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8/1/08 -- Congress passes bill repealing dollar limit on contributions
to qualified funeral trusts.
On Aug. 1, the Senate passed H.R. 6580 (the Hubbard Act) by voice
vote. The House of Representatives OK'd the measure on July 29 by voice
vote, so the legislation is on its way to the White House for the President's
signature. Although the Hubbard Act deals mainly with benefits to Armed
Forces members and their families, it also repeals the dollar limit on
contributions to qualified funeral trusts.
Background. The trustee of a pre-need funeral trust that is a qualified funeral trust may, to the extent the trust would otherwise be treated as a grantor trust, elect special income tax treatment for the trust. A qualified funeral trust is any trust (other than a foreign trust) that meets the requirements of Code Sec. 685(b), including the requirement that the trust arise as a result of a contract with a person engaged in the trade or business of providing funeral or burial services or property necessary to provide the services. If the election is made, the rules for simple trusts and complex trusts, the throwback rules, and the grantor trust rules won't apply to the qualified funeral trust. And the income tax rate schedule generally applicable to estates and trusts under Code Sec. 1(e) will be applied to each qualified funeral trust by treating the interest of each beneficiary in each trust as a separate trust. However, no deduction for a personal exemption under Code Sec. 642(b) is allowed.
Under pre-Hubbard Act law, Code Sec. 685(c) provided that a qualified funeral trust can't accept aggregate contributions by or for the benefit of an individual in excess of an inflation adjusted dollar amount ($9,000 for a contract entered into during calendar year 2008).
New law. For tax years beginning after the enactment date, the Hubbard Act repeals the Code Sec. 685(c) dollar limit on contributions to a qualified funeral trust. (Act § 9).
The legislative language of H.R. 6580, the Hubbard Act is available
to read on Checkpoint.
7/30/08 -- President's signature of Housing Act sets effective date
of various provisions.
On July 30, 2008, the President signed into law H.R. 3221, the "American
Housing Rescue and Foreclosure Prevention Act of 2008" (the Housing Act,
P.L. 110-289, 07/30/2008). The tax title of the Housing Act carries
tax breaks for homebuyers and homeowners, liberalized low-income housing
tax credit rules, relaxed requirements for tax-exempt bonds, eased AMT
rules, and important tax changes for business, including information reporting
of credit card transactions and AMT liberalizations.
For RIA's Complete Analysis of the Housing Assistance Tax Act of 2008 (i.e., Division C of H.R. 3221, the "American Housing Rescue and Foreclosure Prevention Act of 2008") is available on Checkpoint.
For RIA's Special Study of the tax provisions of the Housing Act, see Weekly Alert - 07/31/2008.
The President's signature sets the effective date for numerous Housing Act provisions with an effective date geared to the July 30, 2008, date of enactment, including the following:
Interest earned on exempt facility, qualified residential rental, and veterans' mortgage bonds isn't an AMT preference: For bonds issued after July 30, 2008, tax-exempt interest earned on the following instruments is not a preference item for AMT purposes:
- exempt facility bonds issued as part of an issue 95% or more of the net proceeds of which are used to provide qualified residential rental projects (as defined in Code Sec. 142(d));
- qualified mortgage bonds (as defined in Code Sec. 143(a)); and
- qualified veterans' mortgage bonds (as defined in Code Sec. 143(b)) (Code Sec. 57(a)(5)(C)(iii), as amended by Act § 3022(a)(1))
Additionally, tax-exempt interest earned on the above three types of bonds is not included in the corporate AMT adjustment based on current earnings. (Code Sec. 56(g)(4)(B)(iii), as amended by Act § 3022(a)(2))
FHLB-guaranteed state & local bonds eligible for tax-exempt bond treatment: Interest on state and local government bonds generally is excluded from gross income, but not if the bonds are treated as federally guaranteed under Code Sec. 149(b)(2). Pre-Act law excepted certain guarantee programs from this rule (e.g., guarantees by the Federal Home Loan Mortgage Corporation (FHLMC) or the Government National Mortgage Association (GNMA)), but there was no exception for bonds backed by a Federal home loan bank (FHLB). The Housing Act provides that bonds issued by state and local governments are not treated as federally guaranteed because of any guarantee by a FHLB made in connection with the original issuance of a bond during the period beginning on July 30, 2008 and ending on Dec. 31, 2010 (or a renewal or extension of a guarantee so made). (Code Sec. 149(b)(3)(A)(iv), as amended by Act § 3023(a)) The change is effective for guarantees made after July 30, 2008.
Election to include reimbursement for hurricane-related casualty in loss year: Casualty losses are generally allowed for the tax year of the loss. For a disaster loss arising in an area determined by the President to warrant assistance by the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, a taxpayer may elect to take the loss into account for the tax year immediately before that in which the disaster occurred. Under pre-Act law, Reg. § 1.165-1(d)(2)(iii) provides that when a taxpayer receives reimbursement for such loss in a later tax year, the deductible loss isn't recomputed for the tax year in which the deduction was taken. Instead, the reimbursement amount is taken into income in the tax year received.
The Housing Act allows a taxpayer who claimed a casualty loss to a principal residence (within the meaning of the Code Sec. 121 homesale exclusion rules) from Hurricanes Katrina, Rita, or Wilma, and in a later year receives a grant under P.L. 109-148, P.L. 109-234, or P.L. 110-116 as reimbursement of that loss, to elect to file an amended return for the tax year to which the deduction was allowed. On the amended return, the casualty loss deduction must be reduced, but not below zero, by the amount of the reimbursement. The election to file an amended return under the above rule applies for any grant only if any amended income tax returns with respect to that grant are filed by the later of: (1) the due date for filing the tax return for the tax year in which the taxpayer receives the grant, or (2) July 30, 2009 (the date which is one year after the July 30, 2008, enactment date). (Act § 3082(a)(2)(B)) No penalty or interest applies if payment is made no later than one year after the filing of the amended return.
Real Estate Investment Trust (REIT) rules liberalized. A REIT is an entity that otherwise would be taxed as a U.S. corporation but elects to be taxed under a special REIT tax regime. To qualify as a REIT, an entity must meet a number of requirements. At least 90% of REIT income (other than net capital gain) must be distributed annually; the REIT must derive most of its income from passive, generally real-estate-related investments; and REIT assets must be primarily real-estate-related. In addition, a REIT must have transferable interests and at least 100 shareholders, and no more than 50% of the REIT interests may be owned by 5 or fewer individual shareholders. The portion of a REIT's income that is distributed to its shareholders each year as a dividend is deductible by the REIT and thus is not taxed at the entity level, only at the investor level.
The Housing Act makes many technical changes to the REIT rules, all of them tied into the July 30, 2008, enactment date. For example, it liberalizes the REIT rules by, among other items, clarifying that REITs can earn foreign currency income associated with real estate activities (effective for gain and items of income recognized after July 30, 2008), increasing the permissible size of REIT investments in taxable REIT subsidiaries (effective for tax years beginning after July 30, 2008), and extending the special rules for lodging facilities to health care facilities (effective for tax years beginning after July 30, 2008). (Code Sec. 856 and Code Sec. 857, as amended by various Act Sections)
Alternate procedure for nonforeign affidavits under FIRPTA rules: Under the Foreign Investment in Real Property Tax Act (FIRPTA) rules in Code Sec. 897, a nonresident alien or a foreign corporation is generally taxed on gain realized from a disposition of an interest in U.S. real property (USRPI) as if that gain or loss were effectively connected to a U.S. trade or business carried on by that person during the year. Although the tax is imposed upon the dispositions on a net basis, the transferee of a USRPI is generally required to deduct and withhold tax equal to 10% of the amount realized. Under one of several exceptions under pre-Act law, a transferee is not required to withhold if the transferor furnishes the transferee with an affidavit stating, under penalties of perjury, the transferor's U.S. taxpayer's identification number (i.e., social security number or entity identification number (EIN)) and that the transferor is not a foreign person (nonforeign affidavit or affidavit).
For dispositions of USRPIs after July 30, 2008, the Act provides an alternative procedure for furnishing the nonforeign affidavit. Under this procedure, instead of furnishing a nonforeign affidavit to the transferee, a transferor may furnish the affidavit to a "qualified substitute." The qualified substitute is then required to furnish a statement to the transferee stating, under penalties of perjury, that the qualified substitute has the affidavit in his possession. (Code Sec. 1445(b)(9)(A), as amended by Act § 3024(a)) A qualified substitute is the person (including any attorney or title company) responsible for closing the transaction (other than the transferor's agent), and the transferee's agent.
Modified estimated tax payment rules for large corporations: The Act makes two changes in the estimated tax payment rules for large corporations (those with assets of $1 billion or more):
- It repeals the changes made by prior legislation for required installments of estimated tax for July, August, and September of 2012. Thus, large corporations will make regular estimated tax payments for these installments based on their income tax liability. (Act § 3094(a))
- It increases the required installments of estimated tax for July, August, and September of 2013, as in effect on July 30, 2008, by 16.75%, with corresponding reductions in the next required payment. (Act § 3094(b)).
The following material can also be found on Checkpoint:
- the legislative language for the tax-related provisions in Division C of H.R. 3221, the "Housing Assistance Tax Act Of 2008," as passed by the House of Representatives on July 23, 2008;
- the text of the Joint Committee on Taxation's JCX-63-08: Technical Explanation of Division C of H.R. 3221, the "Housing Assistance Tax Act Of 2008" as scheduled for consideration by the House of Representatives on July 23, 2008; and
- the text of the Joint Committee on Taxation's JCX-64-08: Estimated Budget Effects of the Tax Provisions Contained in H.R. 3221, the "Housing And Economic Recovery Act of 2008," scheduled for consideration by the House of Representatives on July 23, 2008.
7/30/08 -- Senate fails to invoke cloture on extenders bill.
On July 30, the Senate by a vote of 51-43 failed to gain the 60 votes needed to invoked cloture on the motion to proceed to H.R. 3335, the Senate tax extenders bill. After the failed cloture vote, Senate Majority Harry Reid (D-NV) filed a motion to reconsider the bill. It is possible Reid will try and call up the bill again before Congress leaves for the August recess, but its prospects for consideration before the fall appear to be dim.
7/28/08 -- Housing Act cleared for the President's signature.
On July 26, the Senate by a vote of 72-13 passed H.R. 3221, the "American Housing Rescue
and Foreclosure Prevention Act of 2008" (the Housing Act). The House of Representatives passed the
measure on July 23 by a vote of 272-152, so the Housing Act is cleared for the President's
signature.
RIA's Complete Analysis of the Housing Assistance Tax Act of 2008 (i.e., Division C of
H.R. 3221, the "American Housing Rescue and Foreclosure Prevention Act of 2008" ) is available on Checkpoint.
For RIA's Special Study of the tax provisions of the Housing Act, see Weekly Alert -
7/31/2008.
The following material can also be found on Checkpoint:
- the legislative language for the tax-related provisions in Division C of H.R. 3221, the
"Housing Assistance Tax Act Of 2008," as passed by the House of Representatives on July 23, 2008;
- the text of the Joint Committee on Taxation's JCX-63-08: Technical Explanation of Division C of
H.R. 3221, the "Housing Assistance Tax Act Of 2008" as scheduled for consideration by the House
of Representatives on July 23, 2008; and
- the text of the Joint Committee on Taxation's JCX-64-08: Estimated Budget Effects of the Tax
Provisions Contained in H.R. 3221, the "Housing And Economic Recovery Act of 2008," scheduled
for consideration by the House of Representatives on July 23, 2008.
7/23/08 -- House passes American Housing Rescue and Foreclosure Prevention Act; Senate to follow suit.
On July 23, 2008, the House of Representatives by a vote of 272-152 passed H.R. 3221, the "American Housing Rescue and Foreclosure Prevention Act" (the Housing Act). The measure is virtually certain to be OK'd by the Senate.
For highlights of the Housing Act, see Weekly Alert - 7/24/2008.
The following are available on Checkpoint in PDF format:
- The legislative language for the tax-related provisions in Division C of H.R. 3221, the "Housing Assistance Tax Act Of 2008," as passed by the House of Representatives on July 23, 2008;
- The text of the Joint Committee on Taxation's JCX-63-08: Technical Explanation of Division C of H.R. 3221, the "Housing Assistance Tax Act Of 2008" as scheduled for consideration by the House of Representatives on July 23, 2008; and
- The text of the Joint Committee on Taxation's JCX-64-08: Estimated Budget Effects of the Tax Provisions Contained in Mnobr>H.R. 3221, the "Housing Assistance Tax Act Of 2008," scheduled for consideration by the House of Representatives on July 23, 2008.
7/22/08 -- House to take up housing relief bill this week; unofficial summary
shows signs of compromise.
The House of Representatives is poised to once again consider H.R.
3221, the "American Housing Rescue and Foreclosure Prevention Act."
It will likely take up the bill on July 24 (and possibly
as early as July 23). This will be the latest volley in the
legislative game of ping pong on the housing bill. It was passed by the
Senate on Apr. 10, and by the House on May 8.
Then the Senate passed another version on July 11. Now the ball is once
again in the House's court.
An unofficial summary of the tax title of the version of H.R. 3221 to be taken up by the House of Representatives indicates that an effort is being made to arrive at a compromise between the House and Senate versions. In particular, the offsets to the revenue cost of the tax title carry the House bill's postponement of worldwide interest allocation, plus the Senate's credit card information reporting
measure and home sale exclusion crackdown.
After House passage of a compromise version of H.R. 3221, it would head back to the Senate, which may make additional changes. On July 22, Senate Finance Committee Chair Max Baucus (D-MT) said that there were still problems with the housing bill that could require the Senate to amend the anticipated House-passed version.
Congress' goal is to pass a housing relief bill before it adjourns for the August recess.
An unofficial summary of H.R. 3221, Housing Assistance Tax
Act of 2008, to be taken up by the House of Representatives, can be accessed
through Checkpoint.
7/14/08 -- Senate-OK'd housing bill includes tax relief and revenue
raisers.
Late on July 11, the Senate by a vote of 63-5 voted to return H.R.H.R. 3221,
the "American Housing Rescue and Foreclosure Prevention Act," to the House
as amended. The version of H.R. 3221 approved by the Senate includes
many of the same or similar tax changes that are in the version of H.R. 3221
that was passed by the House of Representatives on May 8, 2008, but the
tax package is not entirely offset and its offsetting revenue raisers
are not the same as those in the House bill. The Administration has threatened
to veto H.R. 3221.
The tax provisions in the Senate-passed version of H.R. 3221 include:
- A property tax deduction for non-itemizers, for 2008 only.
- A refundable first-time homebuyer credit (essentially equivalent to an interest-free loan).
- A provision allowing the low-income housing tax credit and rehabilitation tax credit to be used to offset the alternative minimum tax (AMT), and providing that tax-exempt housing bonds are not subject to the AMT.
- A number of real estate investment trust (REIT) modernization provisions (e.g., modifying the REIT safe harbor for dealer sales and extending the special lodging facilities rule to health care facilities).
- Low-income housing tax credit simplification and a temporary increase in the credit.
- Temporarily allowing bonds guaranteed by federal home loan banks to be eligible for treatment as tax-exempt bonds regardless of whether the bonds are used to finance housing programs.
- Extension and expansion of certain GO Zone tax incentives.
The revenue offsets in the Senate bill include payment-card and third party network information reporting provisions, a reduction in the home-sale exclusion for periods of nonqualified use of the residence, plus increases in information return and failure to file penalties.
The following material can also be found on Checkpoint:
- the legislative language of the tax title to H.R. 3221, as passed by the Senate on July 11, 2008; and
- a Senate Finance summary of the tax title to H.R. 3221, as passed by the Senate on July 11, 2008.
7/9/08 -- House passes pension technical corrections bill.
On July 9, the House of Representatives by voice vote approved H.R. 6382,
the "Pension Protection Technical Corrections Act of 2008." The bill will
be sent to the Senate for consideration. In December of 2007, the Senate
OK'd a similar measure (S. 1974). The text of H.R. 6382, the
"Pension Protection Technical Corrections Act of 2008" is available to
read on Checkpoint.
7/2/08 -- President signs FAA funding extension into law.
On July 1, the President signed into law H.R. 6327, the "Federal
Aviation Administration Extension Act of 2008" (P.L. 110-253, 07/01/2008).
The legislation provides for a three month extension of funding and expenditure
authority for the Airport and Airway Trust Fund.
6/25/08 -- House passes AMT relief with bipartisan majority; President
threatens veto.
On June 25, the House by a vote of 233 to 189 approved H.R. 6275,
the "Alternative Minimum Tax Relief Act of 2008." The bill will be sent
to the Senate for consideration.
The bill would patch the alternative minimum tax (AMT) problem for 2008 by extending for one year AMT relief for nonrefundable personal credits and increasing AMT exemption amounts to $69,950 for joint filers and $46,200 for individuals. The one-year AMT patch would be fully offset with a variety of revenue raising measures, including taxing certain carried interests as ordinary income, barring large integrated oil companies from claiming the Code Sec. 199 domestic production activity deduction, freezing the Code Sec. 199 deduction at the 6% level for other producers of oil and natural gas, and requiring information returns for merchant payment card reimbursements.
On June 24, in a Statement of Administration Policy, President Bush indicated that he would veto the bill because of his strong opposition to provisions raising taxes on certain partners in partnerships and taxes on payments by U.S. subsidiaries to foreign affiliates and limiting the availability of the domestic production deduction for certain oil companies.
The following material can also be found on Checkpoint:
- he text of H.R. 6275, the "Alternative Minimum Tax Relief Act
of 2008," as OK'd by the House Ways & Means Committee;
- JCX-50--08 (June 17, 2008), the Joint Committee on Taxation Staff
Description of H.R. 6275, the "Alternative Minimum Tax Relief Act
of 2008," Scheduled for Markup by the Committee on Ways and Means;
- JCX-52--08 (June 18, 2008), the Joint Committee on Taxation Staff's
Description of an Amendment in the Nature of a Substitute to the Provisions
of H.R. 6275;
- for JCX--51--08 (June 17, 2008), the Joint Committee on Taxation Staff's
Estimated Revenue Effects of H.R. 6275, the "Alternative Minimum
Tax Relief Act of 2008," Scheduled for Markup by the Committee on Ways
and Means; and
- a brief summary of H.R. 6275, the "Alternative Minimum Tax Relief
Act of 2008."
6/19/08 -- Congress overrides second veto of farm bill; entire measure
now "officially" law.
With its unusual second vote on June 18 to override the President's
veto of the farm bill (Food, Conservation, and Energy Act of 2008), Congress
has corrected an embarrassing clerical error in the bill that was originally
sent to the President before the Memorial Day recess.
Background. The House of Representatives and the Senate by wide margins passed H.R. 2419 (the Food, Conservation, and Energy Act of 2008), the farm bill, on May 14 and May 15, respectively. The President as expected vetoed the bill on May 21 and that day, the House of Representatives voted 316-108 to override the President's veto. On May 22, the Senate followed suit with a veto override vote of 82-13. At the last minute, a clerical problem was discovered in the bill that the President vetoed: one of the titles of H.R. 2419 as it was passed by the House and Senate (a non-tax trade title) had been accidentally omitted from the copy of the bill that was sent to the President.
Now the fix. On May 22 and June 5, the House of Representatives and Senate, respectively, approved H.R. 6124 (also called the Food, Conservation, and Energy Act of 2008) carrying all of the farm bill's titles. On June 18, the President vetoed the bill again, and that same day both the House and Senate voted to override the veto. Thus, all fifteen titles of the farm bill are now law.
Section 4(a) of H.R. 6124 repeals H.R. 2419 (the original, "defective" farm bill). Additionally, Sec. 4(b) provides that except as otherwise provided, H.R. 6124 and the amendments it makes take effect on the earlier of (1) the date of enactment of H.R. 2419, or the date of enactment of H.R. 6124. Since H.R. 2419 was enacted on May 22, 2008, that date (and not June 18, 2008) is the enactment date for the "new" farm bill carrying all 15 titles.
6/19/08 -- Public law number assigned to Heroes Act.
A public law number has been assigned to the Heroes Earnings Assistance and Relief Tax Act of 2008 (Heroes Act), which was signed into law on June 18. It is P.L. 110-245.
For a Special Study of tax provisions in the Heroes Act, see Weekly Alert - 05/29/2008.
6/19/08 -- Tax title to Senate housing relief bill released; President threatens to veto the measure.
On June 19, the Senate leadership released the legislative language of the "bipartisan" tax package that Senate Finance Committee Chair Max Baucus (D-MT) and Ranking Member Chuck Grassley (R-IA) intend to offer as part of a larger amendment to a new housing bill (H.R. 3221). Also on June 19, the President issue a Statement of Administration Policy to the effect that in its current form the bill being considered by the Senate would be vetoed by the President.
Called the "Housing Assistance Tax Act of 2008," the tax title of the Senate housing relief package includes a refundable credit for first time homebuyers, a new property tax deduction for non-itemizers, many changes for the low-income housing credit, modernization of the Real Estate Investment Trust (REIT) rules, a provision allowing taxpayers to receive 20% of the value of their unused AMT or research and development (R&D) credits to the extent they invest in assets that qualify for bonus depreciation, and an extension and expansion of some GO Zone incentives.
The revenue offsets would consist of information reporting for payment card and third party network transactions, a reduced homesale exclusion for certain periods of nonqualified use, and increased information return and failure to file penalties.
The legislative language of the "Housing Assistance Tax Act of 2008" is available to read on Checkpoint.
If the Senate passes a housing relief package, it would have to be reconciled with the housing relief package passed by the House of Representatives on May 8.
6/18/08 -- House Ways & Means OKs one-year AMT patch.
On June 18, the House Ways & Means Committee OK'd H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008." The bill would patch the AMT problem for 2008 by extending for one year AMT relief for nonrefundable personal credits and increasing AMT exemption amounts to $69,950 for joint filers and $46,200 for individuals. The one-year AMT patch would be fully offset with a variety of revenue raising measures, including taxing certain carried interests as ordinary income, barring large integrated oil companies from claiming the Code Sec. 199 domestic production activity deduction, freezing the Code Sec. 199 deduction at the 6% level for other producers of oil and natural gas, and requiring information returns for merchant payment card reimbursements.
The following material can also be found on Checkpoint:
- the text of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008," as OK'd by the House Ways & Means Committee;
- JCX-50--08 (June 17, 2008), the Joint Committee on Taxation Staff Description of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008," Scheduled for Markup by the Committee on Ways and Means;
- JCX-52--08 (June 18, 2008), the Joint Committee on Taxation Staff's Description of an Amendment in the Nature of a Substitute to the Provisions of H.R. 6275;
- JCX--51--08 (June 17, 2008), the Joint Committee on Taxation Staff's Estimated Revenue Effects of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008," Scheduled for Markup by the Committee on Ways and Means; and
- a brief summary of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008."
6/18/08 -- Senate Finance leaders unveil new housing stimulus tax package.
On June 18, Senate Finance Committee Chair Max Baucus (D-MT) and Ranking Member Chuck Grassley (R-IA) unveiled the "bipartisan" tax package that they intend to offer as part of a larger amendment to a new housing bill (H.R. 3221), in cooperation with the Senate Banking Committee. Among other provisions, the tax package includes a refundable credit for first time homebuyers, a new property tax deduction for non-itemizers, many changes for the low-income housing credit, modernization of the Real Estate Investment Trust (REIT) rules, a provision allowing taxpayers to receive 20% of the value of their unused AMT or research and development (R&D) credits to the extent they invest in assets that qualify for bonus depreciation, and an extension and expansion of some GO Zone incentives.
The revenue offsets would consist of information reporting for payment card and third party network transactions, a reduced homesale exclusion for certain periods of nonqualified use, and increased information return and failure to file penalties.
A June 18, 2008, Senate Finance press release and summary of the housing stimulus tax package to be included in H.R. 3221 is available to read on Checkpoint.
If the Senate passes a housing relief package, it would have to be reconciled with the housing relief package passed by the House of Representatives on May 8.
6/18/08 -- Senate Finance bill includes tax crackdown for oil companies doing business with Iran.
On June 18, the Senate Finance Committee, by a vote of 19--2, favorably reported out of Committee the &bdq;Iran Sanctions Act of 2008." The measure contains a tax crackdown for certain taxpayers doing business with Iran. Specifically, taxpayers on whom certain economic sanctions for investing in Iran are imposed, or on whose affiliates such sanctions would have been imposed if the affiliates were U.S. persons, would have to amortize geological and geophysical expenditures over ten years (instead of the seven-year period that applies for major integrated oil companies and the two-year period that applies to certain independent producers and smaller integrated oil companies).
A description of the Chairman's Modification to the "Iran Sanctions Act of 2008" is available to read on Checkpoint.
6/17/08 -- President signs Heroes Act into law.
On June 17, the President signed into law H.R. 6081, the "Heroes
Earnings Assistance and Relief Tax Act of 2008." The Heroes Act provides
targeted tax relief for members of the military and their families, fully
offset with tightened expatriation rules, a new rule requiring U.S. companies
working under federal government contract to treat overseas employees
as subject to employment taxes, and a higher failure to file penalty.
For a Special Study of tax provisions in the Heroes Act, is available to read on Checkpoint now.
6/17/08 -- Ways and Means to consider AMT patch bill.
On June 18, the House Ways and Means Committee is scheduled to take up H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008." The bill was introduced on June 17 by Ways and Means Chairman Charley Rangel (D-NY). The bill would patch the AMT problem for 2008 by extending for one year AMT relief for nonrefundable personal credits and increasing AMT exemption amounts to $69,950 for joint filers and $46,200 for individuals. The one-year AMT patch would be paid for with a variety of revenue raising measures, including taxing certain carried interests as ordinary income, barring large integrated oil companies from claiming the Code Sec. 199 domestic production activity deduction, freezing the Code Sec. 199 deduction at the 6% level for other producers of oil and natural gas, and requiring information returns for merchant payment card reimbursements.
The following material can also be found on Checkpoint:
- the text of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008;" and
- a brief summary of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008."
6/17/08 -- Second defeat for cloture on Renewable Energy Job Creation Act.
On June 17, the Senate by a vote of 52 to 44 failed once again to gain the necessary votes to invoke cloture on the motion to proceed to the House-passed bill H.R. 6049, the "Renewable Energy Job Creation Act." The bill had previously been approved by the House on May 21 by a vote of 263-160. The "Renewable Energy Job Creation Act" would extend a number of tax breaks for one year, including the deduction for state and local sales tax, the deduction for tuition and other education expenses, and the deduction for educators' out-of-pocket expenses. The bill also would OK a deduction of property taxes for non-itemizers and expand the refundable child tax credit. It also would extend the research credit and the credit for solar energy, and provide incentives to encourage energy efficient products, such as plug-in hybrid cars.
Offsetting revenue provisions include a delay in application of worldwide allocation of interest, and a provision that would tax individuals on a current basis if they receive deferred compensation from a tax indifferent party.
6/13/08 -- House Democratic leaders adamant on full offsets for tax extenders.
Setting up a showdown with the Senate, House Majority Leader Steny Hoyer
(D-MD) and House Ways and Means Committee Chair Charlie Rangel (D-NY)
said at a June 12 press conference that they will not bring a bill to
the House floor that would extend expiring tax provisions without offsets.
Hoyer said, "I speak for myself and for the speaker Nancy Pelosi--the
House will not vote to waive the [PAYGO] rule for tax extenders legislation
that increases the deficit.
In addition, on June 12, House Democrats sent a letter to Senate Minority Leader Mitch McConnell (R-KY) declaring that the House would not pass an extenders bill if the Senate strips the offsets from the package. The letter said that the legislation passed by the House (H.R. 6049) demonstrated that it is not necessary to increase the deficit in order to extend tax relief and maintained that continued "opposition to the reasonable offsets for this legislation will result in millions of American families and businesses being denied tax relief."
6/13/08 -- Baucus bill would offer tax credit to promote capture of carbon emissions.
On June 12, Senate Finance Committee Chairman Max Baucus (D-MT) introduced the "Accelerating Carbon Capture and Sequestration Act of 2008," which would provide a tax credit to coal-fired power plants that capture and sequester their carbon outputs through innovative new technologies.
The bill would create a $20 per ton of carbon tax credit for companies
that sequester their carbon emissions underground in a geological formation
such as a coal bed or saline aquifer. It also would create a $10 per ton
tax credit for carbon used for enhanced oil recovery, which uses carbon
emissions to increase oil production and efficiency in older wells.
6/12/08 -- Rangel to try for a fully offset AMT patch bill.
House Ways and Means Committee Chair Charlie Rangel (D-NY) is expected
to move a one-year patch for the Alternative Minimum Tax (AMT) the week
of June 16, with House floor consideration expected before the July 4th
recess. Rangel told reporters June 11 that he will move a $62 billion
AMT bill through the Ways and Means Committee next week, paid for by taxing
carried interest and hedge fund manager's income from investment services
as regular income.
Rangel's bill is sure to meet opposition in the Senate, where Republicans would prefer an AMT patch without offsets.
6/12/08 -- Baucus bill provides AMT relief, energy incentives, and host of individual and business tax extenders.
On June 12, Senate Finance Committee Chair Max Baucus (D-MT) introduced the "Energy Independence and Tax Relief Act of 2008," which he intends to offer as a substitute bill to H.R. 6049, "the Renewable Energy Job Creation Act," when the Senate proceeds to that legislation. Along with extending almost 50 tax provisions--including relief from the alternative minimum tax (AMT), renewable energy tax incentives, the research and development credit, and the state and local sales tax deduction--the Baucus-amended bill includes a $350 ($700 for married filing jointly) non-itemizer property tax deduction for 2008; a new credit for qualified plug-in electric drive vehicle (a $3,000 base credit, plus $200 if the vehicle uses a battery with at least 5 kilowatt hours (KWHs) of capacity, and another $200 for each KWH of battery capacity in excess of 5 KWHs up to 15 kilowatt hours); and a fringe benefit for bicycle commuters. The bill also would changes the standards for imposing the tax return preparer penalty (substantial authority for undisclosed positions; reasonable basis for disclosed positions; and reasonable belief that a transaction was more likely than not to be sustained on the merits for tax shelters and reportable transactions); treat attorneys like other contingency fees as deductible in the year accrued rather than on disposition of the case; allow the Code Sec. 199 domestic production activities deduction for the film industry for tax years beginning after 2007; and lower the threshold at which the child tax credit is refundable (from $12,050 in 2008) to $10,000 for the 2008 tax year. Except for the AMT relief, which is not offset, the bill's cost would be offset by a delay in application of worldwide allocation of interest, and a provision that would tax individuals on a current basis if they receive deferred compensation from a tax indifferent party.
The Baucus bill includes:
AMT relief. Under the Baucus bill, the AMT exemption amounts would increase to $46,200 for individuals ($69,950 for married filing jointly) for 2008, and personal credits would be allowed against the AMT. Currently, the AMT exemption is $33,750 ($45,000 for married couples filing jointly), and personal credits aren't allowed against AMT. The bill would also modify the refundable AMT credit under Code Sec. 53(e) to allowed 50% long-term unused minimum tax credits bill's to be refunded over each of two years instead of 20% each of five years, eliminate the AGI phase-out, and abate any underpayment of tax outstanding on the bill's enactment date related to incentive stock options and the AMT including interest.
Energy-related provisions. The bill would extend and modify the renewable energy production tax credit; the solar energy and fuel cell investment tax credit; the residential energy-efficient property credit; the credit for energy-efficiency improvements to existing homes; the energy-efficient appliance credit; and the authority to issue qualified green building and sustainable design project bonds. It would extend the deferral of gain on sales of electric transmission property; the credit for clean renewable energy bonds (CREBs); the deduction for energy efficient commercial buildings. It would also creates a new category of qualified energy conservation bonds to fund State and local programs to reduce greenhouse gas emissions, and allow accelerated depreciation for smart electric meters and smart electric grid systems.
Individual extenders. The bill would generally extend for a year to the end of 2008: the deduction for state and local sales taxes; the qualified tuition deduction; the provision allowing taxpayers to make tax free contributions from their IRAs to qualified charitable organizations; the teacher expense deduction; the tax-favored treatment of certain RIC dividends; and the exclusion for amounts received under qualified group legal service plans.
Business extenders. The business provisions would generally extend for a year to the end of 2008: the research and development credit; 15-year straight-line depreciation for qualified leasehold and restaurant improvements (and include retail improvements); expensing of brownfields environmental remediation costs; qualified zone academy bonds; the deduction for domestic production activities in Puerto Rico; enhanced charitable deduction for food and book inventory; the Indian employment credit; and the basis adjustment to stock of S corporations making charitable contributions of property. The new markets tax credit would be extended one year to the end of 2009.
A summary of "the Energy Independence and Tax Relief Act of 2008" is available to read on Checkpoint now.
6/12/08 -- Housing stimulus tax relief in the works; pre-July-4 action anticipated.
House and Senate tax-writing staffs met June 11 to discuss a housing tax bill. House Ways and Means Committee Chairman Charles B. Rangel (D-NY) told reporters that staffers were asked to find compromise legislation that would address the slump in the housing market. Staffers are working on a tax package that will be added to a comprehensive housing bill expected to be considered by the House before Congress adjourns for the July 4th recess.
Both the Senate and House passed separate and substantially different versions of a housing stimulus bill earlier this year (see Article # 1428 and Article # 1415 for details), but a conference was never held. The House's version of the bill was offset with revenue raising provisions but the Senate's wasn't.
6/10/08 -- Cloture vote fails on bill providing AMT relief, energy incentives, and host of individual and business tax extenders.
On June 10, the Senate by a vote of 50 to 44 failed to gain the necessary votes to invoke cloture on the motion to proceed to the House-passed bill H.R. 6049, "the Renewable Energy Job Creation Act." The bill had previously been approved by the House on May 21 by a vote of 263-160, and President Bush had threatened to veto it. Senate Finance Committee Chair Max Baucus (D-MT) said that they will try and bring the bill up again, hopefully some time this week. Baucus indicated that he would be meeting with Senate Majority Leader Harry Reid (D-NV) for further discussions on the bill.
Earlier in the day, Baucus had unveiled a substitute amendment to H.R. 6049. Along with extending almost 50 tax provisions--including relief from the alternative minimum tax (AMT), renewable energy tax incentives, the research and development credit, and the state and local sales tax deduction--the Baucus-amended bill includes a $350 ($700 for married filing jointly) non-itemizer property tax deduction for 2008; a new credit for qualified plug-in electric drive vehicle (a $3,000 base credit, plus $200 if the vehicle uses a battery with at least 5 kilowatt hours (KWHs) of capacity, and another $200 for each KWH of battery capacity in excess of 5 KWHs up to 15 kilowatt hours); and a fringe benefit for bicycle commuters. The bill also would changes the standards for imposing the tax return preparer penalty (substantial authority for undisclosed positions; reasonable basis for disclosed positions; and reasonable belief that a transaction was more likely than not to be sustained on the merits for tax shelters and reportable transactions); treat attorneys like other contingency fees as deductible in the year accrued rather than on disposition of the case; allow the Code Sec. 199 domestic production activities deduction for the film industry for tax years beginning after 2007; and lower the threshold at which the child tax credit is refundable (from $12,050 in 2008) to $10,000 for the 2008 tax year. Except for the AMT relief, which is not offset, the bill's cost would be offset by a delay in application of worldwide allocation of interest, and a provision that would tax individuals on a current basis if they receive deferred compensation from a tax indifferent party.
The Baucus amendment includes:
AMT relief. Under the Baucus amendment, the AMT exemption amounts would increase to $46,200 for individuals ($69,950 for married filing jointly) for 2008, and personal credits would be allowed against the AMT. Currently, the AMT exemption is $33,750 ($45,000 for married couples filing jointly), and personal credits aren't allowed against AMT. The amendment would also modify the refundable AMT credit under Code Sec. 53(e) to allowed 50% long-term unused minimum tax credits bill's to be refunded over each of two years instead of 20% each of five years, eliminate the AGI phase-out, and abate any underpayment of tax outstanding on the bill's enactment date related to incentive stock options and the AMT including interest.
Energy-related provisions. The amendment would extend and modify the renewable energy production tax credit; the solar energy and fuel cell investment tax credit; the residential energy-efficient property credit; the credit for energy-efficiency improvements to existing homes; the energy-efficient appliance credit; and the authority to issue qualified green building and sustainable design project bonds. It would extend the deferral of gain on sales of electric transmission property; the credit for clean renewable energy bonds (CREBs); the deduction for energy efficient commercial buildings. It would also creates a new category of qualified energy conservation bonds to fund State and local programs to reduce greenhouse gas emissions, and allow accelerated depreciation for smart electric meters and smart electric grid systems.
Individual extenders. The amendment would generally extend for a year to the end of 2008: the deduction for state and local sales taxes; the qualified tuition deduction; the provision allowing taxpayers to make tax free contributions from their IRAs to qualified charitable organizations; the teacher expense deduction; the tax-favored treatment of certain RIC dividends; and the exclusion for amounts received under qualified group legal service plans.
Business extenders. The business provisions would generally extend for a year to the end of 2008: the research and development credit; 15-year straight-line depreciation for qualified leasehold and restaurant improvements (and include retail improvements); expensing of brownfields environmental remediation costs; qualified zone academy bonds; the deduction for domestic production activities in Puerto Rico; enhanced charitable deduction for food and book inventory; the Indian employment credit; and the basis adjustment to stock of S corporations making charitable contributions of property. The new markets tax credit would be extended one year to the end of 2009.
The text of News Release "Baucus Bill Extends Energy Incentives, Individual
And Business Tax Relief, Blocks Alternative Minimum Tax For Millions Of
Working Families," June 10, 2008 is available to read on Checkpoint
now.
6/6/08 -- Farm bill headed to President again to fix clerical error.
Congress is close to correcting an embarrassing clerical error in the
farm bill (the Food, Conservation, and Energy Act), which was supposed
to have been wrapped up before the Memorial Day recess.
Here's what happened. The House of Representatives and the Senate by wide margins passed H.R. 2419, the farm bill, on May 14 and May 15, respectively. The President as expected vetoed the bill on May 21 and that day, the House of Representatives voted 316-108 to override the President's veto. On May 22, the Senate followed suit with a veto override vote of 82-13. At the last minute, a clerical problem was discovered in the bill that the President vetoed: one of the titles of H.R. 2419 as it was passed by the House and Senate (a non-tax trade title) had been accidentally omitted from the copy of the bill that was sent to the President.
Now the fix. On May 22, the House of Representatives by a vote of 306-110 approved H.R. 6124, the revised farm bill carrying all of its titles, including the one that was omitted from the pre-Memorial Day version. On June 5, the Senate by a vote of 77-15 also passed H.R. 6124. The measure is on its way to the President for his expected veto, and then it will go back to Congress for an expected veto override vote in both the House and Senate.
6/6/08 -- Senate begins debate on energy bill.
On June 5, the Senate began debate on H.R. 3044, the Consumer First Energy Act of 2008. The tax provisions in the bill would (1) deny a domestic production activities deduction to major integrated oil companies (i.e., companies producing at least 500,000 barrels of crude oil daily); (2) conform the tax treatment of foreign oil and gas extraction income and foreign oil related income for purposes of the foreign tax credit; and (3) impose a windfall profits tax on major integrated oil companies. The nontax provisions would among other things prevent gasoline related price gouging, authorize the President to declare a federal energy emergency under certain conditions, and temporarily suspend acquisition of petroleum for the Strategic Petroleum Reserve until Dec. 31, 2008.
Senate Finance Committee Chair Max Baucus (D-MT) told reporters that he expects a vote on cloture of the bill to take place on June 10.
The legislative language of S. 3044, the "Consumer First Energy Act of 2008" is available to read on Checkpoint now.
6/6/08 -- Tax extenders bill headed to Senate floor.
On June 5, Senate Finance Committee Chair Max Baucus (D-MT) told reporters that he expects to bring a tax extenders bill to the Senate floor as early as June 11, but that the timing of floor consideration of the measure would be made by Senate Majority Leader Harry Reid (D-NV).
Baucus said the extenders and energy provisions of his bill would be
offset by revenue raisers similar to offsets included in H.R. 6049,
the Renewable Energy and Job Creation Act of 2008, approved by the House
on May 21 by a vote of 263-160. Baucus also said that he had not yet made
a decision on whether to include a one-year patch for the Alternative
Minimum Tax (AMT) in the bill.
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