Congress Passes Economic Stimulus Package

On February 7, 2008, the Senate, after narrowly failing to pass a broader stimulus package a day earlier, passed the Economic Stimulus Act of 2008 (HR 5140) by a vote of 81 to 16. Since the Senate version still differed somewhat from the version that the House had passed on January 29, the House also on February 7, 2008 passed the Senate version of the legislation by a vote of 380 to 34. The legislation includes a recovery rebate credit for 2008, with the basic credit 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 (2) 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. 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.

The legislation now moves to the President for his expected signature. The legislation, estimated to cost $125 billion over a ten-year period, was passed without revenue offsets as necessary emergency legislation. The IRS estimates that the rebate checks will start to be issued in June and July, 2008.