Tax Watch Archive

6/25/08 -- House passes AMT relief with bipartisan majority; President threatens veto.
On June 25, the House by a vote of 233 to 189 approved H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008." The bill will be sent to the Senate for consideration.

The bill would patch the alternative minimum tax (AMT) problem for 2008 by extending for one year AMT relief for nonrefundable personal credits and increasing AMT exemption amounts to $69,950 for joint filers and $46,200 for individuals. The one-year AMT patch would be fully offset with a variety of revenue raising measures, including taxing certain carried interests as ordinary income, barring large integrated oil companies from claiming the Code Sec. 199 domestic production activity deduction, freezing the Code Sec. 199 deduction at the 6% level for other producers of oil and natural gas, and requiring information returns for merchant payment card reimbursements.

On June 24, in a Statement of Administration Policy, President Bush indicated that he would veto the bill because of his strong opposition to provisions raising taxes on certain partners in partnerships and taxes on payments by U.S. subsidiaries to foreign affiliates and limiting the availability of the domestic production deduction for certain oil companies.

The following material can also be found on Checkpoint:

• he text of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008," as OK'd by the House Ways & Means Committee;
• JCX-50--08 (June 17, 2008), the Joint Committee on Taxation Staff Description of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008," Scheduled for Markup by the Committee on Ways and Means;
• JCX-52--08 (June 18, 2008), the Joint Committee on Taxation Staff's Description of an Amendment in the Nature of a Substitute to the Provisions of H.R. 6275;
• for JCX--51--08 (June 17, 2008), the Joint Committee on Taxation Staff's Estimated Revenue Effects of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008," Scheduled for Markup by the Committee on Ways and Means; and
• a brief summary of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008."

6/19/08 -- Congress overrides second veto of farm bill; entire measure now "officially" law.
With its unusual second vote on June 18 to override the President's veto of the farm bill (Food, Conservation, and Energy Act of 2008), Congress has corrected an embarrassing clerical error in the bill that was originally sent to the President before the Memorial Day recess.

Background. The House of Representatives and the Senate by wide margins passed H.R. 2419 (the Food, Conservation, and Energy Act of 2008), the farm bill, on May 14 and May 15, respectively. The President as expected vetoed the bill on May 21 and that day, the House of Representatives voted 316-108 to override the President's veto. On May 22, the Senate followed suit with a veto override vote of 82-13. At the last minute, a clerical problem was discovered in the bill that the President vetoed: one of the titles of H.R. 2419 as it was passed by the House and Senate (a non-tax trade title) had been accidentally omitted from the copy of the bill that was sent to the President.

Now the fix. On May 22 and June 5, the House of Representatives and Senate, respectively, approved H.R. 6124 (also called the Food, Conservation, and Energy Act of 2008) carrying all of the farm bill's titles. On June 18, the President vetoed the bill again, and that same day both the House and Senate voted to override the veto. Thus, all fifteen titles of the farm bill are now law.

Section 4(a) of H.R. 6124 repeals H.R. 2419 (the original, "defective" farm bill). Additionally, Sec. 4(b) provides that except as otherwise provided, H.R. 6124 and the amendments it makes take effect on the earlier of (1) the date of enactment of H.R. 2419, or the date of enactment of H.R. 6124. Since H.R. 2419 was enacted on May 22, 2008, that date (and not June 18, 2008) is the enactment date for the "new" farm bill carrying all 15 titles.

6/19/08 -- Public law number assigned to Heroes Act.
A public law number has been assigned to the Heroes Earnings Assistance and Relief Tax Act of 2008 (Heroes Act), which was signed into law on June 18. It is P.L. 110-245.

For a Special Study of tax provisions in the Heroes Act, see Weekly Alert - 05/29/2008.

6/19/08 -- Tax title to Senate housing relief bill released; President threatens to veto the measure.
On June 19, the Senate leadership released the legislative language of the "bipartisan" tax package that Senate Finance Committee Chair Max Baucus (D-MT) and Ranking Member Chuck Grassley (R-IA) intend to offer as part of a larger amendment to a new housing bill (H.R. 3221). Also on June 19, the President issue a Statement of Administration Policy to the effect that in its current form the bill being considered by the Senate would be vetoed by the President.

Called the "Housing Assistance Tax Act of 2008," the tax title of the Senate housing relief package includes a refundable credit for first time homebuyers, a new property tax deduction for non-itemizers, many changes for the low-income housing credit, modernization of the Real Estate Investment Trust (REIT) rules, a provision allowing taxpayers to receive 20% of the value of their unused AMT or research and development (R&D) credits to the extent they invest in assets that qualify for bonus depreciation, and an extension and expansion of some GO Zone incentives.

The revenue offsets would consist of information reporting for payment card and third party network transactions, a reduced homesale exclusion for certain periods of nonqualified use, and increased information return and failure to file penalties.

The legislative language of the "Housing Assistance Tax Act of 2008" is available to read on Checkpoint.

If the Senate passes a housing relief package, it would have to be reconciled with the housing relief package passed by the House of Representatives on May 8.

6/18/08 -- House Ways & Means OKs one-year AMT patch.
On June 18, the House Ways & Means Committee OK'd H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008." The bill would patch the AMT problem for 2008 by extending for one year AMT relief for nonrefundable personal credits and increasing AMT exemption amounts to $69,950 for joint filers and $46,200 for individuals. The one-year AMT patch would be fully offset with a variety of revenue raising measures, including taxing certain carried interests as ordinary income, barring large integrated oil companies from claiming the Code Sec. 199 domestic production activity deduction, freezing the Code Sec. 199 deduction at the 6% level for other producers of oil and natural gas, and requiring information returns for merchant payment card reimbursements.

The following material can also be found on Checkpoint:

• the text of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008," as OK'd by the House Ways & Means Committee;
• JCX-50--08 (June 17, 2008), the Joint Committee on Taxation Staff Description of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008," Scheduled for Markup by the Committee on Ways and Means;
• JCX-52--08 (June 18, 2008), the Joint Committee on Taxation Staff's Description of an Amendment in the Nature of a Substitute to the Provisions of H.R. 6275;
• JCX--51--08 (June 17, 2008), the Joint Committee on Taxation Staff's Estimated Revenue Effects of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008," Scheduled for Markup by the Committee on Ways and Means; and
• a brief summary of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008."

6/18/08 -- Senate Finance leaders unveil new housing stimulus tax package.
On June 18, Senate Finance Committee Chair Max Baucus (D-MT) and Ranking Member Chuck Grassley (R-IA) unveiled the "bipartisan" tax package that they intend to offer as part of a larger amendment to a new housing bill (H.R. 3221), in cooperation with the Senate Banking Committee. Among other provisions, the tax package includes a refundable credit for first time homebuyers, a new property tax deduction for non-itemizers, many changes for the low-income housing credit, modernization of the Real Estate Investment Trust (REIT) rules, a provision allowing taxpayers to receive 20% of the value of their unused AMT or research and development (R&D) credits to the extent they invest in assets that qualify for bonus depreciation, and an extension and expansion of some GO Zone incentives.

The revenue offsets would consist of information reporting for payment card and third party network transactions, a reduced homesale exclusion for certain periods of nonqualified use, and increased information return and failure to file penalties.

A June 18, 2008, Senate Finance press release and summary of the housing stimulus tax package to be included in H.R. 3221 is available to read on Checkpoint.

If the Senate passes a housing relief package, it would have to be reconciled with the housing relief package passed by the House of Representatives on May 8.

6/18/08 -- Senate Finance bill includes tax crackdown for oil companies doing business with Iran.
On June 18, the Senate Finance Committee, by a vote of 19--2, favorably reported out of Committee the &bdq;Iran Sanctions Act of 2008." The measure contains a tax crackdown for certain taxpayers doing business with Iran. Specifically, taxpayers on whom certain economic sanctions for investing in Iran are imposed, or on whose affiliates such sanctions would have been imposed if the affiliates were U.S. persons, would have to amortize geological and geophysical expenditures over ten years (instead of the seven-year period that applies for major integrated oil companies and the two-year period that applies to certain independent producers and smaller integrated oil companies).

A description of the Chairman's Modification to the "Iran Sanctions Act of 2008" is available to read on Checkpoint.

6/17/08 -- President signs Heroes Act into law.
On June 17, the President signed into law H.R. 6081, the "Heroes Earnings Assistance and Relief Tax Act of 2008." The Heroes Act provides targeted tax relief for members of the military and their families, fully offset with tightened expatriation rules, a new rule requiring U.S. companies working under federal government contract to treat overseas employees as subject to employment taxes, and a higher failure to file penalty.

For a Special Study of tax provisions in the Heroes Act, is available to read on Checkpoint now.

6/17/08 -- Ways and Means to consider AMT patch bill.
On June 18, the House Ways and Means Committee is scheduled to take up H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008." The bill was introduced on June 17 by Ways and Means Chairman Charley Rangel (D-NY). The bill would patch the AMT problem for 2008 by extending for one year AMT relief for nonrefundable personal credits and increasing AMT exemption amounts to $69,950 for joint filers and $46,200 for individuals. The one-year AMT patch would be paid for with a variety of revenue raising measures, including taxing certain carried interests as ordinary income, barring large integrated oil companies from claiming the Code Sec. 199 domestic production activity deduction, freezing the Code Sec. 199 deduction at the 6% level for other producers of oil and natural gas, and requiring information returns for merchant payment card reimbursements.

The following material can also be found on Checkpoint:

• the text of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008;" and
• a brief summary of H.R. 6275, the "Alternative Minimum Tax Relief Act of 2008."

6/17/08 -- Second defeat for cloture on Renewable Energy Job Creation Act.
On June 17, the Senate by a vote of 52 to 44 failed once again to gain the necessary votes to invoke cloture on the motion to proceed to the House-passed bill H.R. 6049, the "Renewable Energy Job Creation Act." The bill had previously been approved by the House on May 21 by a vote of 263-160. The "Renewable Energy Job Creation Act" would extend a number of tax breaks for one year, including the deduction for state and local sales tax, the deduction for tuition and other education expenses, and the deduction for educators' out-of-pocket expenses. The bill also would OK a deduction of property taxes for non-itemizers and expand the refundable child tax credit. It also would extend the research credit and the credit for solar energy, and provide incentives to encourage energy efficient products, such as plug-in hybrid cars.

Offsetting revenue provisions include a delay in application of worldwide allocation of interest, and a provision that would tax individuals on a current basis if they receive deferred compensation from a tax indifferent party.

6/13/08 -- House Democratic leaders adamant on full offsets for tax extenders.
Setting up a showdown with the Senate, House Majority Leader Steny Hoyer (D-MD) and House Ways and Means Committee Chair Charlie Rangel (D-NY) said at a June 12 press conference that they will not bring a bill to the House floor that would extend expiring tax provisions without offsets. Hoyer said, "I speak for myself and for the speaker Nancy Pelosi--the House will not vote to waive the [PAYGO] rule for tax extenders legislation that increases the deficit.

In addition, on June 12, House Democrats sent a letter to Senate Minority Leader Mitch McConnell (R-KY) declaring that the House would not pass an extenders bill if the Senate strips the offsets from the package. The letter said that the legislation passed by the House (H.R. 6049) demonstrated that it is not necessary to increase the deficit in order to extend tax relief and maintained that continued "opposition to the reasonable offsets for this legislation will result in millions of American families and businesses being denied tax relief."

6/13/08 -- Baucus bill would offer tax credit to promote capture of carbon emissions.
On June 12, Senate Finance Committee Chairman Max Baucus (D-MT) introduced the "Accelerating Carbon Capture and Sequestration Act of 2008," which would provide a tax credit to coal-fired power plants that capture and sequester their carbon outputs through innovative new technologies.

The bill would create a $20 per ton of carbon tax credit for companies that sequester their carbon emissions underground in a geological formation such as a coal bed or saline aquifer. It also would create a $10 per ton tax credit for carbon used for enhanced oil recovery, which uses carbon emissions to increase oil production and efficiency in older wells.

6/12/08 -- Rangel to try for a fully offset AMT patch bill.
House Ways and Means Committee Chair Charlie Rangel (D-NY) is expected to move a one-year patch for the Alternative Minimum Tax (AMT) the week of June 16, with House floor consideration expected before the July 4th recess. Rangel told reporters June 11 that he will move a $62 billion AMT bill through the Ways and Means Committee next week, paid for by taxing carried interest and hedge fund manager's income from investment services as regular income.

Rangel's bill is sure to meet opposition in the Senate, where Republicans would prefer an AMT patch without offsets.

6/12/08 -- Baucus bill provides AMT relief, energy incentives, and host of individual and business tax extenders.
On June 12, Senate Finance Committee Chair Max Baucus (D-MT) introduced the "Energy Independence and Tax Relief Act of 2008," which he intends to offer as a substitute bill to H.R. 6049, "the Renewable Energy Job Creation Act," when the Senate proceeds to that legislation. Along with extending almost 50 tax provisions--including relief from the alternative minimum tax (AMT), renewable energy tax incentives, the research and development credit, and the state and local sales tax deduction--the Baucus-amended bill includes a $350 ($700 for married filing jointly) non-itemizer property tax deduction for 2008; a new credit for qualified plug-in electric drive vehicle (a $3,000 base credit, plus $200 if the vehicle uses a battery with at least 5 kilowatt hours (KWHs) of capacity, and another $200 for each KWH of battery capacity in excess of 5 KWHs up to 15 kilowatt hours); and a fringe benefit for bicycle commuters. The bill also would changes the standards for imposing the tax return preparer penalty (substantial authority for undisclosed positions; reasonable basis for disclosed positions; and reasonable belief that a transaction was more likely than not to be sustained on the merits for tax shelters and reportable transactions); treat attorneys like other contingency fees as deductible in the year accrued rather than on disposition of the case; allow the Code Sec. 199 domestic production activities deduction for the film industry for tax years beginning after 2007; and lower the threshold at which the child tax credit is refundable (from $12,050 in 2008) to $10,000 for the 2008 tax year. Except for the AMT relief, which is not offset, the bill's cost would be offset by a delay in application of worldwide allocation of interest, and a provision that would tax individuals on a current basis if they receive deferred compensation from a tax indifferent party.

The Baucus bill includes:

AMT relief. Under the Baucus bill, the AMT exemption amounts would increase to $46,200 for individuals ($69,950 for married filing jointly) for 2008, and personal credits would be allowed against the AMT. Currently, the AMT exemption is $33,750 ($45,000 for married couples filing jointly), and personal credits aren't allowed against AMT. The bill would also modify the refundable AMT credit under Code Sec. 53(e) to allowed 50% long-term unused minimum tax credits bill's to be refunded over each of two years instead of 20% each of five years, eliminate the AGI phase-out, and abate any underpayment of tax outstanding on the bill's enactment date related to incentive stock options and the AMT including interest.

Energy-related provisions. The bill would extend and modify the renewable energy production tax credit; the solar energy and fuel cell investment tax credit; the residential energy-efficient property credit; the credit for energy-efficiency improvements to existing homes; the energy-efficient appliance credit; and the authority to issue qualified green building and sustainable design project bonds. It would extend the deferral of gain on sales of electric transmission property; the credit for clean renewable energy bonds (CREBs); the deduction for energy efficient commercial buildings. It would also creates a new category of qualified energy conservation bonds to fund State and local programs to reduce greenhouse gas emissions, and allow accelerated depreciation for smart electric meters and smart electric grid systems.

Individual extenders. The bill would generally extend for a year to the end of 2008: the deduction for state and local sales taxes; the qualified tuition deduction; the provision allowing taxpayers to make tax free contributions from their IRAs to qualified charitable organizations; the teacher expense deduction; the tax-favored treatment of certain RIC dividends; and the exclusion for amounts received under qualified group legal service plans.

Business extenders. The business provisions would generally extend for a year to the end of 2008: the research and development credit; 15-year straight-line depreciation for qualified leasehold and restaurant improvements (and include retail improvements); expensing of brownfields environmental remediation costs; qualified zone academy bonds; the deduction for domestic production activities in Puerto Rico; enhanced charitable deduction for food and book inventory; the Indian employment credit; and the basis adjustment to stock of S corporations making charitable contributions of property. The new markets tax credit would be extended one year to the end of 2009.

A summary of "the Energy Independence and Tax Relief Act of 2008" is available to read on Checkpoint now.

6/12/08 -- Housing stimulus tax relief in the works; pre-July-4 action anticipated.
House and Senate tax-writing staffs met June 11 to discuss a housing tax bill. House Ways and Means Committee Chairman Charles B. Rangel (D-NY) told reporters that staffers were asked to find compromise legislation that would address the slump in the housing market. Staffers are working on a tax package that will be added to a comprehensive housing bill expected to be considered by the House before Congress adjourns for the July 4th recess.

Both the Senate and House passed separate and substantially different versions of a housing stimulus bill earlier this year (see Article # 1428 and Article # 1415 for details), but a conference was never held. The House's version of the bill was offset with revenue raising provisions but the Senate's wasn't.

6/10/08 -- Cloture vote fails on bill providing AMT relief, energy incentives, and host of individual and business tax extenders.
On June 10, the Senate by a vote of 50 to 44 failed to gain the necessary votes to invoke cloture on the motion to proceed to the House-passed bill H.R. 6049, "the Renewable Energy Job Creation Act." The bill had previously been approved by the House on May 21 by a vote of 263-160, and President Bush had threatened to veto it. Senate Finance Committee Chair Max Baucus (D-MT) said that they will try and bring the bill up again, hopefully some time this week. Baucus indicated that he would be meeting with Senate Majority Leader Harry Reid (D-NV) for further discussions on the bill.

Earlier in the day, Baucus had unveiled a substitute amendment to H.R. 6049. Along with extending almost 50 tax provisions--including relief from the alternative minimum tax (AMT), renewable energy tax incentives, the research and development credit, and the state and local sales tax deduction--the Baucus-amended bill includes a $350 ($700 for married filing jointly) non-itemizer property tax deduction for 2008; a new credit for qualified plug-in electric drive vehicle (a $3,000 base credit, plus $200 if the vehicle uses a battery with at least 5 kilowatt hours (KWHs) of capacity, and another $200 for each KWH of battery capacity in excess of 5 KWHs up to 15 kilowatt hours); and a fringe benefit for bicycle commuters. The bill also would changes the standards for imposing the tax return preparer penalty (substantial authority for undisclosed positions; reasonable basis for disclosed positions; and reasonable belief that a transaction was more likely than not to be sustained on the merits for tax shelters and reportable transactions); treat attorneys like other contingency fees as deductible in the year accrued rather than on disposition of the case; allow the Code Sec. 199 domestic production activities deduction for the film industry for tax years beginning after 2007; and lower the threshold at which the child tax credit is refundable (from $12,050 in 2008) to $10,000 for the 2008 tax year. Except for the AMT relief, which is not offset, the bill's cost would be offset by a delay in application of worldwide allocation of interest, and a provision that would tax individuals on a current basis if they receive deferred compensation from a tax indifferent party.

The Baucus amendment includes:

AMT relief. Under the Baucus amendment, the AMT exemption amounts would increase to $46,200 for individuals ($69,950 for married filing jointly) for 2008, and personal credits would be allowed against the AMT. Currently, the AMT exemption is $33,750 ($45,000 for married couples filing jointly), and personal credits aren't allowed against AMT. The amendment would also modify the refundable AMT credit under Code Sec. 53(e) to allowed 50% long-term unused minimum tax credits bill's to be refunded over each of two years instead of 20% each of five years, eliminate the AGI phase-out, and abate any underpayment of tax outstanding on the bill's enactment date related to incentive stock options and the AMT including interest.

Energy-related provisions. The amendment would extend and modify the renewable energy production tax credit; the solar energy and fuel cell investment tax credit; the residential energy-efficient property credit; the credit for energy-efficiency improvements to existing homes; the energy-efficient appliance credit; and the authority to issue qualified green building and sustainable design project bonds. It would extend the deferral of gain on sales of electric transmission property; the credit for clean renewable energy bonds (CREBs); the deduction for energy efficient commercial buildings. It would also creates a new category of qualified energy conservation bonds to fund State and local programs to reduce greenhouse gas emissions, and allow accelerated depreciation for smart electric meters and smart electric grid systems.

Individual extenders. The amendment would generally extend for a year to the end of 2008: the deduction for state and local sales taxes; the qualified tuition deduction; the provision allowing taxpayers to make tax free contributions from their IRAs to qualified charitable organizations; the teacher expense deduction; the tax-favored treatment of certain RIC dividends; and the exclusion for amounts received under qualified group legal service plans.

Business extenders. The business provisions would generally extend for a year to the end of 2008: the research and development credit; 15-year straight-line depreciation for qualified leasehold and restaurant improvements (and include retail improvements); expensing of brownfields environmental remediation costs; qualified zone academy bonds; the deduction for domestic production activities in Puerto Rico; enhanced charitable deduction for food and book inventory; the Indian employment credit; and the basis adjustment to stock of S corporations making charitable contributions of property. The new markets tax credit would be extended one year to the end of 2009.

The text of News Release "Baucus Bill Extends Energy Incentives, Individual And Business Tax Relief, Blocks Alternative Minimum Tax For Millions Of Working Families," June 10, 2008 is available to read on Checkpoint now.

6/6/08 -- Farm bill headed to President again to fix clerical error.
Congress is close to correcting an embarrassing clerical error in the farm bill (the Food, Conservation, and Energy Act), which was supposed to have been wrapped up before the Memorial Day recess.

Here's what happened. The House of Representatives and the Senate by wide margins passed H.R. 2419, the farm bill, on May 14 and May 15, respectively. The President as expected vetoed the bill on May 21 and that day, the House of Representatives voted 316-108 to override the President's veto. On May 22, the Senate followed suit with a veto override vote of 82-13. At the last minute, a clerical problem was discovered in the bill that the President vetoed: one of the titles of H.R. 2419 as it was passed by the House and Senate (a non-tax trade title) had been accidentally omitted from the copy of the bill that was sent to the President.

Now the fix. On May 22, the House of Representatives by a vote of 306-110 approved H.R. 6124, the revised farm bill carrying all of its titles, including the one that was omitted from the pre-Memorial Day version. On June 5, the Senate by a vote of 77-15 also passed H.R. 6124. The measure is on its way to the President for his expected veto, and then it will go back to Congress for an expected veto override vote in both the House and Senate.

6/6/08 -- Senate begins debate on energy bill.
On June 5, the Senate began debate on H.R. 3044, the Consumer First Energy Act of 2008. The tax provisions in the bill would (1) deny a domestic production activities deduction to major integrated oil companies (i.e., companies producing at least 500,000 barrels of crude oil daily); (2) conform the tax treatment of foreign oil and gas extraction income and foreign oil related income for purposes of the foreign tax credit; and (3) impose a windfall profits tax on major integrated oil companies. The nontax provisions would among other things prevent gasoline related price gouging, authorize the President to declare a federal energy emergency under certain conditions, and temporarily suspend acquisition of petroleum for the Strategic Petroleum Reserve until Dec. 31, 2008.

Senate Finance Committee Chair Max Baucus (D-MT) told reporters that he expects a vote on cloture of the bill to take place on June 10.

The legislative language of S. 3044, the "Consumer First Energy Act of 2008" is available to read on Checkpoint now.

6/6/08 -- Tax extenders bill headed to Senate floor.
On June 5, Senate Finance Committee Chair Max Baucus (D-MT) told reporters that he expects to bring a tax extenders bill to the Senate floor as early as June 11, but that the timing of floor consideration of the measure would be made by Senate Majority Leader Harry Reid (D-NV).

Baucus said the extenders and energy provisions of his bill would be offset by revenue raisers similar to offsets included in H.R. 6049, the Renewable Energy and Job Creation Act of 2008, approved by the House on May 21 by a vote of 263-160. Baucus also said that he had not yet made a decision on whether to include a one-year patch for the Alternative Minimum Tax (AMT) in the bill.