House lawmakers approved the Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Bill of 2009 (HR 4154) by a vote of 225-to-200 on December 3. The legislation would permanently extend the current exemption for estates up to $3.5 million per individual and $7 million for married couples and set a maximum rate of 45 percent on estates above this threshold.
House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., said the bill would provide certainty for businesses. In addition, the measure would repeal the enactment of carryover basis rules that would require many heirs to pay additional taxes on built-in gains of property inherited starting in 2010.
"This bill simply continues present law at current rates and exemptions. But it does not abolish the estate tax altogether, which would be a severe mistake," said House Majority Leader Steny H. Hoyer, D-Md. He noted that a permanent repeal of all estate taxes would cost billions of dollars and only benefit a small number of wealthy families. Hoyer explained that, although HR 4154 is not paid for, lawmakers were able to add the statutory pay-as-you-go (PAYGO) rules to the measure. HR 4154 includes the Statutory PAYGO Bill of 2009 (HR 2920) that passed the House in July (TAXDAY, 2009/07/23, C.1).
Ways and Means ranking member Dave Camp, R-Mich., who did not vote for the bill, said HR 4154 extends the current rates, which he termed as excessively high. Since the tax rate is not indexed for inflation, it will affect more families each year, according to Camp. Based on historical inflation data, the value of the estate tax exemption could thus be cut in half with every passing generation, GOP lawmakers said. If current law is not changed, the estate tax will disappear in 2010 for one year. He said the bill is unlikely to reach the president's desk before the end of 2009, since the Senate is fully engaged in the health care reform debate.
By Stephen K. Cooper, CCH News Staff
House Passes Permanent Estate Tax Relief for Families, Farmers, and Small Businesses
HRRepNo 111-350
Joint Committee on Taxation Technical Explanation of HR 4154, the Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009, JCX-57-09
JCX-58-09
The IRS has released the 2010 optional standard mileage rates that employees, self-employed individuals and other taxpayers can use to compute deductible costs of operating automobiles (including vans, pickups and panel trucks) for business, medical, moving and charitable purposes. The revenue procedure also provides substantiation rules for employees' local travel or transportation expenses when a payor (an employer, its agent, or a third party) provides a mileage allowance under a reimbursement or other expense allowance arrangement. Finally, the procedure explains the fixed and variable rate allowance (FAVR) rules that payors can use to reimburse business expenses paid or incurred with respect to an automobile owned or leased by an employee. The mileage rates are all lower than they were for 2009, reflecting generally lower transportation costs.
The updated rates are effective for deductible transportation expenses paid or incurred on or after January 1, 2010; and for mileage allowances or reimbursements paid to, or transportation expenses paid or incurred by, an employee or a charitable volunteer on or after January 1, 2010. Rev. Proc. 2008-72, I.R.B. 2008-50, 1286, is superseded.
The standard mileage rate for business mileage in 2010 will be 50 cents per mile. When a taxpayer uses this mileage rate for automobiles the taxpayer owns, depreciation will be considered to have been allowed at a rate of 23 cents per mile. This depreciation reduces the taxpayer's basis in the automobile.
A taxpayer computes a deduction using the business standard mileage rate on a yearly basis, in lieu of computing the fixed and variable automobile costs allocable to business purposes, such as depreciation, lease payments, maintenance and repairs, tires, gasoline, oil, insurance, and license and registration fees. However, the taxpayer may continue to claim separate allowable deductions for parking fees and tolls, interest relating to the purchase of the automobile, and state and local personal property taxes. The standard business mileage rate may not be used for automobiles used for hire (such as taxicabs) or when five or more automobiles are owned or leased and used simultaneously by the taxpayer (such as in fleet operations). Rules providing for substantiation of an employee's ordinary and necessary expenses for local travel or transportation away from home are also provided. Such expenses will be deemed substantiated when the employer, its agent or a third-party provider provides a mileage allowance under a reimbursement or other expense allowance arrangement.
The standard mileage rate for medical and moving expenses will be 16.5 cents per mile.
The standard mileage rate for charitable purposes will remain at 14 cents per mile.
IR-2009-111, FED ¶46,547
Rev. Proc. 2009-54, FED ¶46,548
Other References:
Code Sec. 61
CCH Reference - 2009FED ¶1090.11
CCH Reference - 2009FED ¶1201.24
CCH Reference - 2009FED ¶5907.0325
Code Sec. 62
CCH Reference - 2009FED ¶6006.0324
Code Sec. 162
CCH Reference - 2009FED ¶8590.021
CCH Reference - 2009FED ¶8590.55
Code Sec. 170
CCH Reference - 2009FED ¶11,620.029
CCH Reference - 2009FED ¶11,620.6744
Code Sec. 213
CCH Reference - 2009FED ¶12,543.82
Code Sec. 217
CCH Reference - 2009FED ¶12,623.021
CCH Reference - 2009FED ¶12,623.11
Code Sec. 274
CCH Reference - 2009FED ¶14,417.043
CCH Reference - 2009FED ¶14,417.045
CCH Reference - 2009FED ¶14,417.046
CCH Reference - 2009FED ¶14,417.047
CCH Reference - 2009FED ¶14,417.048
CCH Reference - 2009FED ¶14,417.05
CCH Reference - 2009FED ¶14,417.051
CCH Reference - 2009FED ¶14,417.052
CCH Reference - 2009FED ¶14,417.053
CCH Reference - 2009FED ¶14,417.50
Code Sec. 1016
CCH Reference - 2009FED ¶29,412.385
Tax Research Consultant
CCH Reference - TRC INDIV: 36,056.15
CCH Reference - TRC INDIV: 36,164
CCH Reference - TRC INDIV: 39,106.10
CCH Reference - TRC INDIV: 42,158
CCH Reference - TRC INDIV: 51,056.15
CCH Reference - TRC BUSEXP: 24,506.05
CCH Reference - TRC BUSEXP: 24,506.10
CCH Reference - TRC BUSEXP: 24,510
CCH Reference - TRC BUSEXP: 24,906.25
CCH Reference - TRC BUSEXP: 24,912.10
CCH Reference - TRC DEPR: 3,252.15
A small business tax credit to employers who hire new workers and a temporary payroll tax holiday were among tax incentive ideas discussed at a White House jobs summit on December 3. President Obama said he will speak in greater detail the week of December 7 on several new job creation ideas, including tax-cut proposals. He is scheduled to make a speech on the economy at the Brookings Institution in Washington, D.C., on December 8.
At a breakout session on small business job growth, Treasury Secretary Timothy F. Geithner said the administration is open to ideas to extend or modify existing tax cuts and new tax incentives. One participant criticized a payroll tax holiday, saying it was too broad-based, and that targeted tax incentives would be more effective.
The White House summit invited representatives from small business, large firms, labor, community lenders and economists to discuss regulatory, financial and tax measures that could create new jobs. Breakout sessions addressed energy, trade, small business and infrastructure jobs. With respect to energy jobs, the president stressed the job potential of green technology but also noted that the price of carbon must be determined first before the administration can "make a big push" on green jobs.
The president, in opening remarks, emphasized that the private sector is the ultimate engine of job creation, although the federal government plays a critical role in establishing the conditions for economic growth. Obama said that the measurement of a real economic recovery is when the private sector begins to invest again. "Only when our businesses start hiring again and people start spending again and families start seeing improvement in their own lives again that we're going to have the kind of economy that we want, "he noted.
Senate Finance Committee ranking member Charles E. Grassley, R-Iowa, seized the occasion to introduce what he termed a jobs bill. The Clean Renewable Energy Advancement Tax Extension Jobs (CREATE Jobs) Bill of 2009 would extend the tax credit for the production of electricity from wind and open-loop biomass through December 31, 2016. The legislation would also increase the amount of bond authority for new clean renewable energy bonds. Such bonds are used to finance facilities that generate electricity from wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, marine renewable and municipal trash combustion facilities.
In addition, the proposed legislation extends bonus depreciation for one year. The current 50-percent first-year bonus depreciation allowance expires at the end of 2009.
" Green energy is a real bright spot in our economic future," Grassley said. "We need to keep up the momentum for job creation, a clean environment, and energy independence. Getting these tax incentives extended is important to help businesses secure the loans they need to make the investments necessary to create jobs."
By Jeff Carlson and Paula Cruickshank, CCH News Staff
SFC Press Release: Grassley Continues Push for Job Creation With Bill to Extend Renewable Energy, Key Business Tax Incentives
Massachusetts Governor Deval Patrick has signed legislation authorizing a two-month tax amnesty program, during which penalties for failure to timely file or pay Massachusetts taxes will be waived if the taxpayer files all outstanding returns and makes payments as required by the Commissioner of Revenue. The amnesty program will begin on a date to be determined by the commissioner and will end no later than June 30, 2010. The scope of the program, including the particular tax types and periods covered and any limited look-back period for unfiled returns, will be determined by the commissioner. Amnesty will not apply to penalties that the commissioner does not have the sole authority to waive, including penalties applicable to fuel taxes administered under the International Fuel Tax Agreement and local option portions of taxes collected for the benefit of cities, towns, or state governmental authorities. Any taxpayer who has been the subject of a tax-related criminal investigation or prosecution is not eligible for amnesty. Eligible taxpayers who fail to come forward under the program and pay tax owed will be subject to an additional penalty of $500.
The New York Legislature has passed a tax amnesty measure (A.B. 21, Laws 2009, Fourth Special Session) on December 2, 2009, that would allow the Department of Taxation and Finance to administer an accounts receivable discount program, for certain outstanding tax, fee, or surcharge liabilities, that are or were imposed under the Tax Law and administered by the department. The measure awaits Gov. David A. Paterson's signature.
Under the program, penalties would be reduced by 50% for delinquent assessments that are overdue for between three years and six years. In addition, penalties would be reduced by 80% for delinquent assessments that are overdue for more than six years. The limited forgiveness period would probably take place in the last quarter of FY 2009-10.
Subscribers can view the full text of A.B. 21.
The Ohio Department of Taxation (DOT) has issued an information release announcing the Ohio Offshore Voluntary Disclosure Program, under which certain Ohio taxpayers may resolve personal income tax issues with limited penalties.
The Ohio Tax Commissioner has stated that he will consider requests for partial penalty abatement for any taxpayer who underreported his/her income in prior years, provided that by March 1, 2010 the taxpayer or his/her representative contacts the DOT and provides the following:
-- a cover letter stating an intention to enter the Ohio Offshore Voluntary Disclosure Program;
-- a description of the source of funds or other assets in each account;
-- the date the initial deposit was made or the date on which the taxpayer took control or ownership of each account;
-- documentation indicating whether the principal (which includes initial deposits and all subsequent contributions) has been taxed or untaxed and the tax years involved;
-- the amount of potential tax liability; and
-- whether the taxpayer participated in the IRS Offshore Voluntary Disclosure Program.
Taxpayers will have 60 days after initial contact to submit all documents and payments necessary to resolve the liabilities.
Explanations at ¶89-206