tax bill would repeal an export subsidy that was ruled illegal by the World Trade Organization and would lift retaliatory tariffs being imposed on 1,600 US exports to Europe. In place of the export subsidy, the legislation would shower $130 billion in new tax breaks on American businesses.

The conference committee passed the measure after supporters made a second unsuccessful attempt to put FDA regulation of tobacco into the bill. It had been in the Senate version of the tax bill but not in the House proposal.

House leaders expect to have the measure up for a vote in the full House today and Senate supporters hope that chamber can complete work on the proposal by tomorrow.

But that fast-track scenario could still hit a snag over the tobacco issue. The legislation does include a provision to spend $10.1 billion to buy out farmers who hold quotas giving them the right to grow a certain amount of tobacco. Both the Senate and House had approved buyout provisions for farmers, but the Senate linked its buyout to FDA regulation of tobacco. That's something the House refused to do.

Sen. Edward Kennedy, D-Massachusetts, argued for the FDA regulation and warned that without it, it could jeopardise passage of the entire corporate tax bill. He and other supporters of FDA regulation have suggested they might stage a filibuster to keep the tax measure from passing. However, Republicans, who used the fast-approaching election to win big passage by lopsided margins two weeks ago of a bill to extend three popular middle class tax cuts, are hoping the approaching election will build pressure to pass the corporate tax bill.

They believe that Democrats in the Senate will not want to be seen as blocking the tax bill with its buyout for tobacco farmers and run the risk of making that stand an issue in tightly contested Senate races in the Southern tobacco growing states.

Democratic Senate candidate Erskine Bowles of North Carolina announced that he had cancelled his campaign schedule for Wednesday to fly to Washington to lobby on behalf of the tobacco buyout. He criticised his Senate opponent, Rep. Richard Burr, R-North Carolina, and a member of the conference committee, for voting against Kennedy's amendment to add FDA regulation because the amendment would have also restored a higher funding figure that the Senate bill would have provided to farmers.

Supporters of the corporate tax legislation faced questions raised by the Bush administration in a letter written by Treasury Secretary John Snow. Snow complained that both the House and Senate versions of the bill "include a myriad of special interest tax provisions that benefit few taxpayers and increase the complexity of the tax code."

Senate Finance Committee Chairman Charles Grassley, R-Iowa, said he viewed the Snow letter as an effort to provide political cover from charges both from conservative Republicans and liberal Democrats that the tax bill has beneficial tax breaks for a number of companies.

The measure repeals a $5 billion annual tax break provided to US exporters that was ruled illegal by the World Trade Organization. The European Union began in March imposing a penalty tariff on 1,600 US products exported to Europe and was raising that tariff by 1 percentage point every month that Congress failed to repeal the outlawed tax break. The legislation takes the $57.7 billion saved over 10 years by eliminating the export tax subsidy and used that money to help provide more than $130 billion in new tax breaks.

The biggest one of those measures, which would cost $76.5 billion over ten years, would give a tax deduction aimed at lifting the fortunes of America's hard-hit manufacturers. However, manufacturing is broadly defined to include construction companies and engineering and architectural firms.

With an eye towards the November 2 election, the tax measure was loaded with a wide array of tax breaks for other groups such as small businesses, bow and arrow hunters, fishermen and farmers.

The bill would also reinstate the deductibility of state sales taxes on individuals' federal income tax returns, a provision that is popular in the seven states that do not have state income taxes.

In order to keep the bill from increasing the budget deficit, the legislation would raise an additional $81.7 billion by closing various corporate loopholes and tax shelters.