Daily Tax Update - March 19, 2010

HOUSE LEADERS CONTINUE TO SEARCH FOR VOTES – PELOSI PREDICTS BILL WILL PASS: House Democratic leaders are working to garner the 216 votes necessary to pass the health care bill. A vote is expected Sunday. House Rules Chairwoman Louise Slaughter said yesterday, “We’ve got a surplus. We’ve got some spares.” Meanwhile, House Speaker Nancy Pelosi also predicted the bill would pass. Pelosi said, “We feel very strong about where we are.”

  • For the first time, the Medicare payroll tax would be applied to investment income, beginning in 2013. A new 3.8-percent tax would be imposed on interest, dividends, capital gains, and other investment income for individuals making more than $200,000 a year and couples making more than $250,000. The bill also would increase the Medicare payroll tax by 0.9 percentage points to 2.35 percent on wages above $200,000 for individuals and $250,000 for married couples filing jointly.
  • Other Changes to the Senate-passed bill include:
    • Tax on High-Cost Health Insurance Plans. The 40-percent excise tax on so-called Cadillac health insurance plans would begin in 2018, be indexed to the consumer price index (CPI) plus one for 2019, and then rise annually by the CPI beginning in 2020.
    • Economic Substance Doctrine. The bill clarifies the application of the economic substance doctrine so that transactions will be treated as having economic substance only if they change the taxpayer's economic position in a meaningful way and the taxpayer has a substantial purpose for the transaction, other than changing federal income tax liability.
    • Tax on Medical Devices. The bill removes a provision from the Senate-passed bill establishing an annual fee on medical device manufacturers and creates a new excise tax on medical device sales equal to 2.9 percent of the price of the device.
    • Ways and Means Committee Ranking member Dave Camp said, “This is the problem with a $1 trillion bill. They've got to find all these ways to pay for it.”
  • A summary of the bill can be accessed here

TAX BILLS INTRODUCED MARCH 18TH:
H.R.4877: To amend the Internal Revenue Code of 1986 to encourage investment in certain industries by providing an exclusion from tax on certain gains.
Sponsor: Rep Polis, Jared [CO-2] (introduced 3/18/2010)      Cosponsors (3)

H.R.4878: To amend the Internal Revenue Code of 1986 to reduce the rate of tax on corporations that make certain education contributions.
Sponsor: Rep Young, Don [AK] (introduced 3/18/2010)      Cosponsors (None)

H.R.4881: To amend the Internal Revenue Code of 1986 to allow individuals a deduction for costs incurred to remediate the presence of drywall containing elevated levels of sulphur or strontium in the principal residence of the taxpayer, a deduction for alternative living costs incurred by reason of the need to vacate such residence because of such drywall, and a credit against income tax for the costs of moving to and from the temporary living quarters.
Sponsor: Rep Wittman, Robert J. [VA-1] (introduced 3/18/2010

S.3136: A bill to amend the Internal Revenue Code of 1986 to extend and increase the exclusion for benefits provided to volunteers firefighters and emergency medical responders.
Sponsor: Sen Dodd, Christopher J. [CT] (introduced 3/18/2010)      Cosponsors (1)

S.3137: A bill to amend the Internal Revenue Code of 1986 to provide that solar electric property need not be located on the property with respect to which it is generating electricity in order to qualify for the residential energy efficient property credit.
Sponsor: Sen Udall, Mark [CO] (introduced 3/18/2010)      Cosponsors (2)

S.3141: A bill to amend the Internal Revenue Code of 1986 to provide special rules for treatment of low-income housing credits, and for other purposes.
Sponsor: Sen Bingaman, Jeff [NM] (introduced 3/18/2010)      Cosponsors (5)

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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