Tax Legislation

3

President Signs Two-Year Extension of Bush-Era Tax Cuts, Payroll Tax Relief, Estate Tax Compromise

President Obama signed a multi-billion dollar tax cut package, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act) (P.L. 111-312), on December 17. The new law follows through on the framework agreed to December 6 by President Obama and GOP leaders in Congress. The 2010 Tax Relief Act extends the Bush-era individual and capital gains/dividend tax cuts for all taxpayers for two years. Th e bill also provides for an AMT “patch,” a one-year payroll tax cut, 100 percent bonus depreciation through 2011 and 50 percent bonus depreciation for 2012, a top federal estate tax rate of 35 percent with a $5 million exclusion, and more.

read more

Sunsetting Provisions Create Challenges for Tax Planning

Time is almost up for the historic tax cuts enacted by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). Without any Congressional action, many popular tax cuts automatically disappear (“sunset”) after December 31, 2010. They will be replaced by rates, deductions, credits and other provisions based on the far less generous law in place before EGTRRA. Additionally, enhanced capital gains and dividends tax rates in the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) and subsequent legislation will also sunset after December 31, 2010. This CCH Tax Briefing alerts tax practitioners and their clients to what the Tax Code is scheduled to look like after EGTRRA’s and JGTRRA’s tax benefits sunset after December 31, 2010.

read more

Congress Approves Small Business Tax Bill with $12 Billion in Tax Benefits

Congress approved a package of enhanced small business tax incentives, as part of a larger Small Business Jobs Act of 2010, H.R. 5297. The Senate passed the measure on September 16, 2010. The House subsequently passed the legislation on September 23, 2010. The new law extends bonus depreciation, extends and doubles Code Sec. 179 expensing, provides for 100 percent gain exclusion for qualified small business stock, relaxes the S corp built-in gain conversion rules, allows five-year carrybacks of the general business credit for qualified taxpayers, removes cell phones from the listed property rules, enhances the deduction for start-up expenses, provides retroactive Code Sec. 6707A penalty relief, and allows a self-employment income tax deduction for 2010 health care expenses. Revenue raising provisions to help pay for these tax breaks include increased failure-to-file penalties on information returns, a controversial new information reporting rule for rental property expense payments, tightened U.S. sourcing on guaranteed fees, streamlined tax levies on federal contractors, accelerated estimated tax payments by certain large corporations, and more.

read more

President Signs Foreign Tax Reforms to Fund Education / Medicaid

Returning briefly from its summer recess, the House on August 10 approved, by a 247 to 161 vote, a critical education and Medicaid funding bill, H.R. 1586, which includes a $9 billion package of international tax reforms. Wasting no time, President Obama signed the bill into law that same afternoon, on August 10, 2010, as Pub. Law 111-226. The Senate had approved the legislation earlier on August 5 by a 61 to 39 margin.
Riding the coattails of a popular measure to fund the jobs of well over 100,000 teachers and first responders, as well as help states fund Medicaid shortfalls, the international tax provisions provide the bulk of the bill’s revenue off sets needed under Congressional “pay-go” rules. The bill also adds another $1.1 billion in revenue by eliminating the advance payment option for the earned income credit (EIC).

read more