to ensure
that dependent students who take a medically necessary leave of absence
do not lose health insurance coverage, and other purposes.
The legislative language of H.R. 2851 is available to read on Checkpoint.
10/8/08 -- President signs into law adoption bill clarifying uniform definition of child for various tax purposes.
On October 7, President Bush signed into law H.R. 6893, the "Fostering Connections to Success and Increasing Adoptions Act of 2008," which has been assigned the Public Law number of P.L. 110-351. The tax provisions in this measure clarify the uniform definition of a child for purposes of the dependency exemption, earned income tax credit, dependent care credit, and head of household filing status. Effective for tax years beginning after 2008, the Act provides that:
- an individual who otherwise satisfies the uniform definition is not treated as a qualifying child unless he is either: (1) younger than the individual claiming him as a qualifying child or (2) permanently and totally disabled;
- the child tax credit is available only for a qualifying child for whom the taxpayer is allowed a deduction under Code Sec. 151;
- an individual who is married and files a joint return (unless the return is filed only to claim a refund) is not considered a qualifying child for child-related tax benefits, including the child tax credit; and
- if a parent may claim a particular qualifying child, no other individual may claim that child; under an exception if no parent claims the qualifying child, another individual may claim the child if that individual (1) is otherwise eligible to claim the child and (2) has a higher adjusted gross income for the tax year than any parent eligible to claim the child.
The legislative language of H.R. 6893, the "Fostering Connections to Success and Increasing Adoption Act" is available to read on Checkpoint.
Public
law number assigned to the Emergency Economic Stabilization Act of
2008.
10/6/08 -- Public law number assigned to the Emergency
Economic Stabilization Act of 2008.
A public law number has been assigned to the Emergency Economic
Stabilization Act of 2008, which was signed into law on Oct. 3, 2008.
It is P.L. 110-343.
For Special Studies on the many tax provisions in the Emergency
Economic Stabilization Act, see Weekly Alert - 10/09/2008.
10/3/08 -- House passes financial bailout package with a host of tax changes; President's signs it the same day.
On October 3, Congress ended one of the most tumultuous legislative sessions in recent memory by enacting H.R. 1424, the Emergency Economic Stabilization Act of 2008 ("the 2008 Act"). On September 29, the House of Representatives rejected the bill when it consisted of a financial bailout package only, but on October 1, the Senate set the stage for a shotgun wedding by passing a bill that joined together the financial bailout package with a massive tax relief bill (including alternate minimum tax (AMT) relief, extenders of expiring tax provisions, energy incentives, and disaster relief) plus enhanced FDIC insurance provisions. The Senate then sent the revised bill back to the House, which finally approved the measure on Oct. 3. Later that day, the President's signed it into law.
For more details on the 2008 Act, see Weekly Alert - 10/09/2008.
The entire legislative language of H.R. 1424, the Emergency Economic Stabilization Act of 2008, split up into five documents is available to read on Checkpoint.
10/2/08 -- Senate passes financial bailout package with major tax law attached; now it's up to the House.
Late on October 1, the Senate by a vote of 74-25 approved H.R. 1424, the Emergency Economic Stabilization Act of 2008. The bill will be sent to the House for consideration. Should the House Democratic leadership decide to consider the bill, a vote on the measure is scheduled to take place on Friday, Oct. 3.
The bill that the Senate approved carried the full text of H.R. 6049, the Renewable Energy and Job Creation Act of 2008, as amended, as it was passed the Senate by a vote of 93-2, on September 23. These tax provisions include an AMT patch, a host of extenders, energy incentives, and disaster tax relief. H.R. 1424 also includes the Wellstone—Domenici Mental Health Parity and Addiction Equity Act of 2008, which the House by a vote of 376-47 passed as a separate bill (H.R. 6983). The Wellstone—Domenici portion of H.R. 1424 would prohibit discrimination in the provision of treatment for mental health and substance abuse disorders when compared to coverage for treatment of medical and surgical disorders.
The bill passed by the Senate also includes a provision that temporarily increases the amount of federal insurance for bank deposits from $100,000 to $250,000.
The Senate's strategy is to make it difficult for the House of Representatives to turn down a financial relief package that includes substantial tax breaks for individuals and businesses plus enhanced bank deposit protection.
The entire legislative language of H.R. 1424, the Emergency Economic Stabilization Act of 2008, split up into five documents is available to read on Checkpoint.
10/2/08 -- Inmate Tax Fraud Prevention Act cleared for President's signature.
On October 2, the Senate by unanimous consent approved H.R. 7082, the Inmate Tax Fraud Prevention Act. On September 27, the House of Representatives had approved the measure by voice vote so it's cleared for the President's signature.
H.R. 7082 amends the Code to allow disclosure between IRS and the Bureau of Prisons in certain circumstances where IRS believes a prisoner has filed a false return.
10/1/08 -- Senate set to pass bailout package with extender, energy and other tax provisions.
Late on October 1, the Senate was expected to pass a financial bailout package, technically known as the "Emergency Economic Stabilization Act of 2008, " after attaching a number of tax provisions to the legislation and a provision that temporarily increases the amount of federal insurance for bank deposits from $100,000 to $250,000. The tax provisions, which include an AMT patch, extenders, energy incentives, and disaster tax relief, derive from H.R. 6049, the Renewable Energy and Job Creation Act of 2008, as amended, which passed the Senate by a vote of 93-2, on September 23 (see the September 24 entry on the subject).
In addition, like the financial bailout package that was rejected by the House on September 29, the before the Senate contains an extension for home mortgage debt forgiveness relief, tax relief for community banks that had invested in Fannie Mae and Freddie Mac preferred stock, and a tax crackdown on compensation and severance pay for certain financial executives. The Senate package sweetened the mortgage debt relief package by extending the relief for 3-years from 2-years under the House-defeated measure.
The House is expected to take up the Senate measure no later than Friday October 3. The tax provisions are expected to entice a number of Republicans House Members to change their original no votes to yes but there is also concern that it could have the opposite effect on a number of Blue Dog Democrats.
The Senate package also includes mental health parity and other provisions. The combined cost for all measures picked up from H.R. 6049, as amended by the Senate--energy, AMT, extenders, and other provisions--is $150.496 billion, and the offsets in the package total $43.504 billion. Energy provisions are completely offset, and extenders and other provisions are partially offset. Of the total cost, $64.1 billion is unoffset AMT relief. Both the House and Senate had previously passed unoffset AMT relief this year.
The tax provisions in the House-defeated bailout package that were considered in the Senate package in somewhat modified form include:
... Ordinary loss treatment for losses on sales of Fannie Mae and Freddie Mac preferred stock by financial institutions or financial institution holding companies as ordinary losses. This would apply to any preferred stock that was owned on September 6, 2008 or sold between January 1 and September 6, 2008. This would allow banks to obtain the tax benefit of the loss on the preferred stock and therefore reduce the need to obtain additional capital. This should also prevent some community banks from becoming insolvent.
... For participants in the legislation's Troubled Asset Relief Program who sell $300 million in assets, or whose combined assistance from direct purchases and auctions reaches $300 million, limits on golden parachutes and the tax deductibility of executive compensation. Specifically, executive compensation in excess of $500,000 would not be deductible, and the definition of executive compensation would be expanded to include performance pay and stock options. The current golden parachute tax regime would be expanded to apply to existing employee contracts--a 20% excise tax would apply to parachute payments a (normal 3 times salary rule) triggered by termination other than by retirement of the employee, including involuntary termination of the employee, change in control or bankruptcy of the company. The employer would lose the corresponding deduction on the parachute payment. Golden parachutes would be prohibited prospectively for the top 5 executives in the case of termination, or in the case of bankruptcy, insolvency, or receivership of the financial institution.
... The package would provide assistance to homeowners who have been caught up in the current mortgage crisis and are trying to save their homes. The "Mortgage Forgiveness Debt Relief Act of 2007," P.L. 110-42, excludes debt forgiven before the end of 2009 from taxable income. The package would extend this treatment for 3 years, through 2012. It would not extend the relief to home equity loans.
The tax provisions in the Senate bailout package that derive from H.R. 6049, as amended by the Senate, include the following:
... An increase in the AMT exemption amounts to $46,200 (individuals) and $69,950 (married filing jointly) for 2008. Additionally, personal credits could offset the AMT for 2008.
... Extensions of expiring family and business tax cuts include:
- A two year extension of the option to deduct state and local general sales taxes, the above-the-line tax deduction for qualified higher education expenses, and the above-the-line deduction for up to $250 of educators' expenses.
- Extension through 2009 of the standard deduction for real property taxes for nonitemizers.
- Extension through 2009 of the ability of qualifying taxpayers to make tax-free contributions from their IRA plans to qualified charitable organizations.
- An extension of the research credit through 2009, plus an increase in alternative simplified credit from 12% to 14% for the 2009 tax year; the alternative incremental research credit would be repealed for the 2009 tax year.
- Extension through 2008 of the 15 year writeoff for qualified leasehold, restaurant and retail improvements.
- Extension through 2009 of a provision allowing a Code Sec. 199 domestic production activities deduction for activities in Puerto Rico.
- Extension through 2009 of the expensing option for brownfields environmental remediation.
- Extension through 2009 of the special expensing rule for qualifying film and TV productions.
... A provision requiring hedge fund managers and others to account for deferred compensation (income held in offshore accounts and other corporate structures) as it accrues, rather than avoiding appropriate and timely income taxes.
... Additional relief provisions including liberalizations for the child tax credit, income averaging for Exxon Valdez litigation amounts, a 5-year writeoff for certain farming equipment, and a change in the standards for imposition of the tax return preparer penalty (preparer standard for undisclosed positions is reduced to "substantial authority").
... Midwestern disaster area tax relief for victims of the disaster in Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska and Wisconsin, and a new tax relief package for victims of all Federally-declared disasters occurring after Dec. 31, 2007 and before Jan. 1, 2010 (e.g., eased loss deduction rules, a new business writeoff for demolition, cleanup and repair, a 5 year carryback for casualty losses or qualified disaster expenses, bonus 50% first year depreciation for property placed in service through Dec. 31, 2011 (Dec. 31, 2012 for real property), and increased expensing dollar limits).
... Clean-energy tax incentives totaling approximately $18 billion.
... A delay of the tax deduction for domestic manufacturing activities of major American oil and gas companies.
... A tightening of the rules by which oil and gas companies pay taxes on income earned overseas, and making general fund monies available with increased payments into the oil spill liability trust fund as new drilling is considered.
... A one year extension of the Federal Unemployment Tax Act (FUTA) surtax at the current level, and by increasing reporting requirements for brokers on sales of stock.
The legislative language of H.R. 1424, containing the "Emergency Economic Stabilization Act of 2008, " with extender, energy and other tax provisions is available to read on Checkpoint.
10/1/08 -- President signs Federal Aviation Act Part II into law.
On September 30, President Bush signed into law the Federal Aviation Administration Extension Act of 2008, Part II (P.L. 110-330). The Act generally extends aviation taxes and spending authority from the Airport and Airway Trust Fund from Sept. 30, 2008 through Mar. 31, 2009.
The legislative language of H.R. 6894, the Federal Aviation Administration
Extension Act of 2008, Part II is available to read on Checkpoint.
9/29/08 -- House recesses after rejecting financial bailout package.
On September 29, the House of Representatives recessed, subject to
the call of the Chair, after rejecting the financial bailout package (H.R. 3997,
the Emergency Economic Stabilization Act of 2008) by a vote of 205 to
228. Congressional leaders will continue to work in the background to
round up necessary support to enact a financial bailout.
The version of H.R. 3997 that failed to pass the House contains a two-year extension for home mortgage debt forgiveness relief, tax relief for community banks that had invested in Fannie Mae and Freddie Mac preferred stock, and a tax crackdown on compensation and severance pay for certain financial executives.
9/29/08 -- House and Senate fail to agree on AMT patch, tax extenders and energy tax incentives.
Ending an especially contentious round of bickering over "must do" tax legislation, the House recessed on September 29 without passing a tax package that the Senate would consider. Earlier, the Senate had refused to take up the House's legislation. At stake is necessary legislation to "patch" the AMT and extend a host of tax breaks that expired at the end of last year. Other initiatives that entered into the mix were tax breaks for disaster areas and alternative energy tax incentives.
The final salvos (for now, anyway) took this form:
- The Senate passed a comprehensive relief package (AMT patch, extenders, disaster relief and alternative energy incentives) on September 23 (H.R. 6043) but only sent it to the House of Representatives on the morning of September 29, the day that the financial bailout package (H.R. 3997, the Emergency Economic Stabilization Act of 2008) was being debated, and 45 minutes before the House said it would adjourn. The House didn't take up the Senate's legislation.
- The House of Representatives on September 24 passed separate, non-offset bills carrying a one-year AMT patch (H.R. 7005) and disaster relief (H.R. 7006), and on September 26, a bill carrying extenders and renewable energy provisions (H.R. 7060). The latter bill carried a number of revenue raisers including, among other items, reduced tax breaks for the oil and gas industry, broker reporting of customer basis in securities transactions, a one year extension of the FUTA surtax, and a delay in the application of worldwide allocation of interest. After the Senate said it wouldn't take up the House's legislation, House Ways and Means Committee Chair Charlie Rangel (D-NY) tried to introduce legislation that would have separated H.R. 7060 into two bills (H.R. 7201 the Energy Improvement and Extension Act of 2008, and H.R. 7202, the Temporary Tax Relief Act of 2008), but the House didn't vote on either of these two bills.
RIA observation: Congress is virtually certain to eventually OK an AMT "patch" consisting of higher AMT exemption amounts for 2008 and allowing personal credits to offset the AMT, and extender legislation. The AMT "patch" provisions in the failed House and Senate bills were identical, and the lion's share of the extenders in each chamber's bills were identical as well.
9/28/08 -- Financial bailout agreement said to include home mortgage
debt relief extension, tax relief for community banks, and crackdown on
some executive comp.
On September 28, major Congressional players involved in the financial
bailout negotiations reportedly agreed on the broad outline of an agreement
and were meeting with their colleagues to explain the details and build
support for the package.
According to a press release issued yesterday by Senate Finance Democrats,
the package includes the following tax relief provisions:
... Two-year extension for home mortgage debt forgiveness
relief provision. Under the Mortgage Forgiveness Debt Relief Act of
2007, effective for indebtedness discharged on or after Jan. 1, 2007 and
before Jan. 1, 2010, Code Sec. 108(a)(1)(E) generally allows taxpayers
to exclude up to $2 million of mortgage debt forgiveness on their principal
residence (see Weekly Alert -- 12/20/2007 for details). The financial
bailout package would extend this debt relief provision through 2012.
... Tax relief for community banks. Some 800 community banks
have huge losses on their Fannie Mae and Freddie Mac preferred stock
holdings which became worthless when the government bailed those companies
out. Without a tax change, these community banks would have capital
losses on these holdings that they couldn't utilize. The financial bailout
package would allow community banks to treat losses on their Fannie
Mae and Freddie Mac preferred stock as ordinary losses that can offset
ordinary income. Applying to any preferred stock that was owned on Sept.
6, 2008 or sold between Jan. 1, 2008, and Sept. 6, 2008, this provision
would allow banks to claim the book benefit of the loss on their tax
returns, therefore reducing their need to obtain additional capital
from the FDIC or investors.
... Tax crackdown on compensation and severance pay for certain
financial executives. When more than $300 million of a company's
assets are purchased by the Treasury through an auction, (1) "golden
parachute" payments would be banned for top executives hired while
the Treasury rescue is in effect and (2) tax provisions would kick in
to strengthen the tax treatment of remaining executive compensation
and severance packages. Specifically, the deductibility of executive
compensation for companies would be cut in half from current law levels,
and companies would also lose deductions currently available for excessively
large severance packages. Executives receiving severance packages would
continue to face a 20% excise tax on payments once they reach an excessive
threshold, and that tax would be due if the executive leaves for reasons
other than a standard retirement for which they are eligible--not just
if the company changes hands, as in current law.
9/28/08 -- House and Senate still at loggerheads over AMT patch, tax
extenders and energy tax incentives.
Late word on the evening of September 28 was that the House and Senate
leadership was still at loggerheads over enacting an AMT patch, tax extenders,
and energy tax incentives.
The Senate passed a comprehensive relief package on September 23 (H.R.
6043) but the House didn't take it up. Instead, on September 24, it passed
separate, non-offset bills carrying a one-year AMT patch (H.R. 7005) and
disaster relief (H.R. 7006), and on September 26, a bill carrying extenders
and renewable energy provisions (H.R. 7060). The latter bill carried a
number of revenue raisers including, among other items, reduced tax breaks
for the oil and gas industry, broker reporting of customer basis in securities
transactions, a one year extension of the FUTA surtax, and a delay in
the application of worldwide allocation of interest. The Senate has refused
to consider the House's piecemeal approach. Late on September 28, House
tax writers reportedly considered redrafting a bill carrying extenders
with some offsets, and another bill carrying renewable energy incentives,
also with offsets. However, the House appeared to be rebuffed by the Senate
once again.
Finance Chairman Max Baucus (D-Mont.) issued a press release in the
evening of September 28 declaring that the House's continuing refusal
to consider the Senate's omnibus bill, and instead pressing for a piecemeal
package, "endangers tax relief that American businesses and families
need right now. While I commend the House's effort to fully offset the
cost of this needed tax legislation, it is clear to me from discussions
in the Senate that even this new package of bills will not pass in this
body." Baucus went on to say that "the tax relief agreed to
in the Senate is the only legislation with any hope of providing energy
tax incentives, protection from the alternative minimum tax, and business
and family tax cuts this year.... The House needs to take a vote on the
Senate package and pass these tax breaks for jobs, energy, and families,
period, even at some cost. Americans need the sound energy future, the
good-paying jobs, and the tax relief the Senate bill ensures. The House
can provide it with one vote. I hope that vote will be scheduled soon."
9/28/08 -- Federal Aviation Act Part II at White House for President's
signature.
Last week, both the House and Senate approved H.R. 6984, the Federal Aviation
Administration Extension Act of 2008, Part II, by voice vote and on September
26 it was presented to the President for his expected signature. The Act
generally extends aviation taxes and spending authority from the Airport
and Airway Trust Fund from Sept. 30, 2008 through Mar. 31, 2009.
The legislative language of H.R. 6894, the Federal Aviation Administration
Extension Act of 2008, Part II is available on Checkpoint.
9/28/08 -- House passes Charity Enhancement Act and Inmate Tax Fraud
Prevention Act.
On September 27, the House of Representatives approved by voice vote H.R.
7083, the Charity Enhancement Act of 2008, and H.R. 7082, the Inmate Tax
Fraud Prevention Act.
H.R. 7083 would liberalize some of the rules for donor advised funds.
For tax years ending after the enactment date, it would exempt from the
definition of donor advised fund any fund that is created, funded, and
advised solely by: (i) one or more public charities or (ii) one or more
governmental entities. For distributions after the enactment date, it
would also provide that certain scholarship distributions from donor advised
funds are not treated as taxable distributions. Among other changes: repeal
of special written acknowledgment requirement for charitable contributions
to donor advised funds, effective for tax years ending after the enactment
date, and a change allowing reasonable compensation to be paid by supporting
organizations to substantial contributors without the compensation being
treated as an excess benefit, effective for amounts paid under transactions
entered into after the enactment date.
H.R. 7082 would amend the Code to allow disclosure between IRS and the
Bureau of Prisons in certain circumstances where IRS believes a prisoner
has filed a false return.
9/26/08 -- House-passed Renewable Energy and Job Creation Tax Act
of 2008 meets hostile reception.
On September 26, the House of Representatives by a vote of 257-166
approved H.R. 7060, the Renewable Energy and Job Creation Tax Act
of 2008. The measure, which has revenue raising offsets, was sent to the
Senate but was met with a hostile reception by Senate tax writers. The
Administration has said the bill would be vetoed by the President if passed
in its current form. The bill includes energy production incentives, extends
many tax expired tax breaks for individuals and businesses, and is offset
with, among other items, reduced tax breaks for the oil and gas industry,
broker reporting of customer basis in securities transactions, a one year
extension of the FUTA surtax, and a delay in the application of worldwide
allocation of interest.
RIA observation: H.R. 7060 includes many
of the extenders that are in the omnibus tax bill (H.R. 6043) passed
by the Senate on September 23.
The following material can also be found on Checkpoint:
- the legislative language of H.R. 7060, the Renewable Energy and
Job Creation Tax Act of 2008; and
- a Joint Committee explanation of the language of H.R. 7060, the
Renewable Energy And Job Creation Tax Act of 2008.
9/25/08 -- House passes AMT patch with no offsets plus a disaster
relief bill; separate energy and extenders bill also in the mix.
Late on September 24, the House of Representatives by a vote of 393-30
passed H.R. 7005, the Alternative Minimum Tax Relief Act of 2008.
The bill, which has no offsets, would provide for an increase in the AMT
exemption amounts to $46,200 (individuals) and $69,950 (married filing
jointly) for 2008. Additionally, personal credits could offset the AMT
for 2008, and the AMT credit allowance against incentive stock options
would be liberalized. The AMT provisions in H.R. 7005 are identical
to the AMT provisions in the version of H.R. 6049 that the Senate
passed on September 23.
RIA observation: For details on the AMT changes,
see Weekly Alert - 10/02/2008.
Also late on September 24, the House of Representatives by a vote
of 419-4 passed H.R. 7006, the Disaster Tax Relief Act of 2008. This
bill would, among other items, temporarily liberalize the loss deduction
rules in federally declared disaster areas, allow expensing of qualified
disaster costs, and ease the net operating loss (NOL) rules for federally
declared disaster areas. By contrast, the Senate-passed version of H.R. 6049
has two sets of disaster relief provisions, one providing tax relief for
victims of the Midwestern disaster in Arkansas, Illinois, Indiana, Iowa,
Kansas, Michigan, Minnesota, Missouri, Nebraska and Wisconsin, and a new
tax relief package similar in some respects to H.R. 7006 for victims
of all Federally-declared disasters.
The House of Representatives is slated to consider yet another tax bill
on September 26. This bill (H.R. 7060, the Renewable Energy
And Job Creation Tax Act of 2008) carries renewable energy tax incentives,
and a host of individual and business extenders. The White House has said
that the President would veto H.R. 7060 if it is enacted in its current
form.
The logic behind the House's strategy may be that if it can't reach agreement
with the Senate on an overall tax package, it may be able to reach an
agreement on one or a series of smaller tax bills.
For a summary of key provisions in the Senate-passed bill, see Article #1487.
The following material can also be found on Checkpoint:
- the Joint Committee on Taxation explanation of H.R. 7005;
- the legislative language of H.R. 7005, the Alternative Minimum
Tax Relief Act of 2008;
- legislative language of H.R. 7006, the Disaster Tax Relief Act
of 2008;
- the Joint Committee on Taxation explanation of H.R. 7006;
- the language of H.R. 7060, the Renewable Energy And Job Creation
Tax Act of 2008, to be considered by the House on September 26;
and
- a Joint Committee explanation of the language of H.R. 7060, the
Renewable Energy And Job Creation Tax Act of 2008, to be considered
by the House on September 26.
9/25/08 -- Congress enacts "Michelle's Law" protecting health coverage
of dependent students on medical leave.
On September 26, the Senate by unanimous consent approved H.R. 2851,
Michelle's Law. Since the measure was passed earlier this year by the
House of Representatives, it is cleared for the President's expected signature.
H.R. 2851 amends the Employee Retirement Income Security Act of
'74, the Public Health Service Act, and adds Code Sec. 9813 to ensure
that dependent students who take a medically necessary leave of absence
do not lose health insurance coverage, and other purposes.
The legislative language of H.R. 2851 is available to read on Checkpoint.
9/24/08 -- House-Senate tax writers try to strike a deal on comprehensive
tax legislation.
As Congress races to finish necessary legislation before adjournment,
there were indications that House and Senate tax writers were trying to
come to a meeting of the minds on H.R. 6049, the Renewable Energy
and Job Creation Act of 2008. On September 23 the Senate by a vote
of 93–21 passed the measure (the vote replaced the current text
of H.R. 6049, the energy tax legislation approved in the House of
Representatives earlier this year). The bill includes an AMT patch, numerous
extenders, some liberalized tax breaks, disaster-area relief, and an ambitious
alternative energy title. The original plan was for the House of Representatives
on September 24 to amend the Senate-passed version of the bill with
its own comprehensive package and kick it back to the Senate. Now, it
appears that House and Senate tax writers will try to short-circuit that
process by coming to a "pre-vote" agreement that both sides could live
with.
A key sticking point is that the Senate-passed bill is not fully paid
for, and the House Democrats want the bill fully paid for.
It's possible that late September 24, the House of Representatives
will pass its own version of two segments of the comprehensive tax bill,
namely AMT relief (designated as H.R. 7005) and disaster tax relief
(designated as H.R. 7006).
For a summary of key provisions in the Senate-passed bill, see Article #1487.
The following material can also be found on Checkpoint:
- a Senate Finance Committee summary of H.R. 6049, exclusive of
alternative energy provisions;
- a Senate Finance Committee summary of H.R. 6049's alternative
energy provisions;
- language of the "Tax Extenders and Alternative Minimum Tax Relief
Act of 2008" portion of H.R. 6049; and
- language of the "Energy Improvement and Extension Act of 2008" portion
of H.R. 6049.
9/23/08 -- Senate-passed tax package includes AMT patch, extenders,
energy incentives and disaster tax relief.
Late on September 23, the Senate by a vote of 93-2 adopted H.R. 6049,
the Renewable Energy and Job Creation Act of 2008, as amended. The vote
replaced the current text of H.R. 6049, the energy tax legislation
approved in the House of Representatives earlier this year. The bipartisan
measure crafted by Senate Finance Committee Chairman Max Baucus (D-Mont.)
and Ranking Member Chuck Grassley (R-Iowa) includes an AMT patch, an extenders
package, energy incentives and disaster tax relief.
On the House side, Majority Leader Steny H. Hoyer (MD) said he was pleased
that the Senate had moved forward. He said that the "House expects to
act on both an AMT bill and an energy incentive and tax extenders package
in the next few days, and we hope the Senate will work with us to quickly
send a final package to the President."
What's in the Senate bill: The bipartisan Senate agreement includes
the following elements:
An increase in the AMT exemption amounts to $46,200 (individuals) and
$69,950 (married filing jointly) for 2008. Additionally, personal credits
could offset the AMT for 2008. The cost of the AMT "patch" is not offset.
Extensions of expiring family and business tax cuts include:
- A two year extension of the option to deduct state and local general
sales taxes, the above-the-line tax deduction for qualified higher education
expenses, and the above-the-line deduction for up to $250 of educators'
expenses.
- Extension through 2009 of the standard deduction for real property
taxes for nonitemizers.
- Extension through 2009 of the ability of qualifying taxpayers to make
tax-free contributions from their IRA plans to qualified charitable
organizations.
- An extension of the research credit through 2009, plus an increase
in alternative simplified credit from 12% to 14% for the 2009 tax year;
the alternative incremental research credit would be repealed for the
2009 tax year.
- Extension through 2008 of the 15 year writeoff for qualified leasehold,
restaurant and retail improvements.
- Extension through 2009 of a provision allowing a section 199 domestic
production activities deduction for activities in Puerto Rico.
- Extension through 2009 of the expensing option for brownfields environmental
remediation.
- Extension through 2009 of the special expensing rule for qualifying
film and TV productions.
Extensions of expiring tax cuts would be partially offset by requiring
hedge fund managers and others to account for deferred compensation (income
held in offshore accounts and other corporate structures) as it accrues,
rather than avoiding appropriate and timely income taxes.
Additional relief provisions include liberalizations for the child tax
credit, income averaging for Exxon Valdez litigation amounts, a 5-year
writeoff for certain farming equipment, and a change in the standards
for imposition of the tax return preparer penalty (preparer standard for
undisclosed positions is reduced to "substantial authority").
The bill includes Midwestern disaster area tax relief for victims of
the Midwestern disaster in Arkansas, Illinois, Indiana, Iowa, Kansas,
Michigan, Minnesota, Missouri, Nebraska and Wisconsin, and a new tax relief
package for victims of all Federally-declared disasters occurring after
December 31, 2007 and before January 1, 2010 (e.g., eased loss deduction
rules, a new business writeoff for demolition, cleanup and repair, a 5
year carryback for casualty losses or qualified disaster expenses, bonus
50% first year depreciation for property placed in service through December
31, 2011 (December 31, 2012 for real property), and increased expensing
dollar limits).
Finally, the bill includes clean-energy tax incentives totaling approximately
$18 billion, fully paid for by several offset provisions including a delay
of the tax deduction for domestic manufacturing activities of major American
oil and gas companies. Another offset provision tightens the rules by
which oil and gas companies pay taxes on income earned overseas, and makes
general fund monies available with increased payments into the oil spill
liability trust fund as new drilling is considered. The incentives are
also funded in part by a one year extension of the Federal Unemployment
Tax Act (FUTA) surtax at the current level, and by increasing reporting
requirements for brokers on sales of stock.
9/23/08 -- House passes Wellstone—Domenici Mental Health Parity
and Addiction Equity Act of 2008.
On September 23, the House by a vote of 376-47 passed H.R. 6983,
the "Paul Wellstone and Pete Domenici Mental Health Parity and Addiction
Equity Act of 2008." The bill prohibits discrimination in the provision
of treatment for mental health and substance abuse disorders when compared
to coverage for treatment of medical and surgical disorders. According
to a press release issued by Ways and Means Committee Chairman Charles
B. Rangel (D-NY) and Health Subcommittee Chairman Pete Stark (D-CA), while
the bill does not mandate that group health plans provide coverage for
mental health or addiction treatment services, those that do would have
to provide coverage that is equitable in relation to medical and surgical
coverage. Following the model established by the Health Insurance Portability
and Accountability Act of 1996 (HIPAA), the protections in the bill would
establish a federal floor, but permit stronger state laws to stand, and
enable states to enact additional legislative protections. The mental
health parity requirements in H.R. 6983 would apply only to group
health plans with 51 or more employees.
9/23/08 -- House passes Federal Aviation Act.
On September 23, the House approved H.R. 6984, the Federal Aviation
Administration Extension Act of 2008, Part II, by voice vote. The
Act would generally extend aviation taxes and spending authority from
the Airport and Airway Trust Fund from Sept. 30, 2008 through Mar.
31, 2009. It is expected that the bill, a bipartisan House and Senate
piece of legislation, will easily pass in the Senate.
The legislative language of H.R. 6894, the Federal Aviation Administration
Extension Act of 2008, Part II is available to read on Checkpoint.
9/19/08 -- Senate action on AMT patch, extenders, disaster relief
and energy measure postponed till Sept. 23.
On September 18, the Senate was scheduled to, but did not, consider
major tax legislation featuring AMT relief, extension of a host of expired
personal and business tax breaks, disaster relief for the Midwest, and
many energy provisions. Action on the legislation was postponed until
September 23 because of objections to moving forward on the bill
by Texas Republican Senators John Cornyn and Kay Bailey Hutchinson, who
insisted on disaster relief for Hurricane Ike victims in the Gulf Coast
region. As originally drafted, the legislation included a package of disaster
relief provisions for businesses and individuals in the Midwest who were
victims of various disasters that occurred earlier this year. The Texas
Senators wanted parity in the extenders package for the Gulf Coast. An
agreement was eventually worked out by Senate Finance Committee Chair
Max Baucus (D-MT) and ranking minority member Chuck Grassley (R-IA) with
Senators Cornyn and Hutchinson that would provide relief to the Gulf Coast
region in the extenders package.
Senate Majority Leader Harry Reid (D-NV) said that he still plans to
move the Senate energy bill as three separate parts: energy tax incentives
with renewables paid for; individual and business tax extenders; and a
vote on a 1-year patch for the AMT without offsets. However, the measure's
prospects in the House of Representatives is unclear. The House has passed
only an energy extenders bill (see Article #1480). And on September 18,
Speaker of the House Nancy Pelosi (D-CA) said that it was important to
the House that the energy extenders be paid for, and that she hoped the
Senate would have a vote on paying for the AMT.
Both chambers of Congress are tentatively scheduled to recess following
close of business on Friday, Sept. 26; it seems unlikely that House
and Senate will agree on a tax relief package before then.
For more details on the Senate package, including links to the proposed
legislative language and Senate summary of the provisions, see Article #1481.
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