Tax News

CCH (cch.taxgroup.com) reports:

House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., succeeded in his promised effort to pass an alternative minimum tax (AMT) relief bill on December 12, but the new measure contains more than $50 billion in revenue increases that critics believe are unlikely to win support in the Senate. Rangel said that he introduced the AMT Relief Bill of 2007 (HR 4351) in hopes that GOP lawmakers would agree to pay for a one-year AMT patch, rather than forcing the federal government to borrow money to offset the cost. The bill passed the House on a party-line vote of 226 to 193.
According to the committee, the bill would extend AMT relief for nonrefundable personal credits and increase the AMT exemption amount to $66,250 for joint filers and $44,350 for individuals. The bill would also provide relief for AMT taxpayers who have exercised incentive stock options and would make changes to the refundable AMT credit. The measure also includes a provision to increase the eligibility of the refundable child tax credit, which Rangel estimated would help more than 12 million children nationwide, the committee release said.
Rangel said the revenue increases in the new bill might be more acceptable to the Senate lawmakers, who rejected a House version (HR 3996) that was laden with tax loophole closers as a means of offsetting the cost. Instead, the Senate voted 88 to 5 to approve an AMT relief bill that did not include any tax increases (TAXDAY, 2007/12/07, C.1).
"This new bill removes those controversial pay-fors, and incorporates provisions that have been suggested to receive broad support in the Congress," Rangel said. The new bill will give the Senate one more chance to do the right thing and pass this critical tax relief without adding to the deficit, Rangel said.
The new bill would raise $23.7 billion over 10 years by taxing hedge fund mangers on a current basis if they receive deferred compensation from certain offshore entities. The bill would also raise $26.2 billion over 10 years by delaying for eight years the implementation of a new rule that allows a liberalized method for allocating interest expense between United States sources and foreign sources for purposes of determining a taxpayer's foreign tax credit limitation.
Ways and Means ranking member Jim McCrery, R-La., predicted the Rangel bill would not survive a Senate vote. "We've been down this road before," McCrery said. Eventually House Democrats would be forced to accept an offset-free AMT bill. "Until that happens, considering AMT legislation with unnecessary tax increases does nothing-nothing except contribute to chaos in our tax filing season and delay tax returns for tens of millions of taxpayers," he said.
White House Position
The White House is standing firm in its veto threat against any tax cut package that is paid for by raising taxes elsewhere. White House Press Secretary Dana Perino, at a press briefing on December 12, reaffirmed that President Bush will veto the AMT patch and the proposed energy tax title if they are offset by tax increases.
Perino pressed for another continuing funding resolution to avoid a federal government shutdown after the current stopgap measure expires on December 14. The stopgap funding measure is also necessary to continue the States' Children Health Insurance Program (SCHIP) and aviation and ticket excise taxes.
SCHIP Veto
As promised, on December 12 the president vetoed a $35 billion package to expand the State Children's Health Insurance Program (SCHIP) (HR 3963). Bush, in a written statement, said the Children's Health Insurance Program Reauthorization Act of 2007 would not provide health insurance first to all poor children before extending coverage to families with higher incomes. The current law covers families with incomes at twice the federal poverty level.
Bush's veto threat extends to the proposed 61-cent hike in tobacco taxes that would be used to fund the expanded program. The president's budget supported a five-year reauthorization of the SCHIP program and a 20-percent increase in funding for the health insurance program.
The SCHIP program covers families who earn too much to be eligible for Medicaid. Under current law, children in these families qualify for coverage if their income does not exceed 200 percent of the federal poverty level.
By Stephen K. Cooper and Paula Cruickshank, CCH News Staff
Ways and Means Release: House Will Give Senate Another Chance to Pass AMT Relief Without Adding to the National Debt
AMT Relief Act of 2007, HR 4351
Summary of HR 4351, the AMT Relief Act of 2007
JCT Technical Explanation of the AMT Relief Act of 2007, JCX-113-07
JCT Estimated Revenue Effects of HR 4351, the AMT Relief Act of 2007, JCX-114-07
SAP on HR 4351