Senate Passes Tax Legislation

On September 23, 2008, the Senate passed the Tax Extenders and Alternative Minimum Tax Relief Bill of 2008 (HR 6049), by voice vote as to the AMT part and a vote of 93 to 2 as to the remaining part. The legislation includes a one-year extension of the AMT exemption amount with an inflation adjustment and an extension of the provision allowing nonrefundable personal tax credits against the AMT. Also included in the AMT portion is a provision providing some protection to taxpayers with incentive stock options and who are subject to the AMT. The legislation also extends a number of individual and business expired tax provisions, provides Katrina-like disaster relief for Midwest areas affected by tornadoes and floods, and lowers the standard for return preparer penalties. Also included is a package of tax cuts related to renewable energy.

The legislation includes several revenue raising proposals but is not fully offset. There are approximately $150 billion in tax breaks and $42 billion in revenue raisers. Revenue raisers include a freeze on the Code Sec. 199 domestic production activities deduction for oil and gas producers at six percent, a requirement that securities brokers report the cost basis of stock transactions, and a requirement that deferred compensation paid by tax-indifferent parties be treated as current income.

It appears unlikely that the House will take up the legislation in the form presented by the Senate, with the House objecting to the insufficiency of the revenue offsets. The House appears likely to consider the substance of this legislation is several different bills.