Daily Tax Update - January 26, 2009

FINANCE COMMITTEE TO MARK UP STIMULUS BILL TOMORROW:  The Senate Finance Committee’s economic stimulus bill released last week is similar, but not identical, to the plan passed by the House Ways and Means Committee. 

Among the differences between the Finance and Ways and Means bills are:

  • Although both bills contain a “Making Work Pay” tax credit of up to $500 per year for individuals, or $1,000 per year for couples, the two bills phase out the credit at different rates. Under the Ways and Means bill, those who make more than $75,000 but less than $100,000 (or $200,000 for couples) would get a partial credit. The Finance proposal would also begin to phase out at $75,000 but would only be partially available for those making less than $87,500 ($175,000 for joint filers).
  • The Ways and Means bill would allow businesses to elect to carry back losses over five years, rather than the two years currently permitted, but would penalize companies using the longer period by permanently reducing the value of the NOLs by 10 percent. The Finance bill would allow the full value of NOLs to be claimed.
  • The Finance bill also includes a provision for the delayed recognition of certain cancellation of debt income, which would allow businesses to defer taxes on cancelled debt repurchased after December 31, 2008, and before January 1, 2011.
  • The Finance bill also does not contain the Ways and Means provision that would prospectively repeal Treasury Notice 2008-83, which liberalized rules in the tax code that are intended to prevent taxpayers that acquire companies from claiming losses that were incurred by the acquired company prior to the taxpayer’s ownership of the company.
  • A summary of the provisions can be accessed here.
  • The Joint Committee on Taxation’s description of the bill can be accessed here

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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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