Daily Tax Update - January 24, 2008

HOUSE LEADERS, ADMINISTRATION REACH TENTATIVE AGREEMENT ON ECONOMIC STIMULUS PLAN:  Today, House Congressional leaders and the Administration announced that they had reached a tentative agreement on a $150 billion stimulus package. The rebate part of the plan would cost about $100 billion. The package also includes close to $50 billion in business tax cuts.

The plan includes:

Tax Relief for American Families

  • Rebate Checks: The economic growth package will include rebate checks in the sum of two separate calculations, with an overall phase-out for those with adjusted gross incomes above $75,000 for a single taxpayer and $150,000 for married couples. Rebate checks will include a base amount determined by the greater of two options: (a) Income tax paid in 2007, with a maximum of $600 for a single taxpayer and $1,200 for married couples; or (b) $300 for an individual and $600 for a married couple, provided the individual or couple earned income of at least $3,000 in 2007. A children’s bonus will also be included in the rebate check calculation. Anyone qualifying for the base amount also receives an additional $300 per child, with no cap on the number of children.

Tax Relief for Employers

  • Bonus Depreciation: The economic growth package will provide for a 50 percent bonus deduction on new equipment in the year it is placed in service, with certain exceptions for equipment with a “long life.” 
  • Section 179 Expensing: This provision allows employers, including small businesses, to fully expense $250,000 in both new and used tangible property in the year it is purchased up to an overall investment limit of $750,000.  
  • Increase in Government Sponsored Enterprises (GSE)/Federal Housing Administration (FHA) Conforming Loan Limit: The conforming loan limits for both FHA and GSE (such as Fannie Mae and Freddie Mac) loans would be increased from $362,000 to $725,000 and from $417,000 to $625,000 respectively.
    • House Speaker Pelosi said, “I believe the package that we are putting forth deserves the support of the Congress.” House Minority Leader John Boehner said, “I'm looking for quick action in the House and I'm hoping the Senate will follow shortly.”  
    • Today, Senate Finance Committee Chairman Max Baucus (D-MT) announced, “The Finance Committee will mark up its own stimulus bill next week, a different bill than the House will reportedly consider. The reported agreement between House leaders and the Administration seems to have some very good elements, particularly tax rebate for low-income wage earners. For my part, I want to make sure that every American who looks at his or her paycheck and sees Medicare taxes taken out, Social Security taxes taken out, gets the same rebate as every other taxpaying American. I believe, and I think many Senators agree, that we can do even more to stimulate America’s economy. Extending unemployment insurance can get money out fast to people who need it and will spend it. Increasing food stamps could do the same. Additional business incentives may more directly help hurting businesses that need quick cash to spend.” Baucus added, “I believe the Committee can complete its work by the time the House sends a bill to the Senate. I intend for the Committee to work fast, and to work together. I only announced this markup after speaking with Ranking Member Grassley. He and I will continue the tradition of Finance Committee bipartisanship, and we will work with the Treasury Secretary, with House leaders, and with the White House to agree on any new provisions. Americans want Congress to pass economic stimulus fast, but they also want us to get it right. I am confident that Finance Committee action can help Congress consider an agreement than can quickly pass both chambers and be signed by the President. The Finance Committee will bring forward a package that is timely, targeted, and temporary, with smart solutions to help the American economy and all our citizens.”

TAX BILLS INTRODUCED JANUARY 23rd:
H.R.5101: To amend the Internal Revenue Code of 1986 to accelerate the phasein of the deduction for domestic production activities.
Sponsor: Rep Manzullo, Donald A. [IL-16] (introduced 1/23/2008)      Cosponsors (4)

H.R.5103: To amend the Internal Revenue Code of 1986 to allow a credit against income tax to vehicle fleet operators for purchasing tires made from recycled rubber.
Sponsor: Rep Johnson, Henry C. "Hank," Jr. [GA-4] (introduced 1/23/2008)      Cosponsors (10)

H.R.5105: To amend the Internal Revenue Code of 1986 to reduce taxes by providing an alternative determination of income tax liability for individuals, repealing the estate and gift taxes, reducing corporate income tax rates, reducing the maximum tax for individuals on capital gains and dividends to 10 percent, indexing the basis of assets for purposes of determining capital gain or loss, creating tax-free accounts for retirement savings, lifetime savings, and life skills, repealing the adjusted gross income threshold in the medical care deduction for individuals under age 65 who have no employer health coverage, and for other purposes.
Sponsor: Rep Dreier, David [CA-26] (introduced 1/23/2008)      Cosponsors (11)

H.R.5107: To amend the Internal Revenue Code of 1986 to allow a 5-year carryback for certain net operating losses and to increase the dollar limitation on expensing certain depreciable assets.  Sponsor: Rep Bean, Melissa L. [IL-8] (introduced 1/23/2008)      Cosponsors (None)

H.R.5109: To amend the Internal Revenue Code of 1986 to provide for permanent tax incentives for economic growth.  Sponsor: Rep Garrett, Scott [NJ-5] (introduced 1/23/2008)      Cosponsors (49)

H.R.5126: To amend the Internal Revenue Code of 1986 to reduce individual income taxes by creating a new 5 percent rate of tax and to increase section 179 expensing for small businesses.
Sponsor: Rep Knollenberg, Joe [MI-9] (introduced 1/23/2008)      Cosponsors (None)

H.R.5134: To amend the Internal Revenue Code of 1986 to provide an exclusion for gain from the sale of farmland to encourage the continued use of the property for farming, and for other purposes.
Sponsor: Rep Terry, Lee [NE-2] (introduced 1/23/2008)      Cosponsors (18)

S.2547: A bill to amend the Internal Revenue Code of 1986 to reduce taxes by providing an alternative determination of income tax liability for individuals, repealing the estate and gift taxes, reducing corporate income tax rates, reducing the maximum tax for individuals on capital gains and dividends to 10 percent, indexing the basis of assets for purposes of determining capital gain or loss, creating tax-free accounts for retirement savings, lifetime savings, and life skills, repealing the adjusted gross income threshold in the medical care deduction for individuals under age 65 who have no employer health coverage, and for other purposes.
Sponsor: Sen Bond, Christopher S. [MO] (introduced 1/23/2008)      Cosponsors (None)

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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