Tax News

CCH (cch.taxgroup.com) reports:

  The Senate overwhelmingly voted to approve an alternative minimum tax (AMT) relief and extenders bill (HR 6049) on September 23, paving the way for House lawmakers to decide whether the partially offset tax measure will reach the president's desk before Congress adjourns later in September. The Senate bill, which also includes a package of clean energy tax incentives, passed by a vote of 93-to-2. Senate Budget Committee Chairman Kent Conrad, D-N.D., failed to win approval for revenue-raisers or spending cuts to offset the cost of HR 6049, noting that failing to meet the pay-as-you-go (PAYGO) budget rules will likely slow the bill in the House.

  Senate Majority Leader Harry Reid, D-N.D., questioned whether House Democrats could accept AMT relief that is not paid for, while rejecting the extenders because they were only partially offset. He said that, if Democratic leaders allow the Senate bill to come to the House floor, it would likely pass. The House has scheduled a vote on extenders tax legislation on September 24, but Democratic leaders and members of the House Ways and Means Committee said the Senate's partially paid-for package is unacceptable. Instead, Rep. Earl Pomeroy, D-N.D., said that the House might simply pass a smaller tax bill that only includes the provisions that can be paid for by the Senate-approved offsets.

  The Senate bill includes $18 billion in clean energy tax incentives, which are offset by a provision to delay the tax deduction for domestic manufacturing activities of major American oil and gas companies. The bill would also change rules for paying taxes on income earned overseas, according to a summary released by the Senate Finance Committee. The bill would also provide a one-year extension of the Federal Unemployment Tax Act surtax at the current level, and an increase in reporting requirements for brokers on stock sales. Meanwhile, the $64-billion cost of providing AMT relief would not be offset, under the Senate bill.

  The two-year extension of expiring tax provisions would be offset by requiring hedge fund managers to account for deferred compensation as it accrues, rather than avoiding appropriate and timely income taxes. The bill would provide tax relief for victims of natural disasters, expand the child tax credit and provide parity for mental health treatments. Other provisions included in the Senate bill would allow the deduction of state and local taxes, deduction for qualified tuition and teacher's expenses, and additional deductions for real property taxes. The bill would extend the research and development credit and the new markets tax credit.

  Late on September 23, House Ways and Means Chairman Charles B. Rangel, D-N.Y., introduced the Alternative Minimum Tax Relief Bill of 2008 (HR 7005) and the Disaster Tax Relief Bill of 2008 (HR 7006). Rangel said the two measures are ready to be considered on September 24 by House lawmakers. House Majority Leader Steny Hoyer, D-Md., said that the Senate action would be met with consideration of House legislation that meets PAYGO budget rules and does not add to the national debt.

White House Support

  The Bush administration supports passage of the Senate extenders legislation, "despite the inclusion of several provisions that the administration opposes." The administration raised numerous objections to tax provisions in HR 6049 but did not threaten to veto the extenders package because officials believe that delaying the AMT patch would be "very problematic for our economy" said White House Deputy Press Secretary Scott Stanzel. "The AMT relief is critically important, particularly at this time," Stanzel asserted on September 23.

  The administration remains "strongly opposed to provisions that would freeze the domestic manufacturing deduction for one industry, change the tax treatment of foreign income for American energy companies operating abroad, and eliminate the cap on the oil spill liability trust fund, raising the price of a barrel of oil," stated a written policy statement. The guidance, issued on September 23, contended that the tax provisions "will increase the costs of American oil production, give further advantages to foreign suppliers, and will likely result in higher prices at the pump."

  Other White House concerns include provisions related to deferred compensation and certain tax credit bonds. The administration also opposes new mandatory funding for Payments in Lieu of Taxes and believes that any extension of rural community payments should be phased out.

  By Stephen K. Cooper and Paula Cruickshank, CCH News Staff

Amendment to HR 6049

Summary of the Reid Amendment to the Substitute to HR 6049

SFC Very Preliminary Estimated Revenue Effects of an Individual AMT Proposal

Statement of Administration Policy on Senate Amendments to HR 6049 --Energy Improvement and Extension Act of 2008 and Tax Extenders and Alternative Minimum Tax Relief Act of 2008

Ways and Means Summary of Tax Provisions in AMT and Disaster Relief Tax Bills

Ways and Means Release: Rangel, Kind Introduce Disaster Relief Tax Package

Ways and Means Release: Chairman Rangel Introduces Renewable Energy and Job Creation Act of 2008

SFC Release: Baucus Floor Statement Regarding the Energy Tax Package

JCT Estimated Budget Effects of the Tax Extenders and Alternative Minimum Tax Relief Act of 2008, JCX-69-08R

JCT Estimated Budget Effects of the Energy Improvement and Extension Act of 2008,
JCX-70-08R