Daily Tax Update - December 11, 2006

THE DAILY TAX UPDATE WILL BE PUBLISHED ON A PERIODIC BASIS UNTIL THE 110TH CONGRESS CONVENES ON JANUARY 4TH.

CONGRESS PASSES TAX EXTENDERS, HEALTH, TRADE  PACKAGE AND ADJOURNS FOR THE YEAR:  This weekend, the House and Senate passed a broad package of tax, health and trade provisions before adjourning for the year.  In addition to renewing tax cuts such as the research and development tax credit, the college tuition deduction, and the state and local sales tax deduction, the bill also eliminates an expected five-percent cut in Medicare’s payments to physicians in 2007. The bill also makes permanent the active business rules relating to taxation of distributions of stock and securities of a controlled corporation (section 355).  The ten-year cost of the tax provisions is $45 billion.  The President is expected to sign the bill in the next few days.

  • Ranking Senate Finance Committee member Max Baucus (D-MT) said, “It is the understatement of the year to say that some provisions in this bill are long overdue, but I can say that Congress has finally done the right thing by renewing tax cuts that American families and businesses depend on.   From the college tuition deduction to the research and development credit, many of the tax provisions in this bill will have a direct effect on families’ financial futures and on the ability of American companies to create and keep good-paying jobs here at home.”

The bill would make retroactive to the beginning of 2006 and extend through 2007:

  • an expanded and modified version of the research credit;
  • the deduction for state and local sales taxes;
  • the above-the-line deduction for qualified higher education expenses;
  • the above-the-line deduction for teachers' classroom expenses;
  • state and local governments' authority to issue qualified zone academy bonds;
  • expensing for brownfields remediation costs;
  • tax incentives for investment in the District of Columbia ;
  • tax incentives for Indian employment and business property depreciation on Indian reservations;
  • the 15-year straight-line cost recovery for qualified leasehold and restaurant improvements;
  • the taxable income limit on percentage depletion for oil and natural gas produced from marginal properties;
  • the availability of Archer medical savings accounts; and
  • additional provisions related to distilled spirits, corporate donations of scientific property, and American Samoa.

Additional information can be accessed via:

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