Houses Passes Tax Reconciliation Legislation

The House, on December 8, 2005, by a vote of 234 to 197, approved the Tax Relief Reconciliation Bill of 2005 (H.R. 4297). The legislation includes a number of extensions of expiring provisions and a few additional miscellaneous provisions.

Among the provisions extended through 2006 are:

• The research credit,
• The deduction for state and local sales taxes,
• Allowing nonrefundable credits for calculation of the AMT,
• Above-the-line deduction for higher education expenses,
• Above-the-line deduction for teachers' expenses,
• Deduction for corporate donations of computer equipment,
• Work Opportunity Tax Credit,
• Welfare to Work Tax Credit,
• Fifteen-year amortization of leasehold improvements,
• Qualified Zone Academy Bonds,
• A pair of tax incentives related to Indian reservations, and
• District of Columbia tax incentives.

These extensions are also included in the corresponding Senate legislation although some of the provisions are enhanced in different ways in the House and Senate versions.

Extended for one year in the House legislation but not included in the Senate legislation are:

• Archer Medical Savings Accounts,
• Suspension of the limit on percentage depletion for oil and gas from marginal wells,
• Possession tax credit for American Samoa, and
• Excise tax for enforcing mental health parity rules.

Extended for two years in the House legislation and also included in the Senate legislation are:

• The saver's credit,
• Higher Code Sec. 179 expensing limit, and
• Expensing of brownfield remediation costs.

Also extended for two years in the House legislation but notably omitted from the Senate legislation is a two-year extension of the reduced capital gains and dividend rates.

A number of provisions included in the Senate version of the legislation and not in this House bill have been passed by the House in separate pieces of legislation. Congressional leaders appear pessimistic that differences between the House and Senate versions of this reconciliation legislation can be resolved before adjournment for the year.