President Signs Hiring Incentives to Restore Employment (HIRE) Act
The Senate, on March 17, 2010, passed the Hiring Incentives to Restore Employment (HIRE) Act, which previously passed the House on March 4, 2010. President Obama signed the legislation into law on March 18, 2010.
The HIRE Act provides tax breaks for business to encourage hiring. In addition to continuing a couple of other employment related tax breaks, such as Code Sec. 179 expensing and COBRA premium assistance, the new payroll tax holiday and retention credit and their interaction with the work opportunity credit will give employers additional factors to consider in their hiring decisions.
The legislation also imposes a number of additional burdens with respect to reporting and disclosure of foreign assets. Direct reporting responsibilities are imposed on foreign financial institutions with the threat of withholding used as the tool to achieve compliance. Disclosure and reporting responsibilities imposed on individuals with respect to foreign assets and trusts are also extended to U.S. persons formed or availed of to avoid the disclosure and reporting requirements.
CCH Tax Briefing: Hiring Incentives to Restore Employment Act
Hiring Incentives to Restore Employment (HIRE): Law, Explanation & Analysis
Senate Amendment 3310 to H.R. 2847
Tax Bulletin: HIRE Act: Incentives to Hire and Retain the Unemployed
Tax Bulletin: HIRE Act: Extension of Increased Code Sec. 179 Expensing
Tax Bulletin: HIRE Act: Foreign Account Tax Compliance Requirements
A special CCH briefing discussing the foreign tax compliance provisions in the HIRE Act can be found at http://business.cch.com/briefings/jobsbill.pdf.
Ways & Means Approves Small Business Tax Bill
Legislation that would provide capital gains tax relief to small businesses and crack down on multinational firms that engage in so-called tax treaty shopping was approved by the House Ways and Means Committee on March 17. The Small Business and Infrastructure Jobs Tax Bill (HR 4849), which was introduced by Committee Chairman Sander Levin, D-Mich., passed the committee by a vote of 25-to-15.
Small Business and Infrastructure Job Creation Bill
Senate Passes American Workers, State and Business Relief Bill of 2010
The Senate, on March 10, 2010, passed the American Workers, State and Business Relief Bill of 2010 (H.R. 4213), by a vote of 62 to 36. The measure would extend through 2010 approximately $30-billion worth of expired tax provisions, including the research and development tax credit, accelerated depreciation for certain small businesses and tax credits for biodiesel and other renewable fuels, plus various provisions of the American Recovery and Reinvestment Act (2009 Recovery Act) (P.L. 111-5), and a Medicare physician payment update through the end of September 2010. The measure also extends through the end of the year increased unemployment and COBRA benefits.
House Passes Legislation Encouraging Donations to Victims of Chile Earthquake
On March 10, 2010, the House unanimously passed a bill (H.R. 4783) that allows individuals who make charitable contributions to the victims of the Chile earthquake to take an itemized charitable deduction on their 2009 tax return, as opposed to claiming the deduction on their 2010 tax return. Contributions must be made after February 26, 2010 and on or before April 15, 2010.
The bill also extends the time period for which a charitable donation to the victims of the earthquake in Haiti can be claimed on an individual's 2009 tax return. Pursuant to P.L. 111-126, taxpayers who make monetary contributions to the victims of the earthquake in Haiti after January 11, 2010, and before March 1, 2010, can claim an itemized charitable contribution deduction on their 2009 federal tax return. H.R. 4783 extends that time frame to include donations made on or before April 15, 2010.
House Amends and Passes $15 Billion Jobs Bill
On March 4, 2010, the House amended and passed the Hiring Incentives to Restore Employment (HIRE) Bill (H.R. 2847) by a vote of 217-201. The House amended the bill as passed by the Senate on February 24, 2010, to fully offset the measure. The HIRE bill includes a payroll tax holiday for certain new hires, an extension of the Build America Bonds program to existing tax credit bonds, an extension of highway authorizations, and an extension of higher §179 expensing thresholds. The amended bill now goes to the Senate for consideration.
CCH Tax Briefing: Hiring Incentives to Restore Employment Act
Senate Amendment 3310 to H.R. 2847
President Signs Short-Term Funding of COBRA, Unemployment Benefits
President Obama on March 2 signed the Temporary Extension Act of 2010 (P.L. 111-144). The new law provides a 30-day funding extension for unemployment compensation, COBRA premiums, Medicare physician payments and therapy caps. It also temporarily funds surface transportation and flood insurance programs, small business loan guarantees, federal poverty guidelines and retransmission of television broadcasts.
Temporary Extension Act of 2010
Senate Passes $15 Billion Jobs Bill
On February 24, 2010, the Senate passed the Hiring Incentives to Restore Employment (HIRE) Bill by a vote of 70-28. The $15 billion measure includes a payroll tax holiday for certain new hires, an extension of the Build America Bonds program to existing tax credit bonds, an extension of highway authorizations, and a one-year extension of higher §179 expensing thresholds.
The House passed the Jobs for Main Street Bill of 2010 (H.R. 2847) on December 16, 2009, by a vote of 217 to 212. The significantly more expensive House bill extends unemployment insurance benefits and COBRA health benefits for unemployed workers, and contains a number of non tax provisions. It is not clear if the House will take up the Senate bill.
CCH Tax Briefing: Hiring Incentives to Restore Employment Act
Senate Amendment 3310 to H.R. 2847  top of page
Obama Unveils Health Care Proposal
The White House on February 22 unveiled its health care reform plan depicting its ideas as the best chance for bridging the differences between Democrats and Republicans on final legislation. The proposal is built on the Senate's Patient Protection and Affordable Care Bill (HR 3590), with some modifications, including raising the excise tax threshold on family health plans to $27,500, effective in 2018, excluding high-risk and elderly populations.
President Obama's Health Care Proposal
$15 Billion Jobs Bill Headed for Final Vote in Senate
On February 22, 2010, the Senate voted 62-30 to advance a $15 billion jobs bill offered by Senate Majority Leader, Harry Reid, D-Nev. The Hiring Incentives to Restore Employment (HIRE) Bill (Senate Amendment 3310 to H.R. 2847) includes a payroll tax holiday for certain new hires, an extension of the Build America Bonds program to existing tax credit bonds, an extension of highway authorizations, and a one-year extension of higher §179 expensing thresholds.
The cost of the legislation is offset by revenues raised from the Foreign Account Tax Compliance Bill (S. 1934) and a one-year delay in application of worldwide interest allocation rules.
A final vote in the Senate is expected later in the week.
The House previously passed the Jobs for Main Street Bill of 2010 (H.R. 2847) by a vote of 217 to 212, which is significant different from the Senate proposal. In addition to extending unemployment insurance benefits for six months and COBRA health benefits for unemployed workers, the House measure contains several minor tax provisions. It is not clear if the House will consider the Senate proposal or if differences between the two bills will be worked out in a conference.
CCH Tax Briefing: Hiring Incentives to Restore Employment Act
Senate Amendment 3310 to H.R. 2847
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Obama Unveils $3.83 Trillion Budget; Tax Proposals Focus on Job Creation and Revenue
President Obama presented Congress with his $3.83 trillion fiscal year (FY) 2011 federal budget proposal on February 1, 2010. Tax incentives for individuals and businesses total approximately $300 billion with an additional $100 billion allocated to job creation. Tax provisions proposed in the budget include:
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A one year extension of the Making Work Pay Credit
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A $5000 credit for every new employee hired by a qualified small business in 2010 (capped at $500,000)
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An extension of the enhanced §179 expensing at 2009 levels through December 31, 2010
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An extension of the first-year bonus depreciation deduction
Proposed tax increases would raise $1.4 trillion, with the majority of that revenue coming from rate increases for higher-income taxpayers. However, the proposal also calls for over $450 billion in other revenue raisers. Those increases impact many categories of taxpayers but, perhaps most directly, those with international operations.
CCH Tax Briefing: FY 2011 Federal Tax Budget - Tax Proposals
Budget Message of the President: Fiscal Year 2011 Budget
Office of Management and Budget Fact Sheets on Key Issues top of page
President Signs Accelerated Tax Deduction For Haiti Earthquake Relief Into Law; IRS Announces Qualified Disaster Relief for Haiti
On January 22, 2010, President Obama signed into law H.R. 4462, which allows taxpayers who make monetary contributions to the victims of the earthquake in Haiti after January 11, 2010, and before March 1, 2010, to claim an itemized charitable contribution deduction on their 2009 federal tax return. The House of Representatives unanimously passed H.R. 4462 on January 20, 2010. The Senate approved the measure by unanimous consent one day later on January 21, 2010.
The IRS also designated the January 2010 earthquake in Haiti as a qualified disaster. Employer-sponsored private foundations may assist certain victims in areas affected by the earthquake, and recipients of the aid may exclude relief payments from gross income. The IRS will presume that qualified disaster relief payments made by a private foundation to employees and their family members in areas affected by the Haiti earthquake are consistent with the foundation's charitable purposes.
CCH Tax Briefing: House Approves Accelerated Tax Deduction for Haiti Earthquake Relief
Notice 2010-16; IR-2010-11: IRS Announces Qualified Disaster Treatment for Haiti
H.R. 4462 Legislation to Accelerate the Income Tax Benefits for Charitable Cash Contributions for the Relief of Victims of the Earthquake in Haiti
Senate Finance Committee Press Release: Senate Unanimously Approves Plan to Help Haiti
House Ways and Means Committee Press Release: House Unanimously Approves Bill to Allow Taxpayers to Claim Charitable Deduction in 2009 for Haiti Relief
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IRS Unveils Comprehensive Preparer Reform Blueprint
After six months of internal study, review of hundreds of comments and a series of public meetings, the IRS has announced a sweeping reform of return preparer oversight. All paid signing preparers, regardless of credentials or licenses, will be required to register with the IRS. Unenrolled preparers will be required to complete competency testing and mandatory continuing education. On January 4, the IRS released a blueprint of its new preparer initiative and indicated that regulations necessary to implement the changes would be released in 2010.
CCH Tax Briefing: Return Preparer Oversight
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Senate Passes Health Care Reform Legislation
The Senate on December 24, 2009 passed the Patient Protection and Affordable Care Bill (H.R. 3590) by a vote of 60 to 39. Leaders decided to move up the vote in order to recess earlier for the holidays. The Senate bill raises revenue for health care reform by imposing a 40-percent surtax on high-end employer-sponsored health plans and increasing the Medicare tax to 2.35 percent for couples with adjusted gross incomes (AGI) over $250,000 a year and individuals with AGI over $200,000. The typical premium threshold for the so-called "Cadillac plans" begins at $8,500 for individuals and $23,000 for a family. The House bill would impose a 5.4-percent surtax on high-income earners, hitting couples with adjusted gross incomes over $1 million and individuals with AGI over $500,000.
Although the Senate bill is similar in scope to the House-passed Affordable Health Care for America Act (H.R. 3962) many differences remain, especially over revenue raisers. Lawmakers will now begin the difficult task of reconciling the House and Senate versions.
CCH Tax Briefing: Health Care Reform Update
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President Signs Two-Month Extension of COBRA Health Benefits
Unemployed workers will be eligible for an additional two months of COBRA premium assistance for their health insurance coverage, under the Department of Defense Appropriations Act, 2010 (P.L. 111-118) signed by President Obama on December 19, 2009. The COBRA benefits were scheduled to expire after December 31, but House lawmakers voted 395-to-34 to extend the benefits as part of the defense spending measure on December 16, 2009. Senate lawmakers cleared the measure for the president’s signature on December 19 by a vote of 88 to 10.
Extended eligibility for the 65% COBRA premium subsidy was originally enacted as part of the American Recovery and Reinvestment Act of 2009 (2009 Recovery Act) (P.L. 111-5). Under the new law, employees must have faced involuntary termination between September 1, 2008, and February 28, 2010, in order to qualify for the COBRA benefits. House lawmakers had also attempted to extend the COBRA benefits for six months in the Jobs for Main Street Bill of 2010, which is part of the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2010 (HR 2847) on December 16, 2009, but Senate lawmakers declined to consider that bill while the chamber was in the midst of debate on health care reform legislation
CCH Tax Briefing: Tax Extenders Bill of 2009, including analysis of the extension of COBRA health benefits
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House Passes $75-Billion Jobs Bill; Senate Action in 2009 Unlikely
On December 16, 2009, the House passed the Jobs for Main Street Bill of 2010 (H.R. 2847) by a vote of 217 to 212. The measure would be paid for using Trouble Asset Relief Program funds from the Emergency Economic Stabilization Act of 2008 (P.L. 110-343). In addition to extending unemployment insurance benefits for six months and COBRA health benefits for unemployed workers, the measure contains several minor tax provisions. The bill would spend $2.3 billion to increase eligibility for the refundable portion of the child tax credit by removing the $3,000 floor for 2010. The legislation would also provide that, for one year, individuals will not have to count tax refunds as income for the purpose of assessing their eligibility for means-tested federal programs. The Senate is not likely to act of this legislation until 2010.
Tax-Related Portions of the Amendment to the Senate Amendment to Jobs for Main Street Act of 2010, HR 2847
House Ways & Means Committee Press Release: House Approves Jobs for Main Street Act
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President Signs Extension of Aviation Excise Tax
On December 16, President Obama signed the Fiscal Year 2010 Federal Aviation Administration Extension Act, Part II (HR 4217), which will extend through March 31, 2010, authorities to collect taxes that fund the Airport and Airway Trust Fund, make expenditures from the Airport and Airway Trust Fund and provide grants to airports under the Airport Improvement Program. The House passed the measure by voice vote on December 8, 2009. The Senate subsequently passed the bill December 10, 2009 by unanimous consent.
Fiscal Year 2010 Federal Aviation Administration Extension Act, Part II top of page
House Passes Extenders Bill With Carried Interest, Foreign Reporting Revenue Raisers
The House of Representatives approved a package of tax extenders on December 9, 2009, largely along party lines by a vote of 241 to 181. The $31 billion Tax Extenders Act of 2009 (H.R. 4213) extends more than 50 popular but temporary tax incentives through December 31, 2010. Most of the incentives would have expired after December 31, 2009. Two revenue raisers – a change in the taxation of carried interest and heightened information reporting and disclosure requirements for foreign bank and financial accounts – would pay for the one-year extensions. President Obama has indicated he will sign the extenders bill as passed by the House, but the bill’s fate is uncertain in a Senate focused almost exclusively on heath care reform.
CCH Tax Briefing: Tax Extenders Act of 2009
Tax Extenders ct of 2009 (H.R. 4213)
House Ways & Means Committee Press Release: House Passes Tax Extenders Act
House Passes Estate Tax Extension
The House on December 3, 2009, passed the Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Bill of 2009 (H.R. 4154) by a vote of 225 to 200. The legislation repeals the repeal of the estate tax and introduction of carryover basis as enacted in 2001 and establishes a $3.5 million exclusion amount and top estate tax rate of 45 percent. All of the Republicans in the House were joined by 26 Democrats in opposing the measure. The fate of the legislation in the Senate is uncertain, with some Democrats favoring a one-year extension rather than a permanent extension of the 2009 estate tax exemption amount and top tax rate.
CCH Tax Briefing: Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Bill of 2009
Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009 (H.R. 4154)
Senate Health Bill Calls For Excise Tax On Insurance Plans, Added Payroll Tax On High-Wage Earners
Health care reform took another major step forward on November 18 when Senate Democratic leaders unveiled the Patient Protection and Affordable Care Act. The bill is a blended version of bills passed earlier by the Senate Finance Committee (SFC) and the Senate Health, Education, Labor, and Pensions (HELP) Committee. The $849 billion package, with $370 billion in revenue raisers, was drafted not only with an eye toward garnering the 60 votes necessary for full Senate approval but also in preparation for conference committee negotiations. Although the Senate bill is similar in scope to the House-passed Affordable Health Care for America Act (H.R. 3962) many differences remain, especially over revenue raisers.
On November 7, 2009, the House passed the Affordable Health Care for America Act of 2009 (H.R. 3962), the 2,000+ page bill overhauling health insurance coverage for Americans. The legislation imposes a new surtax on higher-income individuals at a cost of more than $400 billion over 10 years to help pay for nearly universal coverage. The measure also:
- Places new limits on health flexible spending accounts,
- Higher penalties on nonqualified distributions from health savings accounts, and
- Imposes an excise tax on medical devices.
In looking for ways for cover the cost health reform, the legislation also makes significant changes to areas of the tax law unrelated to health care except in their common ability to raise revenues. These tax increases include tightened treaty benefit limitations, new information reporting requirements on payments to corporations, extended repeal of worldwide interest allocation, new restrictions on the biofuel producers credit, and codification of a broad economic substance doctrine.
President Signs Worker, Homeownership, and Business Assistance Act of 2009 Into Law
Two popular but temporary tax incentives have been given a new lease on life as part of legislation extending unemployment compensation benefits. The Worker, Homeownership, and Business Assistance Act of 2009 (H.R. 3548) was passed by the Senate on November 4, 2009, and by the House one day later. President Obama signed the legislation into law November 6, 2009. In addition to extending unemployment insurance benefits for an additional 14 weeks, the legislation includes an extension and expansion of the homebuyer credit and an extension and expansion of the five-year carryback of net operating losses. To pay for these provisions, the legislation includes a delay in the application of worldwide allocation of interest, an increase in the penalties for failure to file partnership and S corporation returns, and an acceleration of corporate estimated tax payments. The legislation also expands the requirement for electronic filing by return preparers.
Treasury Releases 'Green Book' of Tax Proposals
The Obama administration released much-anticipated details about its proposed tax cuts and revenue raisers on May 11. The Treasury Department's General Explanations of the Administration's Fiscal Year 2010 Revenue Proposals (also known as the "Green Book") describes the administration's tax agenda, including permanent Making Work Pay, American Opportunity and research credits; a package of international tax reforms; reinstatement of the 36 and 39.6 percent individual marginal income tax rates; expanded information reporting; and automatic enrollment in IRAs. According to the Treasury, the proposals would generate $736.5 billion in savings for individuals (largely aimed at middle income taxpayers) and $71 billion in long-term savings for businesses. Revenue raisers would bring in roughly $900 billion.
White House Announces Task Force on Tax Reform
President Obama has tasked the economic recovery advisory board headed by former Federal Reserve Board Chairman Paul Volcker with considering measures to overhaul and simplify the current tax system. A tax reform task force, composed of four advisory board members, will make recommendations on tax simplification, closing tax loopholes, and reducing tax evasion and "corporate welfare," according to Office of Management and Budget (OMB) Director Peter Orszag. The economic advisory board will make its recommendations to the president by December 4, 2009.
House Passes 90% Tax on Bonuses; Senate Action Delayed
House lawmakers overwhelmingly approved a measure to tax millions of dollars in bonuses paid to employees of American Insurance Group (AIG), the troubled insurance firm that received $170 billion in federal bailout money under the Troubled Asset Relief Program (TARP). The House voted on March 19, 2009, to approve HR 1586 by a vote of 328 to 93. The legislation would impose a 90-percent tax on the bonuses of highly paid individuals who work for firms that received more than $5 billion in TARP funds.
A companion measure was introduced into the Senate on March 19, 2009. The Compensation Fairness Bill of 2009 (S 651) would impose a 35-percent excise tax on both employers and employees on retention and other bonuses. The proposal would also put a cap on the amount of income employees of these companies are allowed to defer tax free. Small banks as defined by the tax code and entities that received less than $100 million in TARP funds would be exempt from the legislation. However, in the face of growing concern over the constitutionality of the measure and republican opposition, Senate Majority Leader Harry Reid, D-Nev., backed off efforts to bring the measure to the Senate floor the week of March 23, 2009.
Congress Passes Extension of Aviation Excise Taxes
On February 18, 2009, Congress passed the Federal Aviation Administration Extension Act of 2009. The measure extends aviation programs and taxes through September 30, 2009.
President Signs Final Stimulus Bill
President Obama has signed the American Recovery and Reinvestment Act into law. Moving through Congress in less than four weeks, the $787 billion new law, which contains nearly $300 billion in tax relief, sets in motion a wave of direct spending and tax incentives to jump start the U.S. economy out of recession.
Lawmakers Reach Agreement on Economic Stimulus Package
On February 11, 2009, House and Senate conferees announced they had reached an agreement to scale back the massive economic stimulus package, titled the American Recovery and Reinvestment Act of 2009 (H.R. 1) to $789 billion. Many of the tax provisions were pared down to reduce the overall cost of the bill. Still approximately 35 percent of the package is allocated to tax breaks at a cost of $276 billion. The compromise legislation includes:
- the "Making Work Pay" individual tax credit of 6.2 of earned income up to $400 for single returns and $800 for joint filers in 2009 and 2010;
- a one-time stimulus payment of $250 to retirees, disabled individuals, social security recipients and disabled veterans;
- a temporarily increase of the earned income credit for working families with three or more children;
- for 2009 and 2010, a $2,500 higher education tax credit that is available for tuition and related expenses paid during the first four years of college;
- an extension of the first-time homebuyer credit to September 1, 2009, with the repayment obligation eliminated for 2009 purchases;
- for 2009, an increase in the alternative minimum tax (AMT) exemption amounts for individuals to $46,700 for unmarried individuals and $70,950 for married individuals filing joint returns;
- an above-the-line deduction for interest expenses and state and local taxes paid on the purchase of a new automobile;
- an extension of the 50-percent first-year bonus depreciation through 2009;
- an extension of the increased expensing limits under Code Sec. 179 to 2009; and
- a suspension of federal income tax on the first $2,400 of unemployment benefits per recipient in 2009.
Senate Passes Economic Stimulus Bill 61 to 37; $366 Billion in Tax Cuts for Families and Businesses
The Senate has passed its version of the American Recovery and Reinvestment Act (H.R. 1) on February 10, 2009, by a vote of 61 to 37. The bill contains approximately $366 billion in tax relief for individuals and small businesses, and includes energy incentives and relief for state and local governments. The legislation also:
- provides an individual tax credit of 6.2 percent of earned income up to $500 for single returns and $1,000 for joint filers in 2009 and 2010;
- temporarily suspends federal income tax on the first $2,400 of unemployment benefits per recipient in 2009;
- creates a $2,500 higher education tax credit that is available for the first four years of college;
- expands the homeownership tax credit to $15,000 and allows the credit for all home purchases;
- establishes an above-the-line deduction for interest expenses and state and local taxes paid on the purchase of a new automobile;
- the alternative minimum tax (AMT) exemption amounts for individuals are increased in 2009 to $46,700 for unmarried individuals and $70,950 for married individuals filing joint returns;
- extends the 50-percent first-year bonus depreciation through 2009;
- extends the increased expensing limits under Code Sec. 179 to 2009;
- provides a five-year carryback of net operating losses for certain businesses;
- adds the categories of unemployed veterans and disadvantaged youth as qualified target groups for the Work Opportunity Tax Credit (WOTC); and
- allows individuals to exclude 75 percent of the gain from the sale of certain small business stock held for more than five years.
House Passes Economic Recovery Legislation 244-188; Senate Finance Approves Package with AMT Patch
In the face of a declining economy, increasing unemployment and dismal December retail sales reports, the House, on January 22, 2009, passed a comprehensive economic stimulus package. The American Recovery and Reinvestment Act of 2009, focuses largely on infrastructure spending, energy, and bolstering various education initiatives. It also includes a broad tax package that would impact individuals, states and businesses. For businesses, the legislation includes provisions to provide bonus depreciation, increased small business expensing, and work opportunity tax credits. The legislation would also:
- provide a refundable tax credit of up to $500 for working individuals and $1000 for working families;
- temporarily increase the earned income tax credit for working families with three or more children;
- establish a new "American Opportunity" education tax credit;
- eliminate the repayment obligation of the first-time home buyers credit for taxpayers purchasing a home after January 1, 2009;
- provide a five-year carryback of net operating losses for certain companies;
- repeal the alternative minimum tax limits on new private activity bonds;
- establish a one-year deferral of a 3-percent withholding tax on government contractors who have unpaid federal tax obligations;
- would prospectively repeal an IRS ruling that allows banks to use the losses of companies they acquire to cut their own tax liability; and
- include a number of energy incentive provisions, such as an extension of renewable energy production tax credits, clean renewable energy bonds, conservation bonds and research and development tax credits.
Meanwhile the Senate Finance Committee, on January 27, 2009, approved its portion of an $825 billion economic stimulus bill and potentially boosted the total cost to nearly $900 billion after agreeing to include a one-year patch for the alternative minimum tax (AMT). The goal of both chambers is to pass a final stimulus package mid-February.
Congress Passes Increase in Tobacco Excise Tax
The House, on February 4, 2009, passed legislation to renew and expand the State Children's Health Insurance Program (SCHIP). The Senate previously passed the measure on January 29, 2009, by a vote of 66-32. The $31.5 billion measure would fund investment in the SCHIP program with a 61-cent increase in federal tax on cigarettes, with proportional increases for other tobacco products, raising approximately $65 million over 10 years.
$14 Billion Auto Bailout Fails to Clear Congress
On December 10, 2008, the House passed the controversial Auto Industry Financing and Restructuring Act (H.R. 7321), by a vote of 237-170. The measure would provide $14 billion in bridge loans or lines of credit to eligible auto makers. Senate negotiations, however, fell apart late on December 11, 2008, apparently ending chances for the big three to receive a $14-billion bridge loan to keep them afloat. Senate leaders concluded there were not enough votes to support a bill approved by the House. Senate Majority Leader Harry Reid, D-Nev., called for a cloture vote on the Senate version that failed by a 52 to 35 margin, eight votes short of the 60 votes required to take up the bill.
The House-passed bill would create a "car czar" appointed by the president to oversee restructuring efforts by companies receiving assistance under the measure. Although the legislation does not directly amend the Internal Revenue Code, it does include provisions that would limit executive compensation and allows companies that merge with an automaker receiving assistance to claim certain net operating losses.
The White House subsequently announced that $13.4 billion in federal loans would be provided to General Motors and Chrysler LLC. The money will come from the Troubled Asset Relief Program (TARP) established by the Emergency Economic Stabilization Act of 2008.
President Signs Legislation That Eases Funding Requirements for Employer-Sponsored Pension Plans
On December 23, 2008, President Bush signed the Worker, Retiree and Employer Recovery Act (H.R. 7327). The legislation was passed by the House on December 10, 2008, by unanimous consent. The Senate subsequently followed suit and passed the measure on December 11, 2008, by unanimous consent. The legislation eases funding requirements for employer-sponsored pension plans that would have been be forced to make significantly increased contributions to meet funding targets set by the Pension Protection Act of 2006 (P.L. 109-280). The measure also temporarily suspends the excise tax assessed on seniors who fail to take a required minimum distribution from their retirement accounts. The legislation also makes a number of technical corrections to the Pension Protection Act of 2006 (P.L. 109-280).
President Signs Financial Rescue Bill
President Bush signed the Emergency Economic Stabilization Act of 2008, on October 3, 2008; the same day that the House passed the legislation by a vote of 263 to 171. The House vote came just two days after the Senate passed the measure by a vote of 74 to 25, and four days after the House failed to pass a similarly title bill. The landmark legislation gives the Treasury $250 billion immediately, and requires the president to certify if an additional $100 billion is necessary. An additional $350 billion may be disbursed subject to Congressional approval. The Treasury Department is required to report on the use of the funds and progress made in addressing the crisis. An oversight board and a special inspector general will also be created to watch over the Treasury department. The measure also:
- Requires the Treasury to modify troubled loans wherever possible to help families keep their homes;
- Directs other federal agencies to modify loans that they own or control;
- Improves the HOPE for Homeowners program by expanding eligibility and increasing the tools available to the Department of Housing and Urban Development to help more families keep their homes; and
- Places certain limits on executive compensation.
The legislation requires companies that sell some of their bad assets to the government to provide warrants so that taxpayers will benefit from any future growth these companies may experience as a result of participation in this program. In addition, the president must submit legislation that would cover any losses to taxpayers resulting from this program by charging a small, broad-based fee to all financial institutions.
The legislation temporarily raises the FDIC insurance cap from $100,000 to $250,000. It also includes a one year AMT "patch," would extend a number of individual and business deductions, credits and incentives, provides disaster relief to those impacted recent hurricanes and flooding, and includes a number of energy-related tax provisions. The added tax provisions are largely taken from the Renewable Energy and Job Creation Act of 2008 (HR 6049), which the Senate passed on September 23, 2008, and are only partially offset.
House and Senate Struggling to Reach an Agreement on an AMT "Patch," Disaster Relief and Extenders
With little time left on the Congressional calendar, the House and the Senate are trying to reach an agreement that would extend AMT relief and certain expired or expiring tax provisions, as well as provide assistance to victims of recent disasters. The Senate, on September 23, 2008, passed an amended version of the Renewable Energy and Job Creation Act of 2008 (HR 6049), by a vote of 93 to 2. The Senate-amended version of HR 6049 would:
- Extend AMT relief for one year;
- Provide a number of clean energy tax incentives at a cost of $18 billion;
- Extend expired or expiring individual deductions, including the deductions for local and sales taxes, qualified tuition, teacher expenses, and the additional standard deduction for real property taxes;
- Extend a number of business credits and incentives, including the research and development credit); and
- Provide disaster relief to those impacted by Hurricane Ike and the flooding in the Midwest.
The total cost of the amended Senate version of HR 6049 is only partially offset. In response to the Senate's action, the House on September 24, 2008, passed the Alternative Minimum Tax Relief Act of 2008 (HR 7005) and the Disaster Tax Relief Act of 2008 (HR 7006), setting the stage for final passage of AMT and disaster relief provisions before Congress adjourns for the election. This could potentially postpone and agreement on a broader extenders package and energy-related tax incentives for later this year or next.
Congress Passes Six-Month Extension of Aviation Taxes
On September 23, 2008, the House passed the Federal Aviation Administration (FAA) Extension Act of 2008, Part II (HR 6984). The Senate promptly followed suit and passed the measure on September 24, 2008. HR 6984 provides a six-month extension of aviation programs and taxes through March 31, 2009. The measure now heads to the White House.
Congress Passes Social Security Legislation
On September 17, 2008, the House passed the Social Security Income (SSI) Extension for Elderly and Disabled Refugees Act (HR 2608). The Senate previously passed the measure by unanimous consent on August 1, 2008. The legislation temporarily extends the current seven-year SSI eligibility period for refugees and asylum seekers in the United States to nine years, along with a limited retroactive provision. To pay for the extension, the legislation authorizes the IRS to offset income tax refunds of individuals who have fraudulently secured state unemployment benefits. President Bush is expected to sign the bill into law.
House Passes Comprehensive Energy Legislation
The House, on September 16, 2008, passed the Comprehensive American Energy Security and Consumer Protection Act (HR 6899), by a vote of 236 to 189. Title VIII of the measure, the Energy Tax Incentives Act of 2008, provides a number of energy-related tax incentives, including:
(1) an extension and modification of the renewable energy production tax credit;
(2) an extension and modification of the solar energy and fuel cell investment tax credit;
(3) an extension and modification of the residential energy-efficient property credit;
(4) the creation of $1.75 billion of new clean renewable energy bonds; and
(5) the creation of a new credit for plug-in drive vehicles.
To pay, in part, for these and other incentives, the legislation would deny the Code Sec. 199 domestic production deduction for certain integrated oil companies. The legislation faces an uncertain future. President Bush has threatened to veto the bill. Further, it is unlikely that comprehensive energy legislation will pass in the Senate prior to adjourning before the election. The Senate, however, may take up it's owe $18 billion package of energy tax incentives.
President Signs Comprehensive Housing Legislation
Reacting to the continuing slumps in housing sales, rising unemployment numbers, and weakening credit markets, Congress passed the Housing and Economic Recovery Act of 2008 (H.R. 3221). The House passed the measure on July 23, 2008, by a vote of 272 to 152. After a procedural delay, the Senate followed suit and passed the legislation on July 26, 2008, by a vote of 72 to 13. The legislation includes a $15.1 billion tax title, the Housing Assistance Tax Act of 2008, which will:
(1) provide first-time home buyers (as defined in the legislation) with a refundable credit of 10% of the purchase price of a home, up to $7500 (recipients would be required to repay any credit amount received over a 15 year period and the credit is phased out for individuals with an adjusted gross income in excess of $75,000 (or $150,000 for joint filers));
(2) provide taxpayers who claim the standard deduction an additional standard deduction of up to $500 (or $1000 for joint filers) for state and local property taxes;
(3) provide an increase the state-by-state allocation of low-income housing tax credits;
(4) simplify the rules applicable to tax-exempt housing bonds; and
(5) allow taxpayers in affected GO Zone areas to amend prior returns to take into account receipt of hurricane-related recovery grants.
The legislation also includes several revenue raising provisions, one of which would require certain institutions to file information returns with respect to reimbursements made to merchants that accept various forms of "payment cards" (including credit and debit cards). The bill would also delay the phase-in of the world-wide interest allocation election enacted as part of the American Jobs Creation Act of 2004 for two years (i.e., for taxable years beginning after 2010).
President Bush originally opposed the legislation in part because it creates $3.9 billion in new community development block grants to help rebuild communities significantly impacted by foreclosures. On July 23, 2008, President Bush withdrew his veto threat on the measure in an effort to hasten passage and provide relief to the troubled housing and financial markets. President Bush signed the measure into law on Wednesday, July 30, 2008.
President Signs Tax Relief for Military Personnel and Veterans
On May 20, 2008, the House unanimously approved the Heroes Earnings Assistance and Relief Tax Act of 2008 (HR 6081). The Senate followed suit and passed the measure on May 22, 2008. President Bush signed the measure into law on June 17, 2008. The legislation will:
(1) Allow military personnel to qualify for economic stimulus payments even though a spouse does not have a Social Security number;
(2) Make permanent the ability to include combat pay as earned income under the Earned Income Tax Credit;
(3) Make permanent and modify the availability of qualified mortgage bonds used to finance veterans' residences;
(4) Allow the day prior to the date of death to be treated as the date an employee in the military returned to work for purposes of qualified plan benefit distributions;
(5) Permit an employer to make contributions to a qualified plan on behalf of an employee killed or disabled in combat;
(6) Treat differential wages paid to an employee called to the military as wages for withholding and retirement plan purposes and create a small employer tax credit for differential wages;
(7) Extend the limitations period for tax refund credit claims with respect to veterans' disability determinations;
(8) Make permanent the ability of reservists to make penalty-free withdrawals from retirement plans and permit reservists to make penalty-free withdrawals from flexible spending accounts;
(9) Make permanent the ability of the Social Security Administration to disclose information to the Veterans' Administration for purposes of determining veterans' program eligibility;
(10) Clarify that state payments to service members are treated as qualified military benefits; and
(11) Permit recipients of military death benefit gratuities to roll the sums over tax-free to a Roth IRA or Coverdell Education Savings Account.
To pay for these provisions, the legislation revises the expatriation tax rules, treat domestically controlled foreign persons performing services under contract to the United States as U.S. employers, increases the failure to file penalty, and extends the excise tax for failure to comply with mental health parity requirements.
President Vetoes Farm Legislation for a Second Time; Congressional Override Expected
The Senate, on June 5, 2008, passed HR 6124, the Food, Conservation, and Energy Act of 2008, by a vote of 77 to 15. The House previously passed HR 6124 on May 22, 2008. The measure will now go to the White House. President Bush is expected to veto the measure, setting the stage for an override vote in Congress. HR 6124 would repeal previously passed farm legislation, HR 2419, also titled the Food, Conservation, and Energy Act of 2008, then re-enact the provisions of HR 2419 plus approximately 34 pages of trade provisions inadvertently omitted from the enrolled version of HR 2419.
The House, on May 21, 2008, voted 318 to 108 to override President Bush's veto of the Food, Conservation, and Energy Act of 2008 (HR 2419). The Senate followed suit and, on May 22, 2008, voted to override the veto 82 to 13. The override votes in the House and Senate took place amid a procedural mix-up, calling into question the validity of both votes. The enrolled bill text received by the White House and vetoed by President Bush on May 21, 2008, was missing Title III, which contained approximately 34 pages of trade provisions. Likewise, the House and Senate votes to override the President's veto were of the legislation without Title III. In effort to immediately resolve the mix-up, the House passed HR 6124, also titled the Food, Conservation, and Energy Act of 2008, which contains the same provisions as the enrolled version of HR 2419 plus Title III. Prior to the Memorial Day recess, however, the Senate successfully voted to override the version of HR 2419 vetoed by the President, thus enacting everything except Title III, rather than passing the measure as a whole for a second time.
In an unprecedented move, the Senate subsequently passed HR 6124 on June 5, 2008, sending farm legislation to the White House for a second time. President Bush vetoed HR 6124 on June 17, 2008. Both the House and Senate are expected to override the President's veto for a second time.
The tax title of HR 6124, titled the Heartland, Habitat, Harvest, and Horticultural Act of 2008, provides $1.67 billion in tax relief and incentives. Retired farmers and farmers on disability who participate in land conservation reserve programs will be permitted to count payouts under the program as investment income, preventing reductions in Social Security or disability benefits. New deductions and credits include a deduction for endangered species recovery expenditures and a credit for agricultural chemicals security measures. Deduction and credit enhancements include an increase in the cellulosic biofuels credit and an extension of the conservation easement deduction. Another provision creates uniform three-year depreciation for horses and allows horse sales to qualify for the 15 percent capital gain rate. Also included are a couple of provisions related to timber REITs. Bond provisions include authorization of forest conservation bonds and increased loan limits on Aggie Bonds.
The measure also contains several revenue offset provisions, including a reduction in the ethanol credit, a limitation on the ability to offset farm losses against nonfarm income, and creation of an optional self-employment tax for Social Security. In addition, the legislation excludes denaturant from the alcohol fuels credit.
- CCH Tax Briefing: Congress Enacts Farm Bill Overriding Bush Veto And Passes Military Tax Relief
- CCH Law, Explanation and Analysis
- Title XV, the Heartland, Habitat, Harvest, and Horticultural Act of 2008
- White House Press Release: Statement of the President on the Farm Bill
- Senate Overwhelmingly Approves Farm Legislation with Disaster Assistance, Tax Reforms, Tax Relief
- 2008 Farm Bill Tax Package: Farm Tax Reforms, Farm Tax Relief
- Senate Finance Committee Release: 2008 Farm Bill Tax Package --Homegrown Energy Independence
- Senate Finance Committee Release: 2008 Farm Bill Tax Package --Farm Tax Reforms
- Congressional Research Service Report for Congress --Farm Bill Legislative Action in the 110th Congress (Updated May 9, 2008)
- Congressional Research Service Report for Congress --What Is the "Farm Bill"? (Updated April 1, 2008)
- ClientRelate Bulletin --2008 Farm Act: Tax Relief and Reforms
- ClientRelate Bulletin --2008 Farm Act: Tax Relief for Kansas Disaster Victims
President Signs Economic Stimulus Package Into Law
President Bush, on February 13, 2008, signed into law the Economic Stimulus Act of 2008 (HR 4140).The legislation, estimated to cost $125 billion over a ten-year period, includes a recovery rebate credit for 2008. The basic credit is calculated as the greater of:
(1) net income tax liability not to exceed $600 ($1,200 for joint filers), or
(2) $300 ($600 for joint filers) if the individual has either (a) at least $3,000 of any combination of earned income, social security benefits, and certain veterans' benefits, or (b) net income tax liability of at least one dollar and gross income greater than the sum of the applicable basic standard deduction amount and one personal exemption (two if a joint return).
Any individual qualifying for a basic amount of credit also qualifies for an additional credit of $300 per qualifying child. The 2008 recovery rebate credit would be payable in the form of advance rebate checks paid during 2008 based on 2007 tax returns or information from the Social Security Administration or Veterans Administration. The credit will require valid taxpayer identification numbers.
According to Treasury Secretary, Henry Paulson, the IRS will begin sending rebate checks to qualifying taxpayers immediately after the 2008 filing season. "The IRS will manage the current tax filing season and simultaneously prepare to issue these additional payments starting in early May."
The legislation also includes a temporary increase in the small business expensing limitations, a temporary special first-year 50 percent bonus depreciation allowance, and increases in the housing loan limits for Fannie Mae, Freddie Mac, and FHA approved mortgages.
Guidance Released by the IRS related to the Economic Stimulus Act of 2008:
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